Since the economic collapse a few years ago, it seems only contrarian investors argue the case for higher inflation and interest rates and a recession occurring again once the bubbles on Wall Street burst. Well, other establishment financial minds foresee the same thing.
In a report obtained by CNBC, bank analyst Dick Bove of Rafferty Capital Markets says economic growth, interest rates and inflation higher will transpire for the next little while and then a recession will hit the United States in 2018. In addition, the yield on the 10-year Treasury note will increase to eight percent in 2017.
“In order to develop earnings models for banking companies, you must have a ‘worldview’ related to money supply, the economy, inflation and interest rates,” Bove wrote. “The view that I am using . . . implies a relatively fast growing economy, increasing rates of inflation, much higher interest rates, and a move back to recession by 2018.
Many are concerned on Wall Street because the M2 money supply (currency, demand deposits, time deposits and coins) has outgrown the gross domestic product since the Great Recession and is currently expanding at more than five percent annually. Bove thinks the GDP will eventually start making gains and catch up to the M2.
There are numerous signs that the U.S. is headed back into a recession:
– thousands of store closings and job losses
– Obamacare beginning to take a toll on the U.S. economy
– the number of new mortgage applications has fallen to its lowest level in two decades
– disposable income has dropped to its lowest year over year decline in 40 years
– Gallup poll found that a small number of Americans say they’re better off financial than a year ago.
With this economic data added on top of the enormous quantitative easing measures that have just added fuel to the fire and assisted in the blowing of even more bubbles, the U.S. could be headed into a new era of economic dilapidation.