David Stockman: Expect a Market Meltdown Before the 2016 Election

Image: David Stockman: Expect a Market Meltdown Before the 2016 Election (DreamsTime photo)

By F McGuire   |   Thursday, 19 Nov 2015



Newsmax Finance Insider and Reagan White House budget chief David Stockman warns that there will be a stock-market crash just before next year’s presidential election.

He said the markets are in for a "rough patch of time" because the Federal Reserve has reached a "ridiculous point" keeping interest rates this low for this long, he told CNBC.

"To be with emergency zero interest rates this late in the cycle has simply left the Fed between the biggest rock and hard place that I think is known in monetary history," he said.

"I suspect unless the market crashes between now and [December], they will have to raise interest rates by 25 basis points," added Stockman. "[But] they will try to say one and done and wrap it in incoherent Fed speech."

The central bank has delayed lifting rates before now since it is "playing by the seat of their pants." And it's only a matter of time before its "gibberish and incoherent" language weighs on the market and brings about the next correction, he told CNBC.

"The market has been cycling back and forth and people are beginning to realize the whole thing is a farce," he said. "The central banks have lost control and you have a few daredevils left who are trying to bid it up," he said. "One of these times we are going to plunge and there won't be any bid when we go down."

Stockman is far from the lone prominent financial voice to warn about market troubles ahead.

The Fed “would be ill-advised to begin normalizing interest rates in December” amid the Paris terroist attacks, Japan's re-emergent recession, the continued crash in commodities and the softness in U.S. economic data, warns Ron Insana, a CNBC and MSNBC contributor.

"While no one, myself included, would like to see rates at zero forever, given what that implies about the state of the global economy, the Fed must deal with the world as it is, not as it wishes it to be," Insana, the author of four books on Wall Street, wrote on CNBC.com.

"At this tender moment, the world is neither safe, nor economically secure. This not the moment to test the resilience of the economy, this is a moment to protect the gains that have thus far been made," he wrote.

Donald Trump warned that “a lot of bad things can happen,” such as a recession, when the nation’s central bank finally hikes interest rates, which he alleges have been kept low for so long for political reasons.

The Federal Reserve already should have raised interest rates from the very low levels set during the Great Recession, and he suspects Fed Chair Janet Yellen has delayed doing it for political reasons, USA Today reported.

"When you raise interest rates, I think a lot of bad things can happen, in terms of recession, everything else," he told the newspaper, suggesting she wants to wait until the next president is poised to take over.

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