Wednesday, October 7, 2015

Jim Rickards: The Fed's Next Move is Easing

The information below comes from a new article by Jim Rickards. This article is available to those who provide an email address to West Shore Fund so I will not quote the full article. Below are a few quotes to give you a feel for the article. Jim repeats his forecast that the Fed will not raise rates this year and goes on to say their next move will be to ease. He now feels there may be no increase in rates until after the 2016 elections.

"This time last year Wall Street was telling you that the Fed would raise interest rates in March 2015. After March, the street moved its forecast to June. After June, the street moved its forecast to September. Now that September has come and gone, the street is talking about a rate increase in December. Hope springs eternal!

But, hope is not analysis. Wishful thinking does not make a forecast come true. Not only will the Fed not be raising rates in the foreseeable future, the next move will be toward easing.

I was one of the few analysts who had this right from the start. Here’s a link to my interview on CNBC from November 2014 where I said the Fed would not raise rates in all of 2015: Why was this so plain to see when almost every analyst on Wall Street saw the opposite? The key is understanding the flaws in the Fed’s forecasting models. 

The Fed uses obsolete partial equilibrium models, mean reversion, and regressions from over thirty recovery cycles since the end of World War Two. The problem is that the economy is not an equilibrium system; it’s a complex system. Also, we are not in a cyclical recovery, we are in a growth depression, the first since the 1930’s."
My added comment:

Added note: Jim's appearance on Fox Business to discuss the Fed

Former Fed Governor Mishkin points out the box the Fed is in now in regards to interest rates.

Additional added note: Jim has a new book coming in April 2016

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