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2020 was the year the world changed.
Never before in the History of the World Part 1 or Part 2, had nations across the planet locked down.
Without a scintilla of scientific evidence, political science was imposed by politicians in cities, states and nations—along with nobody bureaucrats labeled “health experts”—who issued draconian mandates.
Among them, human beings were forbidden to go outside, swimming, jogging, have kids go to parks to swing on swings, closing down businesses, forcing people to be injected with the Operation Warp Speed gene therapy jab or they would lose their job, could not enter buildings, venues or travel… and destroying the lives and livelihoods of hundreds of millions, if not billions, of people.
Remember the idiocy of washing down surfaces, scrubbing your hands constantly, Plexiglas dividers, standing one or two meters apart, wearing masks when walking into restaurants but taking them off to eat, eating and drinking without masks on airplanes but forced to put them on between bites and afterwards… as though the virus doesn’t attack when sitting down or eating and drinking!
Same with the one or two meters apart… as though the virus knows its distance and air streams in straight lines and stops and the appointed meter.
How about the stupidity of putting tables in restaurants six feet apart and depending on what autocracy you live in, the arrogant clowns in charge made up the percent of occupancy rates permitted… and no sitting at the bar and having a drink with friends.
The word “draconian” mandates, by the way, was even the language of the Presstitutes who sold the COVID War as they do every war. Yes, Presstitutes, media whores, little boys and girls who get paid to put out for their government whore masters and corporate pimps.
And “draconian” these mandates were, and the damage they caused was harsh, severe, and lasting.
Yes, “draconian.” Google the meaning:
(of laws or their application) excessively harsh and severe.
“the Nazis destroyed the independence of the press by a series of draconian laws”
Yes, THE NAZIS, in charge in a so-called bullshit democracy near you destroyed the independence of We the People “by a series of draconian laws.”
Indeed, it set the stage for the economic calamity that is now hitting equity markets and economies. The people of Slavelandia are now suffering.
Besides the countless millions of businesses that have been destroyed, and besides these arrogant political fools that sucked the joy out of life with their made-up mandates, the economic measures they took to fight their COVID War have created the Dragflation economic crisis we are now encountering. Indeed, this is not the “stagflation” pitch the business media is selling. Economies won’t “stagnate” as inflation rises. They will drag down as inflation spikes.
Ancient History
With the U.S. economy slumping into devastation in 2020, U.S. President Donald Trump signed into law a $3 trillion spending package that artificially juiced up equities and the economy.
In fact, with Trump’s deal to further enrich the big corporations by dramatically lowering their tax rate from 35 percent to 21 percent… America’s national debt rose $7.8 trillion. In fact, the growth in the annual deficit spikes ranked as the third-biggest increase relative to the size of the economy of any U.S. presidential administration, according to Eugene Steuerle, co-founder of the Urban-Brookings Tax Policy Center.
And then there was Trump’s pushing the Federal Reserve to lower interest rates, which they did, as equity markets melted down in December 2018.
Yet Trump, who condemned the Fed for not raising rates, played a different tune when he was not playing President of the United States:
- Candidate Trump in September 2016: “They’re keeping the rates down so that everything else doesn’t go down…We have a very false economy.”
- In 2015, Trump stated: “Janet Yellen (the Federal Reserve Chair) is highly political and she’s not raising rates for a very specific reason: Obama told her not to because he wants to be out playing golf in a year from now and he wants to be doing other things and he doesn’t want to see a big bubble burst during his administration.”
- In 2012, Trump told CNBC: “They’re creating phony numbers and they’re doing it through stimulus and the stimulus, many people would say, is the worst thing that can happen.”
- “The numbers are false; they’re being created and people like me may benefit, but it’s ultimately not good for the economy,” Trump also remarked to CNBC.
- Even as far back as 2011, Trump is on the record: “The Fed’s reckless interest rate policies will cause problems in the years to come. The Fed has to be reigned in or we will become Greece.”
TREND FORECAST: What we have been forecasting is now making its way into the mainstream business media narrative: “It’s Interest Rates, Stupid.” As the era of cheap money policies ends, the state of most world economies simply cannot tolerate any further rate hikes. The debt can’t be managed and markets and economies will suffer.
And Donald Trump knew it, and that’s why he’s changed his tune… he didn’t want a massive recession under his watch.
