What will happen to the USA economy in the following months ?

A few days ago, a big hurricane hit the East Coast of the USA, causing colossal damage. Even the New York Metro was shut down in some places due to floods and power outages.

Around the same time, employment data for the world's largest economy, the United States, a barometer of the world economy, were released.

About 235 thousand jobs were added to the US economy in August 2021, which is much less than 750 thousand of the average forecast and even lower than the lower forecast that required 400 thousand new jobs.

The obvious interpretation is that growth is slowing down, and the labor market finds equilibrium at a lower level.

Despite the negative news, the stock markets of America and Europe recorded new highs, defying the catastrophes, the signs of a slowdown in the economy, and a resurgence of inflation.

The explanation of the dynamics that the markets continue to show has to do with the expectations of investors that the weakness of the economy and employment will force the Fed and the other Central Banks not to withdraw part of the credit easing programs that they have thrown into the system, and not raise negative interest rates.

It is like the continuation of the fire that burns a forest to be a positive development because the fire brigade will continue to pour vast amounts of water, a part of which is filled with some minimal pools that happened to be scattered in the burning forest! 

The fire, however, turns the area into a lunar landscape and evaporates water from the pools faster and faster.

Rarely in recent decades have markets been manipulated so openly by Central Banks, and rarely have "irrelevant" small investors ("puppets") played a leading role for so long.

Usually, when this happens, the following disaster is of epic proportions, and the consequences take decades to heal.

JP Morgan, a strategic analyst who blames retail investors for much of the rally as they buy stocks in every downtrend, brazenly describes what has been happening in the markets lately.

This situation has led stocks to levels that make professional investors, such as pension funds, uncomfortable.

Instead of buying stocks, they buy bonds to maintain a well-balanced balance between bonds and stocks.

And when the time comes, they will start selling their shares - and most likely their bonds, he said. 

Another exciting element is the lending of portfolios operating in the US market, which reaches 40%, the highest rate since the 1980s.

But the most exciting thing that makes Wall Street look like Herod's territory, according to Magnify Money's survey, is that the lending of the Generation Z equity portfolios, i.e., the 20s, reaches 80%.

Robot Voice.

The mobile phone rang, and the number that seemed to be calling referred to the United Kingdom (+ 447908 ….).

When I answered an automatic voice, he started talking to me about the share of TESLA and the opportunity to invest in it or a company with similar expectations without commissions with a loan margin, even if I have the substandard amount of 250 Euros.

If they have reached the point of collecting even a penny, it means that out there (as I write in more detail in tomorrow's article in the Chapter), the "papers" are more than the "fools" and will soon be "choked"...

What will follow the failure of the quantitative easing policy and the breaking of the stock market bubble is difficult to predict as markets can discount but only do what some expect them to do when waiting.

As Andre Costolani used to say, in the markets, 2 plus 2 never makes 4, but 5 minutes 1 or 10 sometimes, and ten minus six, as has happened in recent years.

What Dr. mentioned is interesting. Marc Faber a few days ago. Faber does not believe that central banks will reduce quantitative easing programs (money printing). 

What they will do is exactly the opposite.

Faber predicts that not only will we see more inflation in asset prices, but we will also see dramatic wage inflation: "What I think will happen and most people have not thought about, we will have wage inflation.

For the first time since the late 1970s, we will have accelerating wage inflation, and in some cases, quite dramatic. In some states, the minimum wage is $ 15. It rose to $ 30 an hour very quickly.

Faber is less concerned with the economic situation and more concerned with the rise of socialism and communism in the Western world: "I can tell you a feature of all the socialist countries I have visited in my life, and they all had less freedom, less happiness than us, and the standard of living was essential, not a little, but significantly lower than in the free capitalist world.

I am sorry to say that the western world has taken a dangerous path where, through zero interest rates, everything is free. But, unfortunately, when it happens, there are consequences… ".

He is saying that zero interest rates give the wrong incentives and create inappropriate behaviors.

 They are doing what the "Soviet" economic model did, resulting in a complete internal collapse despite maintaining reliable military power.

What is happening has nothing to do with anti-cyclical Keynesian or monetarist neoliberal policies. Instead, what is happening is just like desperate efforts to keep calm and prosperity with inflationary tricks in the twilight of historical circles. September 12, 2021.

This text ( opinion article ) is for informational purposes only and not replaces the specialized consulting services by professional experts.

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