The economy will fare badly in the coming months and years, warns forecaster François Trahan, who is considered the authority on Wall Street.
The stubbornness and incompetence of the Federal Reserve of the United States (FED), particularly its chief Jerome Powell, revealed in the midst of the pandemic, is fueling the debacle, argued François Trahan during the recording of the Contact podcast.
According to him, both inflation and recession were foreseeable from the start of the pandemic, but the US Federal Reserve acted slowly and stubbornly ignored the warning signs.
“It’s a bit incomprehensible. We think that in this type of institution, people design scenarios that contradict their main vision, like all fund managers around the world do, but saying in March 2021 that there is no inflation without really looking at everything going on, it’s worrying,” he said, noting that inflation hit a 40-year high before the Fed took it into account.
“The Federal Reserve doesn’t seem to be able to see what’s coming in even a month. Their ability to see the economy coming doesn’t seem to be there,” he added.
According to him, raising interest rates four times by 75 basis points is symptomatic of “something is wrong”. “We made mistakes to get there,” he said at the Stéphan Bureau microphone.
If the US Federal Reserve hadn’t stuck its head in the sand or if there had been more voices, the forecaster says, “we would still have had a rate hike, but it would have been controlled and there would have been no panic. The markets would probably have developed differently last year.
Conflicts of interest on Wall Street
The big financial institutions have no interest in deterring investors. Strategists and economists are also encouraged to make positive forecasts, according to the former Wall Street star, now at the helm of the International Strategy and Investment Group.
“As a strategist at a large bank, there is a lot of pressure to be positive. [dans ses prévisions économiques]. “Seeing Life in Pink”. It’s not uncommon for the research director to come up to you and say, ‘Don’t you think the wins could be a little higher?’” he said.
It’s even common to hear in the aisles of big banks that the strategist will earn a large salary because he’s “positive,” argued Mr. Trahan, noting that many Wall Street strategists don’t denounce or make themselves heard can obtain due to the conflict of interest in which they find themselves.
Inevitable economic crisis
The first economic indicators are currently showing that the recession is imminent, François Trahan reminded in an interview with Stéphan Bureau. “An economic downturn is a discovery process and the more the economy slows, the more pressure it puts on the system. At some point something breaks,” he said.
According to him, the looming economic crisis could lead to an unprecedented budget crisis for several G7 countries. He remains convinced that the landing will not go smoothly.
All episodes of Contact hosted by Stéphan Bureau are available on the Qub Radio website.