Yes, the Fed, which brought interest rates to near zero while purchasing $120 billion of Treasury and mortgage back bonds per month until last November are true inflation culprits. Not to mention the $1.9 trillion President Joe Biden used to artificially stimulate the economy to fight the COVID War—stupidly labeled “American Rescue Plan.”
Similar money-printing schemes were invented by governments worldwide to artificially boost sinking economies and equity markets that were destroyed in their fight to win the COVID War.
No clearer example of a face-to-face Fed fraud is the European Central Bank with its negative 0.5 interest rate policy. Now, despite EU inflation at 8.1 percent they are expected to raise rates only .25 percent next month.
These are the same Bankster Bandits that have been selling their bullshit line of lies that interest rates would rise when inflation hit 2 percent. In fact, that was the same fake line the U.S. Fed has been selling for over a decade when the FOMC adopted an explicit inflation target of 2 percent in January 2012.
Adding Insult to Injury
Rather than minding their own business and not getting involved in foreign entanglements, the Washington warmongers ganged up with NATO to fight the Ukraine War, sending scores of billions of dollars in weapons and “aid” to keep bloodying the killing fields. And, making a terrible situation much worse, they imposed sanctions on Russians that have spiked inflation yet higher.
And now, out of the mouth of those who said over a year ago that U.S. inflation was “temporary” such as former U.S. Treasury Secretary and former Fed Head Janet Yellen, she is now spewing out the crap that it wasn’t the trillions in fake money pumped into the economy to fight the COVID War that drove up inflation.
No, it was not the negative Fed rate that artificially drove up the equity markets, housing market and the economy… but rather, it’s the “effects of supply side disturbances to oil and food markets” caused by Russia’s invasion of Ukraine.
And of course, in the world of stupidity and propaganda, it was not the sanctions imposed on Russia, the world’s third largest oil producer—and along with Ukraine other essential raw material and food commodities—that have helped spike inflation. No, according to Biden, when he and NATO made the sanctions “official” he said, the “American people will deal another powerful blow to Putin’s war machine.”
But of course, Biden got it backwards. The sanctions did nothing to stop Putin. The “powerful blow” hit Americans with national gas prices above $5 a gallon.
Referring to U.S. gas prices and the sanctions, today Dmitry Medvedev, Russia’s former president, wrote on his Telegram account:
“Of course, our opponents will continue to do everything to cause maximum damage to our fuel and energy complex… Today, they are experiencing an energy crisis, the scope of which will only increase. Even the main instigator of anti-Russian aggression, the US, has suffered.”
And thanks to those sanctions, today it was announced that German inflation in May spiked to a five-decade high of 7.9 percent year on year.
Over in the U.K., as a result of spiking prices of essential goods, hikes in interest rates and fuel prices hitting new records as households spent 54 percent more on home energy bills… its economy has slipped into Dragflation: their GDP declined for the second straight month in April, falling 0.3 percent from March’s 0.1 percent contraction while inflation hit a four-decade high of 9 percent.
TREND FORECAST: As for the Feds getting inflation forecasts wrong, see our article, “Fed Officials Send Mixed Signals on Policy Shift” (29 June 2021). We noted that, “At his December 2020 press conference, Fed chair Jerome Powell pointed to “disinflationary pressures around the globe” and said “It’s not going to be easy to have inflation move up.”
A month later, Powell acknowledged that inflation was on the move but said any rise above the Fed’s 2-percent target rate would be “transient.”
Also, while the Fed insisted that it would not raise rates until 2024, we had forecast that hikes would begin sooner because inflation would spike and the damage could no longer be covered up. Now, the word on The Street is that it will hike them .75 basis points tomorrow.
LAST WEEK: STOCKS TANK ON INFLATION, FED FEARS
U.S. equity markets had been poised on the hope that inflation had peaked, as many “analysts” quoted by the mainstream media had predicted.
It has not.
In May, prices sped up by 8.6 percent, year on year, compared to 8.5 the month before, the Bureau of Labor Statistics reported, another in a series of 40-year highs.
Zooming food and fuel prices led inflation’s rise, worsened by the war in Ukraine and the resulting Western sanctions against Russia.
Inflation’s continued rise triggered fears that the U.S. Federal Reserve might raise its key interest rate higher and faster tomorrow than The Street had anticipated… possibly by 0.75 basis points rather than the 0.50 that was the general consensus before the inflation numbers were released.
Not Happy Days
Also, the University of Michigan’s monthly survey of consumer sentiment found that Americans are the most pessimistic about the economy’s future since the survey was begun in the 1940s.
