A Soft Landing Is Impossible
The latest buzzword in the mainstream financial media is “soft landing.” Everybody seems convinced the Fed has beaten inflation, and that it has completely avoided pushing the economy into a recession. According to the mainstream narrative, we may see a bit of an economic slowdown in the months ahead, but a recession is pretty much off the table. In his podcast, Peter Schiff explains why a soft landing is impossible.
Wall Street is booming with the growing belief that the inflation war is over, and not only is the Federal Reserve finished hiking interest rates, but it will begin to cut them in 2024.
The markets are excited because their drug pusher is going to show up with more supply. They’ve been away from the drug for a while. The Fed has been hiking rates and that’s not what the markets want. But now the markets are convinced that exactly what they need is going to be supplied as early as next year.”
Another factor driving market optimism is the idea that the economy will avoid a recession and we will enjoy a “soft landing.” It’s a Goldilocks scenario that features rate cuts in the absence of any kind of major economic downturn.
This raises a question: Why would the Federal Reserve start cutting rates and loosening monetary policy absent a significant economic downturn?
Peter speculated that with a lot of economic data weakening, the markets anticipate that the Fed will proactively cut rates to preempt a recession and prevent a crash landing. The thinking is as soon as it sees the economy coming in for a landing, it’s going to cut rates to ensure that landing is soft.
Peter called this “wishful thinking”
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