Notwithstanding the deleterious impact of rate cuts on investment trends, the Wall Street mantra still claims that rate cuts are necessary to prevent the economy from tipping over into recession. But this claim is not supported by the evidence.
Y/Y Change in 16% Trimmed Mean CPI, January 2012 to July 2024 There is only one real reason for a new round of rate cuts, which is now virtually guaranteed to commence next month.
According to our trusty 16% trimmed mean CPI, the price level is up by +41% since then, and was still rising at a 3.31% annual rate in July, as per this week’s CPI release.
Consider the non-financial business sector’s leverage increase just since 1994.
In short, in the context of today’s debt-impaled US economy rate cuts are not what they are cracked up to be.
On the one hand, it has driven household savings rates and business sector savings (i.e.
And that’s to say nothing of another flareup like the recent one, which at its 7% peak was depreciating the dollar’s purchasing power by 50% every nine years.
To wit, Wall Street has repeatedly threatened to stage a hissy fit if the Fed doesn’t soon pleasure traders and speculators with a renewed dose of cheap carry trade credit and even higher PE multiples than the extreme valuations already embedded in the stock market.
https://brownstone.org/articles/rate-cuts-will-achieve-nothing/
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