3 reasons the stock market is plummetting - economy recession crash?

[calfoxwc]

I'm no economics experte' and that is an understatement.

but I am concerned that our economy is headed for a bad crash.

Three reasons:

https://www.ammoland.com/2018/12/miseducated-or-stupid/?utm_source=Ammoland+Subscribers&utm_campaign=77714f5111-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_6f6fac3eaa-77714f5111-20770865#axzz5Yd0Y8DjI

But, I have to add, #1 is badly in need of addition.

Her #1 reason in part - includes:

"“For sophisticated bond market investors, no three words invoke more fear and debate than ‘inverted yield curve,’ ” writes CNBC contributor Mitch Goldberg. The reason: Inversions are seen as bad omens because they can forecast slower economic growth and precede recessions.

Every U.S. recession for the past 60 years followed an inverted yield curve, though sometimes not until months or even years later."

But I have to add:

https://www.investopedia.com/articles/investing/010616/impact-fed-interest-rate-hike.asp

look at prime rate graph (prime rate set by the fed)

now, seems to me, the entire obaMao communist minded presidency - the Fed kept the prime rate falling dramatically...and then kept it

flat as all hell for the rest of the time he was president. Then Trump gets elected, economy booms, and the Fed raises rates upward again.

Which, has to do with deliberately slowing economic growth to avoid "inflation". But it sooner or later CAUSES a recession.

Therefore, mebbe I don't remember enough from economics classes way back in the day, but:

https://en.wikipedia.org/wiki/Recession

In economics, a recession is a business cycle contraction when there is a general slowdown in economic activity.^[1][2]Macroeconomic indicators such as GDP (gross domestic product), investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise. In the United Kingdom, it is defined as a negative economic growth for two consecutive quarters.^[3][4]

Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock or the bursting of an economic bubble. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.

******************************************

    Now, lowest alltime and since decades ago, our unemployment is dramatically at a high level. etc etc etc. Raising the prime rate makes companies spend far less on R&D, assets, and growth. Maybe even extensive layoffs.

   I'm just wondering if I'm wrong - but I think we may be headed for a serious crash with, in part, our national debt. It's skyrocketing over all these years, and yes, both reps and dems are to blame. Maybe at least a little prepping for hard times IS in order.

 

 

[Clevfan4life]

Please understand the Fed gave no fucks about obama, none. The same fucks they gave about any sitting president they never had to endure for more than 8 years. They give no fucks about trump either. They'll shuffle his balls a bit, get him smiling.....then go about their business.

Read some ron paul sometime if u want the 411 on the fed and the horseshit they pull sometimes. Im not even slightly comfirtable with trump going after the fed, cause u cant use the forge hammer technique with them......but im not always in disagreement with him when he disparages them. 

To even think about dismantling the fed in anyway....you'd have to do it so utterly delicately or the country is "done". There would have to be a solid, well thought out in advance plan for what happens to our money and access to credit during the transition. And a plan to stabilize basic goods and services

[calfoxwc]

http://www.aei.org/publication/the-fed-and-fiscal-policy-during-the-obama-years/

The Fed and fiscal policy during the Obama years

The federal government has run massive deficits since President Obama became president in 2009, but the deficits, and the government’s interest payments on the cumulative federal debt, would have been even greater if the Federal Reserve had not intervened with a massive and unprecedented bond and securities buying program.

Beginning in 2009, the Fed began its multi-stage program of quantitative easing through large-scale purchases of Treasury and other securities. In the aftermath of the financial crash, the agency had quickly lowered the targeted federal funds rate to between zero and 0.25 percent. In early 2009, the bank’s leaders, especially Ben Bernanke, sought to provide further monetary stimulus to the national economy and settled on large-scale asset purchases as the most viable way to expand the monetary base with interest rates already at the lower bound.

As of September 2008, the Fed held $477 billion in federally-issued debt, out of a cumulative total of $5.8 trillion. Thus, the Fed owned about 8 percent of all federal debt before the quantitative easing program began. In fiscal year 2009, the Fed then made net purchases of Treasury securities totaling $292 billion, followed by nearly $900 billion over the two-year period of 2010 and 2011 and $800 billion over the three-year period from 2012 through 2014. The Fed now owns $2.5 trillion in Treasury securities, or about 18 percent of all outstanding federal debt, which is well outside the historical norm.

The purpose of quantitative easing was to stimulate asset valuation by lowering long-term borrowing costs and thus also to encourage business expansion and consumption by households. It was also intended to make it easier for the federal government to run larger deficits and thus to provide fiscal stimulus to the national economy. This month, the average interest rate on a newly-issued 30-year mortgage is 3.43 percent, near the lowest level ever recorded. Fixed-rate 30-year mortgage rates have been below 5 percent continuously since January 2011.

