Will The Fed’s Policy Roosters Come Home To Roost in 2015?

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Federal Reserve Washington
Federal Reserve Washington
Federal Reserve Board Building
Washington D.C. USA

The most disturbing thing about slow-motion train wrecks is that you know exactly what will happen. Still, you can’t turn you head as you watch the whole thing unfold in front of you. Your mind is telling you of the certain disaster that is bound to happen. Your heart, on the other hand, is wishing and hoping for something else to happen. As gut wrenching as this may be when it comes to roadside or other accidents, it is just as sickening when you see it play out on a macroeconomic level. Let’s face it-the US Federal Reserve has been trying to put out the fires set by the catastrophic collapse of global financial markets at the end of 2008-with gasoline! There’s really no other way to describe the period of quantitative easing when the US government let loose its printing presses to crank out greenbacks to buy bonds. It was only a matter of time until this is going to haunt the USA. Well, the year the Fed’s rooster come home to roost may very well be 2015.

In any other year, the global financial system can handle one or two shocks. Sadly, this isn’t the case with the new year. 2015 has many different factors in play that should many any monetary policy board member on either side of the Atlantic wake up in the middle of the night in a cold sweat. First, the global equities market is now addicted to the devil rum of easy liquidity thanks to the Fed’s crazy printing presses and flood of dollars. Second, it seems the default ‘stimulus’ is stuck at zero interest rates. Third, many key European countries’ economies are at or near recession levels. Fourth, China’s economy weakens while the likelihood of a soft landing is looking more and more remote. Plus, there’s the uncertainty unleashed by crashing oil prices. Put these all together along with a seeming ham-fisted Fed policy framework and you might just have all the ingredients of a Mother of All Economic Busts. I don’t mean to be all doom and gloom and everything but when you see a train headed for a wreck, you have to speak up.

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