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Are Stocks Heading For a 1937-Type Meltdown?


 -- Published: Thursday, 10 March 2016 | Print  | Disqus 

By Graham Summers

 

Itís literally 1937 all over again.

 

Many analysts have called for the Fed not to repeat its mistake of 1937.

 

That mistake?

 

Raising rates when the economy was already weak. Doing this prolonged the Great Depression.

 

However, few commentators point out WHY the Fed raised rates in 1937.

 

The reason?

 

CPI hit 3.7%.

http://goldseek.com/news/2016/3-10gs/image001.jpg

Notice that by raising rates the Fed kicked off another terrible round of deflation with CPI falling from 3.7% to -2.0% in JUST ONE YEAR.

 

Fast forward to today. The USís inflation rate is moving verticalÖ

 

 http://goldseek.com/news/2016/3-10gs/image004.png

Core inflation is already ABOVE 2%.

 

 http://goldseek.com/news/2016/3-10gs/image006.png

The Fed is cornered. If core inflation continues to rise the Fed will be forced to raise rates, kicking off another market meltdown. In 1937 when the Fed hiked rates during a weak economy, stocks plunged 40% in the following 12 months.

 

http://goldseek.com/news/2016/3-10gs/image007.png

 

Buckle up, itís coming.

 

Best Regards

 

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 


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 -- Published: Thursday, 10 March 2016 | E-Mail  | Print  | Source: GoldSeek.com

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