regulations

Jim Rickards: ‘We’re Going To Go Into A Recession Or The Stock Market Is Going To Have A Very Severe Correction’

Marc Faber isn’t the only “crash prophet” who realizes the financial environment U.S. President-elect Donald Trump could inherit is significantly different than what Ronald Reagan encountered in 1981. Back on December 5 I blogged about James (Jim) Rickards, an American lawyer, economist, investment banker, and best-selling author, who was on RTÉ Radio 1 (Ireland) the prior week informing listeners of the following:

Less regulation, lower taxes, and a lot more infrastructure spending. This was Ronald Reagan’s playbook. This is what Ronald Reagan did in 1981 with a lot of success. But there are big differences, reasons to believe Trump will not be as successful. Namely because when Reagan came in, the U.S. debt-to-GDP ratio- the amount of debt relative to our economy- was 35 percent. Today it’s almost 105 percent. Reagan had inflation of 20 percent. Trump has it close to zero. In other words, Reagan had a lot of tailwinds– inflation had to come down, interest rates had to come down, he had fiscal space to run up the debt. Trump has headwinds

(Editor’s note: Bold added for emphasis)

Last Tuesday, Rickards appeared on CNBC TV’s Squawk Box (Asia) and made this prediction about Trump’s first term in the Oval Office:

I definitely see a stock market correction, perhaps a disorderly one Martin. I’m not sure the Fed is ready to cut rates yet. But I expect it will raise rates in March. I think that’s on track. But beyond that, we’re going to go into a recession or the stock market is going to have a very severe correction. Either one of those will cause the Fed to back-pedal.

(Editor’s note: Bold added for emphasis)

CNBC anchor Martin Soong asked his guest, “What is it going to take to cause these two outcomes- what’s the trigger going to be?” Rickards replied:

First of all, it’s already happening. There’s basically a head-long collision coming between perception and reality. So what’s the perception? The market’s rising on the Trump reflation trade. So, Trump wants to cut taxes. Steve Bannon’s talking to his advisors about a trillion dollars of infrastructure spending, cutting regulations. So all these things are viewed to be highly stimulative. So that’s why the market’s going up… But with the Fed, they’re thinking of two things. Number one, they believe in the Phillips Curve… With unemployment at 4.6 percent and that kind of stimulus coming, they know monetary policy acts with a lag- they want to get out ahead of inflation. So they’re on track to raise rates. By the way, they want to raise them anyway independent of this because they’ve got to raise them so they can cut them in the next recession. So the Fed’s on track to raise. The market expects stimulus. But here’s the point. The stimulus is not going to come. Congress has already said tax cuts have to be revenue neutral- that’s going to take away the stimulative effect. They’re going to balk at more spending. We have $20 trillion of debt. A 104 percent debt-to-GDP ratio. So we’re not going to get this trillion dollars of spending. And we’re in the eighth year of an expansion Martin. Keynesian stimulus- if it works at all, it works at the beginning of an expansion or in a recession. Not after 8 years. You don’t get much bang for the buck.


“Fed to reverse course by year-end: Expert”
CNBC Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: A qualified professional should be consulted prior to making a financial decision based on material found in this weblog. If this recommended course of action is not pursued, then it must be understood that the decision is the reader’s and the reader’s alone. The creator/Editor of this blog is not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information contained herein.)

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Tuesday, January 3rd, 2017 Crash Prophets, Debt Crisis, Employment, Federal Reserve, GDP, Government, Inflation, Infrastructure, Interest Rates, Investing, Monetary Policy, Recession, Spending, Stimulus, Stocks, Taxes Comments Off on Jim Rickards: ‘We’re Going To Go Into A Recession Or The Stock Market Is Going To Have A Very Severe Correction’

Another Great Editorial Cartoon About Chicago

Scott Stantis is a Chicago-based cartoonist whose editorial cartoons grace the pages of the Chicago Tribune five times a week.

If his name sounds familiar it’s because I blogged about a cartoon of his last week that depicted a young lemonade stand operator in Chicago frantically calling the state of Indiana for help as menacing figures named “Taxes,” “Unions,” “Regulations,” and “Fees” loomed over him in Illinois, demanding a piece of the “action.”

Opening my Sunday Tribune again yesterday morning (I’m a little behind on blog-related reading these days), I noticed another cartoon by Stantis which also manages to hit very close to home with what I’ve been blogging about on a regular basis these days.

So much so it’s one of the reasons I now live where I do (with “it” meaning crime and the growing prospect of more criminal activity as local and state government finances erode going forward).

Outside of Chicago.

Like Stantis said:

Would the last one to leave please shoot out the lights?