Survey respondents think prices will increase at an annual pace of 3.3 percent for the next five to 10 years, up from 3 percent foreseen a month earlier.
Investors dove out of stocks, sending the Dow Jones Industrial Average down 880 points on Friday, 10 June, and the NASDAQ down 414.
For the week, the Dow shrank 4.7 percent, the NASDAQ blew off 7 percent, and the Standard & Poor’s 500 index gave up 5.6 percent.
All 11 of the S&P’s sectors lost ground.
It was the second consecutive week of down markets.
Investors also fled from treasury securities, not wanting to be locked into fixed-rate investments while interest rates rise around them.
The sell-off drove the yield on the two-year treasury note from 2.815 percent on Thursday to 3.047 Friday, its biggest one-day leap since 2009 and the highest return in more than a decade.
As securities’ prices fall, yields rise to attract investors.
Brent crude oil closed Friday’s market day slightly above $122 a barrel. U.S. benchmark West Texas Intermediate crude for July delivery closed just above $120.
When the two oils are priced so closely together, it usually signals high oil prices will endure.
New York spot gold rose Friday as equity markets collapsed, gaining 2 percent to $1,875.
Bitcoin sank through the week, ending down 2.5 percent at $29,010 Friday at 5 p.m. EDT.
Abroad, the European Stoxx 600 rode the week down, shrinking by 4.0 percent over the 5 days. Japan’s Nikkei 225 rose early in the week by about 3 percent, then sank with U.S. markets but still ended the five-day stretch up 1.1 percent.
The South Korean KOSPI index ended the week flat at 2,597.
Chinese markets rose as the mainland’s lockdowns began to end.
The Hang Seng in Hong Kong rose 2.4 percent, the SSE Composite was up 2.7 percent, and the CSI Composite added 2.4 percent.
YESTERDAY: ‘STOCK’ AND AWE
Stocks were battered on Monday and cryptocurrencies also faced a day of reckoning as bitcoin fell below $23,000 per coin.
The Dow Jones Industrial Average fell 876 points or 2.8 percent and the S&P 500 benchmark index fell 3.9 percent. Down nearly 22 percent since its peak in January, it is officially in bear territory. The Nasdaq Composite dropped nearly 4.7 percent to end the day at 10809.23.
Investors are worried the Federal Reserve may be forced to be more aggressive with rate hikes at its FOMC meeting on Tuesday as bond yields jump with the 10-year Treasury hitting 3.371 percent.
Economists had been anticipating another 50-basis point hike at the next few Fed meetings, but there’s chatter that the Fed could act more aggressively during Tuesday’s meeting to tame inflation by raising interest rates by 75 basis points.
Economists at Jefferies and Barclays, when considering the recent inflation data, said they expect the Fed to increase rates by three-quarters of a percentage point, which has not been done in nearly 30 years.
Data released on Friday showed consumer prices jumped 8.6 percent year over year last month, which is the fastest increase in over four decades.
The previous meeting occurred in early May and resulted in a 50 basis point hike, its most significant in 20 years. The Fed also announced plans to reduce its $9 trillion balance sheet, which skyrocketed during the COVID-19 outbreak.
“We’re in a brave new world right now. I don’t think anyone can accurately predict inflation one year from now,” James Gorman, the CEO of Morgan Stanley, said at a conference Monday, The Wall Street Journal reported.
March, when interest rates were close to zero, seems like a distant memory. There’s now a viable chance that interest rates can jump to 3 percent by September. After having kept equities and the economy artificially pumped up, the last time the rate was that high, the country was in the Great Recession.
Besides inflation, the World Bank last week warned that global growth could essentially be choked due to the Ukraine War, supply chain issues, COVID lockdowns in major Chinese cities, and dramatic increases in food and energy prices.
David Malpass, the bank’s president, said, “For many countries, recession will be hard to avoid.”
Economists also noticed that the yield on the two-year Treasury note briefly rose above the 10-year yield, which is considered a sign of a looming recession, The New York Times reported. That so-called inverted yield curve typically does not occur in a healthy economy.
TREND FORECAST: The Trends Journal has consistently said that economies will not “stagnate” as inflation rises. Instead, economies around the world, that have still not recovered from economy-killing COVID lockdowns, will enter into “Draglation,” when economies drag down as inflation rises. And, despite our sending out massive press releases to the print and broadcast media warning of Dragflation, they refuse to acknowledge this trend and keep selling the stale stagflation tale.
