The Next Recession Is Right Around The Corner

Monetary Policy is a funny thing, when times are good we raise rates to prevent the economy from overheating and when times are bad we cut rates to help stimulate the economy. But what if it is interest rates that are leading the economy and not the economy leading interest rates. In that case interest rates would paint a very interesting picture.

In my opinion it is interest rates that lead the economy. By lowering rates you entice debt and consumption and by raising rates you cause the inability to service debt and a subsequent recession ensues. It is obvious when looking at this chart of the US Federal Funds Rate that a drop in rates causes a larger debt load and then rates are raised until debt is so un-serviceable a recession begins, to which the response is to cut rates again even lower which does nothing but entice more debt. its a self fulfilling cycle all the way to zero, and soon negative interest rates.

This chart in conjunction with the fact Gold is breaking out, the US stock market indexes are forming a peak, the yield curve has inverted and interest rates around the world are falling once again kick starting the next easing cycle all points to the beginning of the next recession being right around the corner.

This is not financial advice, just be careful out there.