Other central banks around the world have followed similar policies. The result has been a long-period of extremely low borrowing costs for governments. Amazingly, in 2016, the Congressional Budget Office (CBO) expects net interest payments on nearly $14 trillion in outstanding federal debt to total just $253 billion — the same level of interest payments that were made by the federal government in 2008 on $5.8 trillion in debt.

Over the period of 2009 to 2016, the Fed went beyond Treasury securities and also made net purchases of $1.8 trillion in mortgage-backed securities (MBS) issued by Fannie Mae and Freddie Mac. Prior to 2009, the Fed had not ventured into the MBS market.

The Fed’s policies have lowered deficits substantially during the Obama years in large part because of lower borrowing costs but also because of the earnings the Fed has booked on its unusual program of asset purchases. When the Treasury makes interest payments on outstanding federal debt, much of it goes to the Fed because of its large portfolio of Treasury-issued debt.

The returns the Fed earns on its Treasury and MBS assets are used to fund the bank’s operating costs and to cover the expenses of the Consumer Financial Protection Bureau, created in Dodd-Frank. Beyond that, the excess “profits” can be returned, at the discretion of the Fed, to the federal Treasury to lower the government’s annual budget deficit. In 2008, the Fed paid just $32 billion to the Treasury. Over the period 2009 through 2015, the central bank paid the Treasury a total of $584 billion, including $117 billion in 2015 alone.

Congress has noticed the Fed’s large payments to the Treasury in recent years. The federal deficit was lower in these years because of the Fed’s payments to the Treasury, and yet no taxes were raised, or spending cut. In 2015, Congress chose to take this practice one step further by requiring the Fed to make a special, one-time payment to the Treasury of an additional $19.3 billion. This required payment by the Fed was used to “pay for” expanded federal funding of highway construction and maintenance.

One does not need to be an aggressive Fed skeptic to see how dangerous the practice of the Fed returning “profits” to the Treasury could become. In recent years, the Fed has bought large amounts of Treasury securities (using funds effectively created through an expansion of the monetary base), thus reducing the need for the Treasury to secure funds from other sources. The Fed then earns returns on these Treasury holdings, which it returns to the Treasury to lower the apparent size of the government’s budget deficit. It’s certainly a novel way to pay for government activity.

At this point, there are economic and fiscal risks in every direction. If the economy remains sluggish, and demand suppressed, then interest rates are likely to remain low for some time, easing federal borrowing costs in coming years. But a slow growth economy is also disastrous for the federal budget, as revenue growth is below what it should be and enrollment in expensive benefit programs is higher than it needs to be. Moreover, if the economy were to slow precipitously, the Fed is in a very difficult position. The targeted federal funds rate is already extremely low (between 0.25 and 0.50 percent), and the central bank already owns far more in assets than ever before in its history. The next recession will be difficult to weather with monetary stimulus alone.

Meanwhile, if the U.S. were to return to a more normalized level of growth, employment, and inflationary pressure, much as that would be welcomed, it would likely trigger a resumption of more normalized net interest payments on the national debt. For instance, if the ratio of net interest payments to federal debt in 2018 were to be the same as it was in 2007, the total interest cost to the federal government of its outstanding debt would be $713 billion, or $350 billion more than is currently forecast in CBO’s baseline estimates. Of course, federal revenue would also be higher than in the forecast because of stronger growth, but there’s no guarantee the additional revenue would be high enough to cover the added debt service costs associated with more normal interest rates. The federal budget is already so badly out of balance that an additional, permanent increase in net interest payments could easily push the federal government closer to a fiscal crisis.

The United States is still grappling with the effects of the financial crash, recession, and slow recovery of recent years. The Fed chose a policy of unprecedented monetary accommodation, which has substantially eased the way for massive federal borrowing during the Obama presidency.

But the status quo seems unlikely to hold indefinitely. At some point one would expect both monetary and fiscal policy to move in the direction of more normalized positions. At that point, it will be clear that the budget outlook, bad as it has been, is actually even worse than people imagined.

[jbluhm86]

When you hitch your credibility as a leader to the state of the economy, you better hold tight to the reins when the wagon goes off the cliff. 

[calfoxwc]

1 hour ago, jbluhm86 said:

When you hitch your credibility as a leader to the state of the economy, you better hold tight to the reins when the wagon goes off the cliff. 

this is true, especially since the Fed raised the prime rate.

