Reagan Budget Director and Newsmax Finance Insider David Stockman
warns that the Federal Reserve’s policy tactics have bushed the U.S.
stock market to the brink of disaster.
"As soon as the markets realize that the Fed and the ECB are out of
ammunition, it's over," Stockman recently told
"I think we're in an extremely unsafe
world — we've never been here before," he said.
"Global deflation is going to turn into a recession worldwide," said
Stockman. "They're out of ammo to deal with it," he said.
"I would liken the Fed to a blindfolded arsonist. Armed, dangerous
and lost," the former director of the Reagan-era Office of
Management and Budget said.
"They can't possibly believe that they're going to wait out this
cycle at zero interest rates at an economy that's at peak debt," he
said. "I think they'll hike one more time this year or they'll make
an excuse why they can't," he said.
"The world economy is drifting into recession and we are not
decoupled," said Stockman. "We are not exempt."
The S&P 500 has staged a more than 10 percent comeback since
February's low but Stockman said broad swings are nothing but the
beginning of a long and burdensome bear market, CNBC explained.
"We're still in no man's land. We've had a dead cat bounce. It's
been strong," Stockman said. "The only thing left is to bury the
cat!"
Stockman's target on the S&P 500 is 1,300, a 36 percent drop
from Thursday’s open of 2,038.
UCLA economics professor Roger Farmer is among those who
maintain that a prolonged slump in the market can actually help
cause a recession or, conversely, help boost economic growth
when stock prices enjoy a long-lasting rally.
"If the market goes back up again soon, as it did after last
August, I think we'll be OK. I don't think there will be a major
recession. On the other hand, if the market stays down or goes
down further and stays down for a month or two months or three
months, then you want to start worrying," he told the
L.A. Times. "If the
market stays down and we all stay unhappy and depressed about
what's going to happen, that will be self-fulfilling."
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