Real wages are flat to down—actually down lately. There is so much slack because of labor force participation. Real wages are going nowhere, so she's got no inflation concerns at all. So I don't see them raising rates in 2015.
We have 50 million Americans on food stamps, 26 million Americans unemployed or underemployed, 11 million on disability, which is kind of the new form of unemployment in some cases and that's going up. Our fundamental economy is very weak for structural reasons. Yellen is trying to address a structural problem with a liquidity solution. It doesn't work. It won't work. That's why the Fed forecast has been wrong by orders of magnitude five years in a row. The IMF forecast has been wrong five years in a row also. ... That's because we are in a depression and not a cyclical recovery.
So, here is how the world is setup. The taper is going to end this month or next month. Everyone expects the Fed to raise interest rates in 2015. The big debate is will it be March, will it be July. That's nonsense. They can't possibly raise rates because the economy is weak. Janet Yellen is not seeing anything on her dashboard that tells her to raise rates. ... I expect it may actually come to QE4 by the middle of 2015. They are going to have to keep printing. They have no other way.
They'll at best not raise rates and probably go to QE4. ... No, seriously, we are in a depression. You can't solve a depression by printing money. You can only solve it with structural changes.
By the way, in an interview with Money Morning in August, Jim Rickards warned that a "25-year Great Depression is unavoidable."
STEVE MEYERS: This really speaks to what you wrote about in your new book, The Death of Money, the title strongly alludes to this, the hourglass is now empty. You warn we're about to fall into a 25-year Great Depression... That the stock market could plunge overnight 70%.And in an interview with Reuters on October 6, he said:
JIM RICKARDS: (Interrupts) You know, when I use the phrase 25-year depression, it sounds a little extreme, but historically it's not. We had a 30-year depression in the United States from about 1870 to 1900. Economists actually call it the Long Depression. That was before the Great Depression. The Great Depression lasted from 1929 to 1940, so that was quite long. The U.S. is in a Depression Today
STEVE MEYERS: A lot of folks might disagree with you that we're currently in a depression. That word brings to mind images of the 1930s and soup kitchens.
JIM RICKARDS: Well, we have soup kitchens today... They're just at Whole Foods and your local supermarket, because 50 million Americans are on food stamps. It's not that we don't have distress. We have enormous distress, but it's being hidden in different ways.
The next financial panic will be the largest in history. I was involved in the Long-Term Capital Management affair, as a general counsel - and even then, we were hours away from taking down every market in the world. That time, Wall Street bailed out a hedge fund.
Fast forward to 2008, and this time it was the Feds who bailed out Wall Street. Each bailout is bigger than the last. When the next panic happens, it will be bigger than the Fed. And then what are we going to do? Just keep printing trillions of dollars?
It could begin in a lot of different places. But one place to keep a close eye on is China, which is on the verge of a major credit collapse. That could be the one snowflake that starts the global avalanche.Wow. Prepare Accordingly.