In an interview yesterday with Greg Hunter’s USA Watchdog, David Stockman made a dire forecast for financial markets for the summer of 2017, as shown in the 26-minute video below. Mr. Stockman served as a Republican U.S. Representative from the state of Michigan and as the Director of the Office of Management and Budget under President Ronald Reagan.
He is expecting two key events on March 15 2017 are going to set in motion a major drop in financial markets by this summer. He estimated, “I expect the markets will easily correct by 20% and probably a lot more.”
1. Debt Ceiling Crisis:
First, the debt ceiling holiday which started in October 2015 expires, which will lock in the U.S. government’s debt at a limit of $20 trillion. By law, Congress will not be able to borrow any additional funds to cover spending. They will be limited to the monthly tax revenues, which is about $250 to $300 billion, but not enough to cover current spending levels. Mr. Stockman estimates the Treasury Department will run out of cash by this summer, which will cause what he calls “the mother of all debt ceiling crises.”
He expects when Wall Street realizes Congress is unable to cover their current spending commitments, it will shock investors and cause a sell-off.
Although Congress has raised the debt ceiling over 70 times in the past, Mr. Stockman believes they won’t be able to raise it this time because the current deal gives the President authority to allocate spending in the event that no new spending agreement is reached. That gives President Trump bargaining power his predecessors have not had, which increases the likelihood of a government shutdown.
He further predicts the debt ceiling crisis will derail President Trump’s plans to repeal Obamacare, cut taxes, and provide an infrastructure stimulus. He expects that will negatively impact financial markets, causing the current bullish optimism to “dissipate very quickly.”
2. Fed Raising Interest Rates:
Second, Mr. Stockman says, “They are going to raise interest rates on March 15. They have to. I’m talking about the Fed.”
If the Fed raises rates on March 15, it would cause the dollar value to go up, which fits what I have been expecting to see, the dollar getting stronger until it suddenly gets devalued. Raising rates could also be the catalyst for a drop in precious metals prices, which fits the two steep legs down, which I shared in my previous post. I am expecting to see spot silver prices drop by over $4.00 per ounce from the current market price of $18.38.
Mr. Stockman added, “The S&P 500 has been trading at 26 times earnings while earnings have been dropping for the past six or seven quarters. There is no booming recovery coming. There is going to be a recession and there will be no stimulus baton to bail it out. That is the new fact that neither Trump nor the Wall Street gamblers remotely understand.”
Later in the interview, he added, “I think we are going to have a greater depression in the stock market than we have had since 1987 when it dropped 25% in one day.”
Author: James Bailey
James Bailey is an author, business owner, husband and father of two children. His vision is to broadcast the good news of Jesus Christ through blog sites and other media outlets.
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