Elsewhere, the Stoxx Europe 600 fell 2.4 percent to its lowest closing value in over a year and the FTSE, the U.K. benchmark, shed 1.5 percent.
European traders were still coming to terms with the European Central Bank’s decision to raise interest rates by 25 basis points in July to counter inflationary pressures.
BITCOIN: The world’s largest cryptocurrency was trading under $23,000 per coin, which represented a 17 percent drop on the day and a losing trend for the coin that has lost 66 percent of its value since November, when it hit all-time highs.
When bitcoin has a cold, other cryptos tend to have the flu, and since November, the cryptocurrency market capitalization fell from about $3 trillion to about $975 billion on Monday evening, The Wall Street Journal reported.
The selloff prompted Celsius Network to announce that it would freeze all withdrawals “due to extreme market conditions” over the weekend, the paper said.
Binance, another exchange, also said it temporarily paused bitcoin withdrawals “due to a stuck transaction causing a backlog.”
Part of the reason for the recent volatility is the uncertainty about the Fed’s action to contain inflation. When interest rates go up, these speculative assets lose some appeal to investors.
“Almost anything can be systemic in crypto … because the whole space is over-leveraged,” said Cory Klippsten, chief executive of Swan Bitcoin, a bitcoin savings platform, told Reuters. “It’s all a house of cards.”
GOLD: Gold took a hit Monday as the dollar index reached heights not seen since November 2002. Spot gold fell 2.2 percent to $1,829.52 per ounce by 12:05 p.m. EDT, and gold futures slid 2.4 percent to $1,829.80.
TODAY: THE WAITING IS THE HARDEST PART
The stock market was nervous today and ended down for the fifth-straight day as traders waited for the result of the Fed meeting that could result in the central bank taking more aggressive measures to rein in inflation that is at a 40-year high.
The Dow Jones Industrial Average dropped 110 points, or 0.4 percent to end the day at 30364.83. The benchmark S&P 500 tumbled 0.2 percent to 3735.48. The Nasdaq Composite was up 19.12, or 0.18 percent to 10828.35.
Investors looked at the 10-year Treasury yield that topped 3.45 percent as the 2-year increased 14 basis points to 3.418 percent. Jim Paulsen, the chief investment strategist at The Leuthold Group, told CNBC that as long as Treasury yields continue to climb, that means the “stock market’s not done going down.”
The market is fixated on the result of the Fed’s interest-rate decision. It was believed that the meeting would result in a 50-basis-point hike, but as we have noted in the report, they may raise rates by 0.75 percent points.
The Trends Journal has long warned that the Fed was downplaying the inflation risks and data released on Friday cemented our forecast. Inflation, which is at 8.6 percent, continues to be hot despite the earlier 50-basis-point increase so there’s more pressure on the Fed to act more aggressively.
About two-thirds of the economists polled by The Financial Times expect a recession in the U.S.
TREND FORECAST: It should be noted The Trends Journal has warned about skyrocketing inflation for over a year…even while Fed Head Jay Powell has been brushing it off as “transitory.”
Given its past timidity, the Fed is unlikely to raise interest rates high enough fast enough to halt inflation. If it did, the U.S. economy would be thrown into a recession and the rest of the world’s economy would follow. William Dudley, the former Federal Reserve Bank of New York president and former chief economist at Goldman Sachs, told a Wall Street Journal conference today that he believes the Fed will raise rates by 75 basis points.
The paper said he has been critical of the central bank for acting too slow on inflation.
He was asked at the meeting if the central bank could take a more aggressive 1 percentage point increase. He said, “You can certainly make that argument because if you decide that the speed of getting there is just as important as the level that you’re going to get to, then why not get there faster?”
He continued, “My view is that they’re probably splitting the difference” by going for a 75 basis point increase.
Europe’s Stoxx 600 was down 0.91 percent and Britain’s FTSE 100 was down 0.25 percent to 7187.46. South Korea’s Kospi was down 11.51, or 0.46 percent. Japan’s Nikkei 225 fell 1.32 percent to end at 26,629.86.
It was a volatile day in the European market with stocks suffering their sixth-consecutive session with losses.
The Stoxx 600, the benchmark index, has been under pressure due to the European Central Bank’s efforts to get a hold of skyrocketing inflation and the looming risk of recession. Bank of America’s June fund manager survey said investors believe that hawkish central banks are the biggest risk for European stocks along with COVID-19 lockdowns in China.
