Bump at the request of Dellery.
I'll give my analysis. Predicting timing is notoriously difficult, and I have memories of a famous bet I made with Greg many years ago. There's also the case of Japan, which finally appears to be cracking, after decades on monetary craziness. The US has $30 Trillion in Fed debt, and it now grows at over $1 Trillion per year, which is accelerating. So the fact that it WILL default is a given. WHEN that happens can't be predicted as it is based on a loss of confidence. But here's what I'm seeing:
The relief rally is complete or near complete, and the 3250 target looks viable on the S&P. At that point we are at risk of an extension down, which would be in the low 2000's. If that occurs, that will signal the end of Fed tightening and they'll be forced to step in as the alternative would be bank collapses, fund blow ups, and wide spread bankruptcies.
A good go-by number is 2%. When the Fed gets rates to that level, I'll be very worried. Right now the Fed is in a tightening cycle, which means dollar strength vs. gold. In June they end QE (currently they are tapering it off). There will definitely be another rate hike, likely to 1.5%. Bottom line is the Fed's actions to fight inflation will result in a recession. It's going to be a big recession. The updated GDP for first quarter shows negative 1.5%, a contraction. Second quarter, ending in June will also show a contraction, which makes a recession official. So in a few months you are going to see the unemployment, bankruptcies, and serious problems in the housing market. We will get the demand destruction and relief in prices to a degree. Fuel prices will drop assuming that Russia keeps supplying energy products. A physical stoppage of supply will result in economic Armageddon.
On the downside the recession will result in a much bigger US deficit, so US debt levels will race higher. Thus the Fed will step in with massive QE to soak up the US debt and rescue the bankers.
They'll keep it going for a little longer, but what their reaction will do is start the next Fed cycle (by the way, early on when the Fed starts, the stock market should go up). So the next inflation wave will be set. These waves are coming quicker, so maybe they can keep things limping along for 2 years.
Unfortunately with the usurious debt burden still in place, any economic recovery will fuel price increases and the Fed will be in a far worse situation than today. I think this is their last go at it. The debt levels will be so huge any tightening will be catastrophic.
Wild card is Europe, which is far worse than the US. With their sky high energy costs they only have months until a crushing economic implosion. Those things are contagious and will come to the US.
So my summary: Short end, we have only months left due to Europe and possible Russian energy disruptions. Long end, the Fed can keep the US limping along for 3 years, and then it's checkmate due to US debt levels.
