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All the Belief in the World Doesn’t Change a Broken Math Equation

The Lombardi Letter  ( Original )
MAY 29, 2018

Choose your own path to collapse. Prices are rising on commodity inputs across the board. But corporations are unable to raise prices because consumers are tapped out on household debt.

The Fed has to raise rates, which will force debt-bloated companies into default on the debt they already can’t afford. Consumers will follow suit as credit card interest rates increase.

Which will force the Fed to artificially stimulate the economy with more debt, which has ever less positive effect. The engine is flooded. More gas won’t help.

The world markets in the next few months will face ever greater volatility. Or, if you prefer, they will experience wild and more frequent “mood swings,” such that a financial crisis seems unavoidable.

The most likely scenario for 2018 is a recession. There is too much anxiety concentrating in the markets, and it could lead to the wrong economic prescriptions. Thus, it’s time to take measures to prepare for the next financial crisis.

The real economy, we are told, is healthy. But for how long, given that the financial markets are clearly stalling? The economy and stock valuations have increasingly become detached from one another.

Higher yields literally scream “Financial Crisis.”

ORIGINAL SOURCE: The Signs of the Next Financial Crisis Are Getting Louder by Alessandro Bruno at The Lombardi Letter on 5/28/18