Recession could stop President Trump's re-election

A strong economy is expected to help Republicans keep control of the Senate and House in the midterm elections. However, many experts see a recession in 2019-2020. No president has been re-elected during a recession started in his first term.
By: Dr. Steve Johnston, author.com
 
 
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Recession
Presidential Election
President Trump

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Location:
Brookings - Oregon - US

BROOKINGS, Ore. - Aug. 29, 2018 - PRLog -- The Federal Reserve is draining $50 billion dollars a month off their balance sheet by letting Treasury bonds expire.  This forces the Treasury to sell bonds to pay the Fed cash.  The Treasury is also forced to sell $80 billion dollars in bonds per month to finance the current $1 trillion dollar deficit.  With the Treasury selling $130 billion bonds a month, and the Federal Reserve raising the fed discount rate, interest rates are rising as the Fed reverses Quantitative Easing.  The spread between long-term rates and short-term rates has narrowed.  As the Fed tightens and Treasury sells bonds, the yield curve will invert.  An inverted yield curve (with short term rates higher then long term rates) is a sign of tight money, and is historically followed by a recession.  Just as the Fed created money to buy Treasuries and MBS during QE, it now destroys money as these securities "roll off" the balance sheet.  The Fed plans to shed approximately $400 billion in securities in 2018 and $600 billion in 2019.  During the same period the Treasury will have to fund $2 trillion in deficits.

During the next two years the European Central Bank will also be unwinding its QE program, this will lead to increasing world interest rates.  The markets are potentially on a collision course for disaster.  As market rates spike, financially weak companies will find it harder to meet their obligations and rollover debt.  The bursting of the bubble in Treasuries will cause a massive interest rate shock that will drive many U.S. consumers into insolvency and send many people throughout the globe into poverty.  QE caused a bubble in the stock market, real estate, and commodities.  The reversal of QE will cause a crash of Biblical proportion.  If this occurs before 2020, President Trump's chances of re-election could be doomed.

For more info on current events see:

Dr. Steve Johnston, author.com
http://drstevejohnstonauthor.com/Blog/Editorials/Editorials/

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Page Updated Last on: Aug 29, 2018
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