By Richard Russell
The last two times the US saw at least three straight months of declining industrial output, the economy was in recession, or about to be. Industrial output in April fell for the fifth consecutive month, indicating that the US economy was close to or actually dipping into recession. Analysts, surveyed by the Philadelphia Fed, see GDP expanding 2.5% in the second quarter, 3.1% in the third quarter, and 2.4% overall, down 0.8% compared to the last survey. In the face of all this, it is almost axiomatic that the Fed will not be raising interest rates any time this year, or even into 2016.
With the US economy in or near recession, pressure will be put on both parties to “do something.” I see two possibilities ahead. One is bringing back QE and filling the system more fully than ever with liquidity. Or the more likely event: massive make-work projects ... Log in or subscribe to continue reading.