As it’s not posted on the Association of American Editorial Cartoonist website as of this morning, you can check out the cartoon on a Chicago Tribune gallery here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Tuesday, October 29th, 2013 Business, Crime, Debt Crisis, Fiscal Policy, Government, Public Safety, Taxes Comments Off on Another Great Editorial Cartoon About Chicago

CEO Survey: Illinois 3rd Worst State In Which To Do Business

Last week, Chief Executive magazine announced the results of its 9th annual survey regarding the best and worst states in which to do business. From their website:

In its ninth annual survey of CEO opinion about the best and worst states in which to do business, 736 CEOs—the highest response on record—rendered their verdict. Business leaders were asked to grade states with which they are familiar on a variety of competitive metrics that CEOs themselves regard as critical. These include: 1) taxation and regulation; 2) quality of workforce; and 3) living environment. The tax and regulatory grade includes a measure of how CEOs grade a state’s attitude toward business, a key indicator.

The best states in which to do business?

1. Texas (9 consecutive years now)
2. Florida
3. North Carolina
4. Tennessee
5. Indiana

Nice job Indiana!

The “Top 5” were unchanged from last year.

And the worst states in which to do business?

1. California
2. New York
3. Illinois
4. Massachusetts
5. New Jersey

Nice going Illinois. Second year in a row in that position.

The faster Illinois residents dump incompetent and ill-intentioned lawmakers, the sooner the state will be able to make headway on a number of real issues. Avoiding insolvency (somewhat of a stretch at this point) and job retention/attraction readily come to mind here.

By the way, our neighbors to the north- Wisconsin- climbed three spots in this latest survey to number 17. JP Donlon wrote on May 6:

More and more states are getting the pro-growth message. Wisconsin governor Scott Walker’s position is typical of this new thinking. “I’ve never seen a store get more customers by raising its prices, but I’ve seen customers knock down doors when they cut prices,” he says.

You can view the rankings of all 50 U.S. states on the Chief Executive website here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Donlon, JP. “States More Aggressive in Competing With One Another.” Chief Executive. 6 May 2013. (http://chiefexecutive.net/states-more-aggressive-in-competing-with-one-another-2013). 13 May 2013.

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Monday, May 13th, 2013 Business, Debt Crisis, Employment, Fiscal Policy, Government, Taxes Comments Off on CEO Survey: Illinois 3rd Worst State In Which To Do Business

Columbia University Economist Decries Criminal Behavior On Wall Street, ‘Corrupt Politics To The Core’

Stumbling on the following made me reminisce about the “good old days” as editor of Boom2Bust.com, “The Most Hated Blog On Wall Street,” when I would following the shenanigans on Wall Street a lot more than I’m able to today. From Jeffrey Sachs, an economist and Director of The Earth Institute at Columbia University, at the 31st Annual Monetary & Trade Conference on April 17:

A lot of what’s happened actually and what’s been revealed is in my view prima facie criminal behavior. It’s financial fraud on a very large extent. There’s also a tremendous amount of insider trading, and you can even watch it when you’re living in New York, how that works…

I believe we have a crisis of values that is extremely deep, because the regulations and the legal structures need reform. But I meet a lot of these people on Wall Street on a regular basis right now. I’m going to put it very bluntly. I regard the moral environment as pathological. And I’m talking about the human interactions that I have. I’ve not seen anything like this, not felt it so palpably. These people are out to make billions of dollars and nothing should stop them from that. They have no responsibility to pay taxes. They have no responsibility to their clients. They have no responsibility to people, counterparties in transactions. They are tough, greedy, aggressive, and feel absolutely out of control, you know, in a quite literal sense. And they have gamed the system to a remarkable extent, and they have a docile president, a docile White House, and a docile regulatory system that absolutely can’t find its voice. It’s terrified of these companies.

If you look at the campaign contributions, which I happened to do yesterday for another purpose, the financial markets are the number one campaign contributors in the U.S. system now. We have a corrupt politics to the core, I’m afraid to say, and no party is – I mean there’s – if not both parties are up to their necks in this. This has nothing to do with Democrats or Republicans. It really doesn’t have anything to do with right wing or left wing, by the way. The corruption is, as far as I can see, everywhere. But what it’s led to is this sense of impunity that is really stunning, and you feel it on the individual level right now, and it’s very, very unhealthy.

I have waited for four years, five years now, to see one figure on Wall Street speak in a moral language, and I’ve not seen it once. And that is shocking to me. And if they won’t, I’ve waited for a judge, for our president, for somebody, and it hasn’t happened. And by the way it’s not going to happen anytime soon it seems.


“SR 76 Wall Street”
YouTube Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Monday, April 29th, 2013 Banking, Corruption, Crime, Government, Investing, Legal, Political Parties, Wall Street Comments Off on Columbia University Economist Decries Criminal Behavior On Wall Street, ‘Corrupt Politics To The Core’

Romney 3, Obama 0

Last night I watched the last in a series of U.S. Presidential debates between former Massachusetts Governor Mitt Romney and the sitting President Barack Obama.

Once again, the incumbent came out swinging. However, despite it sounding once again like the audience was in his corner, President Obama lost.

More so than in the second debate, if you ask me.