The Federal Reserve raised interest rates Wednesday for the third time this year. The quarter-percentage point hike brought the federal funds rate to a target range of 2 percent to 2.25 percent.Sep 26, 2018

[LogicIsForSquares]

If you get a minute, look up the history of the Federal Reserve. I had read up before but in a grad level Econ course the professor drew a diagram for everyone haha. Same professor explained the US debt to the Chinese students. They were pissed when they found out the Chinese government was buying snake oil that will have no return.

[MLD Woody]

So this is a thread blaming Obama for today's economy?

Wasn't there just another thread going at Obama saying he blamed Bush for his economy?

[The Cysko Kid]

17 minutes ago, MLD Woody said:

So this is a thread blaming Obama for today's economy?

Wasn't there just another thread going at Obama saying he blamed Bush for his economy?

Cal blaming Obama for the economy =/= Obama blaming Bush for the economy

[OldBrownsFan]

Sometimes I think the smart people are the preppers..I have mixed feelings about it. I know some who are into it and have a warehouse of supplies as well as preparing for every possible contingency. Of course they have invested a lot of time and money in it but they consider it "insurance". I have a hard time thinking this way as a Christian because if the worst did happen would I want to just "exist" and have foodstuffs hidden away while others I knew might be starving? Would I want to live that way? A Viet Nam veteran friend told me that I had no idea what thirst was all about and how he was in the jungle without water and they were licking the trees in the morning for the dew and he vowed he would never ever be that thirsty again (I saw he had stacks and stacks of cases of bottled water in his garage). So he is right I don't have any idea what real thirst or hunger is.

A person I knew who was really into this who was nice enough to put me and my family  on his list of people he would take care of with his prepping if the time ever came. I told him what about my wife's family? How could we live (it wouldn't really be living it would be existing) knowing her family was starving? and told him thanks but no thanks. He mentioned he would also like to run a soup kitchen  too if that time ever came and I was all for this and told him I would support that 100 percent.

There is a bible precedent for prepping. Joseph while in Egypt was warned about a coming famine and prepped in the good years knowing the bad years were coming. For now I have supplies for about three months or so that would work if we had a flu epidemic or natural catastrophe but to prepare really long term I'm not going there. If there ever was a total collapse the situation will be so bad I don't think any amount of prepping is going to work...

Then there is always this. One person I knew who had prepped to the max with every contingency was diagnosed with cancer and died a few months later. That put me in mind of the story Jesus said of the man who had made all his preparation for his huge storehouses only to die and ruin his well laid plans:

 

[calfoxwc]

4 hours ago, The Cysko Kid said:

Cal blaming Obama for the economy =/= Obama blaming Bush for the economy

lol, but the woodpecker has it wrong, as most all the time. I was blaming the pro-obamao FED

for keeping the prime rate rock bottom and buying...  which made obamao look good.

 the graph shows what it shows.

[calfoxwc]

we are preppers in a small way. The trouble is, if you don't rotate some of your stockpile, it will go stale and inedible after some months/years. We got out 2 yr old dry cat food to rotate it - it seems to be just fine with them.  After eight years of being out back a lot during hunting seasons, our squirrel and deer population is excellent. then there are the groundhogs, which I have a yearly "Caddyshack" war with... I've been busy - I want to try Canadian Goose - and duck, since there are plenty of those.

   Since I was a kid, I've loved being outdoors, and I've studied and practiced hunter/gatherer survival, etc.Next year, we are going to increase our small stock pile - because we have very close friends who would starve if something dramatic does happen. There is a show on TV - "Would you survive?" and the true stories of people finding themselves in desperate situations are many. Just having a high efficiency wood stove insert keeps our main floor nice and warm - our friends had their funace go out last winter - they stayed with us til it was fixed. We get free firewood obviously. I just go cut some up.

   I bought a new Burkey water filter - the biggest one, the mis size, and the backpack/hiker kit. All for 160 bucks at an auction.Out west, here during a drought, water table drops because of the stupid gas line in our country, earthquake cracks the water table,...I can still find water, and filter anything out of the water to make it pure. The largest Burkey costs about 220 bucks by itself.

  Our friends are always welcome, and in hard times, we would work to take care of all of us. But the entire neighborhood? no, can'tdo it. So, individual prepping, at least in a small limited way, can't be bad, and could save your family's lives.

  Btw, we have plenty of water packages etc, medicines...

If hard times ever do hit, so much of America has been so well off and spoiled, they won't know how to survive and be well.

[Westside Steve]

Wall Street certainly does give a fuck who is in the White House and especially those that are in the House of Representatives Etc.

Probably especially the Fed and who appoints the Fed?

WSS