By Simon Black
In the modern history of the US economy over the past seven decades, the longest period of time the country has gone without a recession was 10 years.
Since the end of World War II there have been 11 recessions in the United States of America, so the average time in between recessions is 6 years and 5 months.
And whenever a recession hits, the all-knowing, all-powerful Federal Reserve attempts to stimulate the economy by cutting interest rates, typically multiple times.
The smallest interest rate cut was 2.03% during the 1990-1991 recession.
The largest interest rate cut during a recession was 9.84% during the 1981-1982 recession.
The average interest rate cut during a recession is 4.03% based on sixty years of Federal Reserve data.
In fact in every single recession in modern US history, interest rates were always MUCH lower at the end of the recession than they were at the beginning.
Now, here’s the problem–
Interest rates right now are at historic lows. The effective Federal Funds Rate as of the first of this month was just 0.29%.
So unless the Fed raises rates by a LOT, and does so VERY quickly, the United States is virtually guaranteed negative interest rates in the next recession.
The Fed is extremely leveraged, with capital of less than 1% of its total balance sheet.
So if asset prices fall by just 1% after the Fed raises interest rates, they will become insolvent.
Source: Sovereign Man
http://www.thetradingreport.com/2016/10 ... recession/
