Outlook from the Fed, ECB and CFOs

Big Chief

The leader of the pack, Jerome Powell said that the economy is growing modestly and at the moment there is no need for further rate cuts. He returned to using " dot plot points" to provide some transparency with the Federal Reserve's future actions. The points point to a return to raising interest rates with a price target of 2.4% in 2021.
With that said, Dear Reader, I remind you of  March of this year when flip-flop Powell said the target rate for 2019 is 2.4%. It would slowly rise to 2.8% by 2021. The rate is now at 1.82%. At that time President Trump put pressure on him to cut rates to compete with the world. Powell declared the Fed is free from political concerns. The president said maybe we need a new chief. Just like a magic trick, the Fed turned course and began lowering rates. It wasn't really magic, but more like the ego feared being the first Fed chair to be fired. Bottom line: do not put any belief in the Federal Reserve to have conviction in their words. The trend in rates is down with a possible test of the all-time low of 1.51%. Powell fears negative rates as our society would "wake up" to the realization that fiat currency has failed.

Meanwhile,

A panel of 51 experts chimed with their outlook. In a survey by Wolters Kluwer Blue Chip, they believe the economy will grow by 1.8% in 2020. They see recession fears fading. They have dropped from a high of 40% to the present 20% and falling. They do cite one change. It is in unemployment. They see a turn to rising from the present lows to 3.7% in 2020. They do not see any more rate cuts until after June 2020. In another report by corporate CFOs, they see the economy growing by 2.1%, however they also see an uptick in unemployment. The biggest losers will be in manufacturing. I translate that to mean more outsourcing and competition from foreign concerns. In a related report, the US mattress manufacturing companies expressed a worry that Chinese firms are targeting their industry.

Little Chief

Resided in her first meeting of the European Central Bank (ECB). Christine Lagarde took over from Mario Draghi. Previously, she ran the IMF. She said that her institution will be "highly accommodative" which is more blunt than Mario who said that he will do whatever it takes to achieve growth. She sees the EU growing even if the rate is small at 1.2%. On questions concerning inflation she predicted that it will be low at 1.1%. However, when she was pressed, she admitted that future inflation will rise to 1.5% in 2020 and higher in 2021 to 1.6%. This outlook means that Europeans will slowly decline in their standard of living just like in the US except that she is more honest with her outlook than our Federal Reserve or government. By the way within the EU, governments offer their own notes. The highest is from Greece at 1.37%. The lowest is Switzerland with a negative .62%. The leading economy, Germany also has a negative yield at .29%. I am amazed that Europeans have not been protesting negative rates which is a conviction of the failure of fiat money. One reason may lie in the euro which is common to all. The fluctuations have not sounded any alarms, although the euro has fallen from 136 to 110 in relationship to the dollar.

Dear Reader, currencies provide a clearer picture for any economy. A strong currency keeps prices low. This helps society by protecting the lowest earners on the totem pole. Currency manipulation is a bigger danger to trade than tariffs. At the moment the global community is in a race to the bottom. By this I mean that by using rate cuts from central banks, the currency of a nation falls in tandem. The euro is very low which helps their exports, but hurts their standard of living. The US has seen its dollar drop which has hurt our society. The reason is more complicated. It centers on our deficits which is dangerously too high. China and Japan use currency manipulation along with most of the nations among the emerging market group. The Chinese government ministers stated that their nation will strive to attain a 6.6% economic growth in 2020. They will provide stimulus or whatever it takes. I see their currency devaluing again to maintain market niches in exporting. The trade tensions with the US is secondary to their currency manipulations. I predict that if Trump wins in 2020, the tariffs will return and a global recession will follow.