Houston, We Have A 'Flows' Problem! The Taper Spigot Is Now Too Tight

By: Gordon Long | Fri, Feb 28, 2014
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According to global economist Richard Duncan , since 1952 every time Total US Real Credit Growth fell below 2%, the US has experienced a recession. This correlation has been marked on 9 separate occasions. We are now below 2% and as a consequence the Federal Reserve will soon have little choice but to make a course correction in the current "Taper" monetary policy.


$2.3 Trillion In Total Us Y-O-Y Credit Growth Required

Approximately $2.3 Trillion in total Y-o-Y credit growth is required. According to Richard Duncan's very detailed tracking at Macro Watch, the Fed will be between $500 and $1T short.


Sub 3% World GDP Growth

Sub 3% global growth levels have also been historically another major indicator of recessionary economic troubles in the US.


Problem Compounding Quickly

There are a number of developments that have placed the Federal Reserve and its new Chair Janet Yellen in this awkward policy quandary. One is falling foreign direct investment. FDI is now at Bear Stearns and Lehman lows and getting worse fast, with global GDP falling to sub 3% levels.


Dramatically Slowing Us Foreign Flows

"Houston, We Have a Problem!"


Conclusion

The chart below, taken from a survey of 222 fund managers responsible for a collective $591 billion in assets under management conducted by BofA Merrill Lynch between Feb. 7 and Feb. 13, 2014, shows where investors think we are in the global economic cycle right now. We have overlapped it with our work and sense we are highly likely in the midst of a major inflection point.

Welcome Ms Yellen! Like Greenspan and Bernanke when they assumed office, you will experience the most taunting challenges of your chairmanship very early in your tenure.

 


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Gordon Long

Author: Gordon Long

Gordon T. Long
Publisher - LONGWave

Gordon T. Long

Gordon T. Long has been publically offering his financial and economic writing since 2010, following a career internationally in technology, senior management & investment finance. He brings a unique perspective to macroeconomic analysis because of his broad background, which is not typically found or available to the public.

Mr. Long was a senior group executive with IBM and Motorola for over 20 years. Earlier in his career he was involved in Sales, Marketing & Service of computing and network communications solutions across an extensive array of industries. He subsequently held senior positions, which included: VP & General Manager, Four Phase (Canada); Vice President Operations, Motorola (MISL - Canada); Vice President Engineering & Officer, Motorola (Codex - USA).

After a career with Fortune 500 corporations, he became a senior officer of Cambex, a highly successful high tech start-up and public company (Nasdaq: CBEX), where he spearheaded global expansion as Executive VP & General Manager.

In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly emerging Internet Venture Capital and Private Equity industry. A focus in the technology research field of Chaos Theory and Mandelbrot Generators lead in the early 2000's to the development of advanced Technical Analysis and Market Analytics platforms. The LCM Groupe is a recognized source for the most advanced technical analysis techniques employed in market trading pattern recognition.

Mr. Long presently resides in Boston, Massachusetts, continuing the expansion of the LCM Groupe's International Private Equity opportunities in addition to their core financial market trading platforms expertise. GordonTLong.com is a wholly owned operating unit of the LCM Groupe.

Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in Thermodynamics-Fluid Mechanics (Aerodynamics). On graduation from an intensive 5 year specialized Co-operative Engineering program he pursued graduate business studies at the prestigious Ivy Business School, University of Western Ontario (Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently selected to attend advanced one year training with the IBM Corporation in New York prior to starting his career with IBM.

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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/