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By Gregory Mannarino TradersChoice.net
Before I even begin this article, I want you to be crystal clear on this…
Ready?
EVERYTHING YOU ARE SEEING NOW WITH REGARD TO THE GLOBAL ECONOMY AND THE MARKETS IS DELIBERATE.
Public Enemy Number One—The Federal Reserve, has allowed inflation to surge WAY beyond their 2 percent target, and today the current rate of inflation—their numbers, sits at 6.8 percent. But now the Fed is saying that NOW they are ready to do something about surging inflation.
How about no, the Fed is lying.
Food and energy prices will continue to balloon with no sign of relief in sight, in fact, we can all expect inflation, or should I say the absolute strength of the dollar to crater FASTER.
Uncertainty is taking hold on the world equity markets and over the past week we have seen stock markets fall under pressure. Here in the US, the debt market is pricing in a Fed rate hike sometime soon—which in my opinion will happen.
The big secret that you are not supposed to know is this. Whatever the Fed does regarding hiking rates, expect it to be minimal to an extreme.
Understand, the Federal Reserve IS NOT DONE fulfilling its goal which is to become not just the lender and buyer of last resort, but to own it all. In order for the Fed to finish its end game, along with other world central banks, MUCH more debt will need to be issued, globally.
Speculation on what the Fed will actually do moving forward is causing world stock markets to fall under pressure, and as a ripple effect the crypto markets have also taken a hit.
I see no guesswork here. I fully expect that the Fed will continue to inflate.
There is also talk of a Fed balance sheet runoff, that is, the Fed will sell some of the debt it is currently holding, but let me ask this… there is NO WAY that is going to happen. Why? Who, or what entity would buy debt which the Fed is currently holding which is yielding LESS than the current rate! Can’t happen.
Looking over at the yield curve, there is some “normalization” as the market is pricing in a rate hike, and with that, risk in the market is climbing—(See the MMRI, Mannarino Market Risk Indicator, which can be found on my website TradersChoice.net).
The bottom line here is expect the unexpected, but also understand that price action distortion across the spectrum of asset classes will continue to get worse.
Expect EXTREME volatility in the crypto space, and to a lesser degree in the equity space as well.
The Fed will in fact keep rates suppressed for as far as the eye can see and beyond, therefore nothing really has changed. With that, global debt issuance by central banks will skyrocket with no end in sight which will drive global central bank issued currencies lower in terms of purchasing power. Debts, deficits, and inflation will continue to spiral out of control for the foreseeable future.