Economic growth came in at a tepid 0.7% in the first quarter of 2017. Nevertheless, officials at the Federal Reserve continue to insist the economy is strong. They held interest rates steady in April, but insisted hikes were still on the table. In fact, the Atlanta Fed forecast Q2 growth to come in at over 4%.
Peter Schiff called the Atlanta Fed’s prediction ‘crazy,’ nothing that they are starting out with a much higher estimate for Q2 than they had in Q1, despite having all of this information about how weak the economy was in Q1 that they didn’t have a few months ago.
And that’s the crux of the matter. The actual economic data doesn’t support the economic optimism, nor the Fed’s monetary policy. In this in-depth analysis of the current economic and policy climate, Dan Kruz makes a strong case against the policymakers’ optimism.
Introduction (‘It’s the economy, stupid!’)
US real GDP growth for Q1:17 was 0.7% with downward revisions likely given increasing weakness throughout the first quarter in retail sales and in auto sales. Yet the Fed remains upbeat on growth while it maintains that further increases in the Fed Funds rate are all but a given. The fly in the ointment: the faltering US economy, which will increasingly stress banking system solvency; money center bank solvency is the privately-owned Fed’s true mandate. In the meantime, the rest of the world keeps ‘printing.’ How long until the Fed rejoins the overt QE party? Is the Fed raising the Fed Funds rate to a miniscule level so that it can offer a few rate decreases prior to revisiting its ZIRP?
This post was published at Schiffgold on MAY 17, 2017.
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