The First Fed Rate Increase has succeeded
By JC Collins
Now that stock markets have gained back almost all of the losses which have taken place since the beginning of the year, we can expect that doom and gloom experts may take a short breather and revaluate their positions.
They’ll go into overdrive to convince the disorganized masses that this is only a short reprieve. Perhaps it’s the eye of the hurricane, or the calm before the real storm. The reality that stock markets are actually doing quite well, and have not lost much value over an extended period of time now is ignored, as every dip and sway of markets are pumped as signs of imminent collapse.
Readers of POM will understand exactly what is happening. It is the waxing and waning of volatility as the international monetary system begins its long anticipated rebalancing.
The first interest rate increase by the Federal Reserve on December 15, 2015 was heralded as the beginning of the end. It was suggested that such an increase after so many years would spark a monumental economic and financial crash.
But I stated over and over that there would only be a temporary period of instability as the international framework absorbed the first Fed rate increase. The purveyors of doom went into overdrive with a wide assortment of economic models, predictions, strategies, cycle divinations, and irrelevant examples to explain the inevitability of the approaching apocalypse.
The inability of so many to understand and acknowledge the long-term strategy of rebalancing the international monetary framework from a unipolar USD based system to a multilateral based system is one of the great mysteries of this time period. The obvious nature of this transition should be apparent to all, and yet very few even take the time to consider the machinations and mandates which are being spoken by the leading monetary authorities in all nations, institutions, and central banks.
Now with the Baltic Dry Index taking off like a rocket, iron/ore prices spiking, copper spiking, crude spiking, US jobs growth higher than expected, and volatility worldwide decreasing, it would appear that the first Fed rate increase has been successful.
It’s even beginning to look like there is an increase in inflation within America. That is a good sign for future rate increase. The normalization of monetary policy, being the ending of QE, which has happened, and the successful implementation of sequential rate increases over an extended period of time, which is happening, is a good thing for all economies around the world.
The possibility of another rate increase next week on the 15th is growing substantially. But whether it happens then, or in April, we can expect a similar period of volatility to follow, as the international framework once again attempts to absorb another Fed rate increase.
It is possible that with each rate increase the volatility will be less, and the world’s ability to manage additional increases will be enhanced.
Everything that is happening is fitting well into the POM thesis which has been painstakingly presented here for mental consumption and historical posterity. The prediction of a coming commodities boom, which was first made last October, is beginning to unfold as infrastructure development in both developed nations and emerging nation’s rolls out.
The US dollar is continuing to lose some value against other currencies. Though the dollar could have another modest surge in the months to come, I would suspect that this is the beginning of a sustained dollar depreciation which will begin the process of realigning America within the multilateral monetary framework.
Every time I hear Trump say that he will bring jobs back to America and renegotiate trade deals, I can’t help but think of the analysis presented here which concludes that the dollar will depreciate. This depreciation will make US made products cheaper for exporting, which will in turn mean more investment into factories and a huge explosion in American made goods being exported around the world.
To recap, this growth in jobs and exports will reduce the US debt-to-GDP ratio and allow for a readjustment on fiscal spending and future budgets.
It’s almost strange to see all the US Presidential candidates now talking about increasing exports and bring jobs back from overseas. This is one of many conclusive aspects which have confirmed the POM thesis for me. The script is being rolled out and the rest of this year should bring more confirmation and validation. – JC