An analyst on one of the TV stations covering the debate said it best when she pointed out that Obama was, in effect, debating himself. Since his Republican challenger lacked significant foreign policy experience (the supposed focus of last night’s exchange), it was the incumbent’s record in this area over the past four years that came under scrutiny.

And plenty of dedicated observers of U.S. foreign policy- myself included- will tell you that it’s in shambles.

Particularly in the Middle East.

As I see it, the Obama administration, in its attempt to tone-down what it perceives as an overly-aggressive U.S. foreign policy under the Republicans, has:

Not deterred Iran from advancing towards a nuclear weapon. Regular readers of this blog know that I believe the Islamic Republic of Iran continues to take advantage of proposed “talks” and other delays to continue work on such a weapon. Notwithstanding military action, they will get a nuke. The prospect of having one is just too tempting. Pop one or two of these over the U.S., and we’ll have a real problem on our hands.

Not left a stable regime in place in Iraq. I predict a real power vacuum here in the coming years, with a number of internal and external actors vying for ultimate control of the geopolitically-important failed state and its resources.

Made a big blunder in announcing the withdrawal of U.S. combat troops from Afghanistan in 2014. Nothing like giving an enemy a timetable to work with. I suspect Al-Qaeda, the Taliban, and their allies will throw everything they’ve got at our men and women in uniform over there as the end of 2014 draws closer, knowing full-well they need only sustain such intensity until the announced exit date. Then what? Attack us on our home soil, possibly. Some terrorism experts have suggested one reason why Al-Qaeda hasn’t launched a massive operation against the United States mainland since 9/11 is because they’ve figured out it’s simply easier to kill scores of Americans on the battlefields of Iraq and Afghanistan. Remember, their stated goal is 4 million Americans dead. Back to being another failed state down the road.

Alienated our ally Israel. President Obama seems to see Israel- like past U.S. foreign policy- as being too aggressive. And it doesn’t appear the sitting President doesn’t care too much for Israeli Prime Minister Benjamin Netanyahu either- despite Vice President Biden and all that “Bibi” talk from the Vice Presidential debate. Consider the following:

November 3, 2011- Several media outlets reported an open-mic incident where then French President Nicolas Sarkozy told his American counterpart, “Netanyahu, I can’t stand him. He’s a liar.” Obama reportedly responded with, “You are sick of him, but I have to work with him every day.”

September 11, 2012- The White House said President Obama would not meet Prime Minister Netanyahu during a U.S. visit later that month. A number of media outlets suggested the Israeli leader was being spurned.

September 12, 2012- President Obama was taped for the CBS show 60 Minutes. From an exchange with Steve Kroft:

KROFT: You’re—you’re saying you don’t feel any pressure from Prime Minister Netanyahu in the middle of a campaign to try and get you to change your policy and draw a line in the sand? You don’t feel any pressure?

OBAMA: When it comes to our national security decisions, any pressure that I feel is simply to do what’s right for the American people. And I am going to block out any noise that’s out there.

Israeli concern over an Iranian nuke is “noise?”

Don’t even get me started on Libya and the deaths of 4 Americans, including an ambassador.

How the Obama administration has handled the Middle East is indicative of U.S. foreign policy as a whole.

Weak.

Worse yet, our adversaries recognize it and actively exploit it.

It shouldn’t be too much of surprise U.S. foreign policy has come to this. After all, Democrats aren’t really known to be big on foreign affairs. If anything, they seem to look at it as an annoyance.

Whenever I think of foreign policy in the Clinton years, two words come to mind.

Cruise missiles.

These days, perhaps it can reduced to just one word.

Drones.

Mitt Romney did a good job at pointing out the poor foreign policy record of the Obama administration.

But, truth be told, most Americans don’t care too much about international affairs.

The Republican challenger won this last debate not by talking about foreign policy- as was the intended focus- but by leading the discussion back to President Obama’s equally-dismal record on the economy.

This is what I meant when I said “more so than in the second debate, if you ask me” earlier in this post.

Romney kept hammering away at Obama’s domestic record as it pertains to take-home pay, unemployment, food stamps, government overreach, over-regulation, small-business woes, trillion dollar deficits, the $16 trillion national debt, the list goes on, and all the way to the end.

It was circling back to the Chicago Democrat’s domestic record these past four years that won the Republican challenger the debate.

In fact, all three debates.

Whether this will translate into a White House win come November 6 remains to be seen.

Regrettably, when it comes to that financial crash I predict is in store for us, I doubt a Romney win will make much of a difference at this point in the game. Economic pain is a certainty. Still, if he’s elected President of the Unites States and implements a sustained, meaningful program of fiscal responsibility, our financial “reckoning day” may not be as devastating as I suspect it would be should the nation continue on its current path.

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Tuesday, October 23rd, 2012 Asia, Debt Crisis, Deficits, Employment, Europe, Fiscal Policy, Foreign Policy, Government, Income, Middle East, Military, Political Parties, Spending, War Comments Off on Romney 3, Obama 0
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