The Stoxx 600 is down 17 percent after touching its all-time high in January, Reuters reported. The report pointed out that among the big losers on Tuesday were consumer discretionary stocks like Ocado and Kingfisher. They fell 10.8 percent and 4.4 percent, respectively. There’s lingering concerns of weaker consumer spending.
In Asia, stocks are down due to higher inflation, slower growth, and higher interest rates.
Stocks in China were higher on Tuesday, with the Shanghai Composite up 1.02 percent higher at 3,288.91. The Shenzhen Component increased 0.204 percent to about 12,023.79.
CNBC reported that JPMorgan recently told investors that Chinese stocks are a good diversifier. The report compared China’s inflationary pressure to the U.S.’s.
“China’s headline consumer price index rose by just 2.1 percent year-on-year in April, compared to the 7.4 percent seen in the euro zone for the same month, and 8.3 percent in the U.S.,” the report said.
GOLD/SILVER: Gold was down 20.60, or 1.1246 percent to 1811.20 as of 5 p.m. ET., and silver was down 0.26, or 1.22 percent to 20.995.
Gold’s recent price drop has been largely blamed on reports that the U.S. central bank plans to act aggressively on interest rates. High interest rates usually lead to investors looking elsewhere since the metal pays no interest, which then in turn leads to a lower gold prices.
Gold sunk almost 3 percent on Monday.
The dollar is at 20-year highs, which also means the metal is pricier for overseas buyers whose currencies are dropping against the dollar.
TREND FORECAST: We maintain our forecast that for gold to maintain strength, prices must stay in the high $1,900 per ounce range and when they solidify above $2,200 per ounce, gold will spike to new highs. On the downside, should gold fall below $1,800, its bottom will be in the $1,730 range.
OIL: The oil market was down today with Brent crude losing $1.41, or 1.15 percent to 120.87, and West Texas Intermediate shedding $2.17, or 1.7613 percent to $118.90 per barrel.
The drop was blamed on concern over how high the Fed will increase interest rates after its FOMC meeting. Reuters also reported that Sen. Ron Wyden, D-Ore., plans to introduce legislation setting a 21 percent surtax on oil company profits “considered excessive.”
The U.S. Department of Energy also announced today that it will sell up to 45 million barrels of oil from the country’s Strategic Petroleum Reserve, the news wire reported.
The Biden administration has been lambasted by Republicans for not acting fast enough to utilize U.S. resources.
“Sanctioning oil and fertilizer from Russia was short sighted. Biden has no plan to enable development of traditional domestic sources,” Rep. Tom Massie, R-Ky., tweeted. “His cabinet and congress plan to use high gas and food prices to bludgeon American consumers into adopting leftist agendas. It won’t work.”
TREND FORECAST: The picture is clear. The higher oil prices rise, the faster inflation will rise and the greater the pressure on central banks to raise interest rates. And the higher interest rates rise, the deeper equity markets and economies will fall.
BITCOIN: Bitcoin fell as low as $20,816 today but regained some of its value by 4:30 p.m. ET, when it was trading at $22,016 per coin. Bitcoin has lost more than half its value since November when it hit $68,982 per coin.
The sell-off dragged the value of the cryptocurrency to levels not seen since December 2020.
Yi He, the Binance co founder and chief marketing officer, sounded optimistic about bitcoin’s future with Yahoo! Finance.
“Every time there’s a winter, it’s always warmer than the last winter. So sometimes you can say it’s 100% Winter. Like if you look at 2014, 2015, or like two years ago, I think the nastiest things are probably stronger than last summer. So for the moment, I don’t really feel it’s so terrible,” he said.
Bitcoin is headed for its longest daily losing streak since mid-2016 and slid for an eighth straight day, CoinDesk reported. Coinbase, one of the most valuable crypto exchanges, announced that it will lay off about 18 percent of its workforce, or about 1,100 employees.
“We saw the opportunities but we needed to massively scale our team to be positioned to compete in a broad array of bets,” Brian Armstrong, the CEO, wrote to his team. “While we tried our best to get this just right, in this case it is now clear to me that we over-hired.”
TREND FORECAST: We had long forecast, the downward breakout point is when prices fall below $25,000 per coin. They are now below that breakout point, thus bitcoin could fall back to $10,000 per coin or lower. On the upside, we maintain our forecast that bitcoin will find strength to hit new highs when it breaks above $55,500 per coin.