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HOUSTON, WE HAVE A 'FLOWS' PROBLEM! - The Taper Spigot is Now Too Tight

 -- Published: Friday, 28 February 2014 | Print  | Disqus 

By Gordon T. Long

Accorrding to global economist Richard Duncan, since 1952 every time Total US Real Credit Growth fell below 2%, the US has experienced a recession. This correlation has been marked on 9 separate occassions. We are now below 2% and as a consequence the Federal Reserve will soon have little choice but to make a course correction in the current "Taper" monetary policy.



Approximately $2.3 Trillion in total Y-o-Y credit growth is required. According to Richard Duncan's very detailed tracking at Macro Watch, the Fed will be between $500 and $1T short.


Sub 3% global growth levels have also been another indicator of major recessionary economic troubles in the US.


There are a number of develpoments that have placed the Federal Reserve and its new Chair Janet Yellin in this awkward policy quandry. One is falling foreign direct investment. FDI is now at Bear Strearns and Lehman lows and getting worse fast, as global GDP has fallen to sub 3% levels.



"Houston, We Have a Problem!"


The chart below, taken from a survey of 222 fund managers responsible for a collective $591 billion in assets under management conducted by BofA Merrill Lynch between Feb. 7 and Feb. 13, 2014, shows where investors think we are in the global economic cycle right now. We have overlayed it with our work and sense we are presently in the midst of a major inflection point.


Welcome Ms Yellen! Like Greenspan and Bernanke when they assumed office, you will experience the most taunting challenges of your chairmanship very early in your tenure.

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Gordon T Long
Publisher & Editor

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that you are encouraged to confirm the facts on your own before making important investment commitments.

© Copyright 2013 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or suggestions you receive from him.

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