Today on The Janssen Report: let’s discuss a 2016 further Federal Reserve rate hike. A major fallacy has been the idea that the Federal Reserve could stimulate the real economy with their massive money printing (quantitative easing) and near-zero and zero-interest rate policies (NIRP and ZIRP) of the past years. Especially because the so-called ‘stimulus’ has been used to alleviate the burden of the banks – not that of the taxpayer and those actors that drive the real economy.

Have we seen any real growth in GDP, in consumption, in production? Has employment really improved? I for one don’t see any of that. This, however, is supposedly the reason why the interest rate was (marginally) increased: recovery. I think the real reason was to prevent further damage to the credibility of the Federal Reserve. They had been talking about a rate hike for years, yet they had to continuously kick the can down the road. Who still believes these people? Apparently the Fed itself wasn’t unanimous in the decision to raise the rate (1) and they seem to have some serious doubts that they can even solve he problems… (2).

How could anyone have been so foolish to think that handing cash to the banks will lead to economic growth? I have discussed this topic many times on the Janssen Report and warned that the results of these policies would only be the creation of giant bubbles in markets (stocks/equity, bonds). This is partly apparent in the concomitant rise of margin debt, showing how much of the growth in the indices has been accompanied by a growth in borrowed money financing stock purchases.

And my expectation continues to be that a Federal Reserve rate hike will pop those bubbles. We are already seeing instability in the markets, although attributing that solely to the very minor rate hike is a little too much credit… We also need to take into account the interconnectedness of the big economies around the world. But there too there has been unprecedented ‘stimulus’ by the central banks. Just look at China (where there is true stock market turmoil), Europe (QE of more than a trillion euros) and Japan.

2016 promises to be an interesting year. Keep an eye on your stocks and seriously consider swapping some of that equity to physical gold and silver. Still one of the best hedges against the upcoming turmoil! Even UBS seems to think so (3).

View this episode of the Janssen Report (recorded in the Algarve in Portugal) here:

If you’re interested in more in-depth information on what to do, register as a free member to my Janssen Hedge Membership here.

Cheers and happy hedging this year,

Marco Janssen

The Janssen Report

Sources:

1. http://www.zerohedge.com/news/2016-01-06/fomc-minutes-show-fed-rate-hike-decision-was-not-unanimous-fear-market-reaction
2. http://www.bloomberg.com/news/articles/2016-01-04/fischer-worries-fed-can-t-head-off-or-contain-financial-crises
3. http://www.zerohedge.com/news/2016-01-06/ubs-sees-30-bear-market-get-out-stocks-buy-gold
4. http://goldsilver.com/video/marc-faber-stock-markets-will-crash-like-titanic-gold-prices-could-double-easily-from-here/
5. http://www.marketwatch.com/story/how-debt-the-dollar-and-china-could-tie-the-feds-hands-2016-01-06
6. http://www.bloomberg.com/news/articles/2016-01-05/asian-stock-futures-mixed-after-muted-rally-with-oil-below-36
7. http://www.zerohedge.com/news/2016-01-06/spot-most-manipulated-market-world
8. http://www.zerohedge.com/news/2016-01-06/stocks-freefall-nasdaq-breaks