Economic Collapse The End Of 2017? Bill Gross // Recession could happen if Fed follows dot

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01. whether they follow their own plan now up until this point Brian as you know the market expected basically nothing in terms of a Fed fund increase over the next six to twelve months maybe 20 or 25 basis points but not much and so you know the market believes they can't raise interest rates very much the Fed continues to maintain that they should that they should normalize you know the the curve and they should normalize the balance sheet by reducing it you know we're just gonna have to see I think they have to be very careful because it's a highly levered US economy it's a highly levered global economy and currencies in the dollar and other you know related assets like gold will move you know substantially if the Fed overstates its case what do you how do you think they're gonna take today's market reaction we know now that they really do look at the market stocks calm but we're seeing if you look at the intraday chart of the 10-year and the two year a sharp rise how is the Fed gonna like that or is that gonna bother them yeah I don't think the Fed would like it I think the Fed basically wants to normalize the curve and that has produce a steeper curve than what exists now why would they want that because that favors banks and that allows for credit to flow more easily when their curve is steeper as opposed to flatter and so you know today's flattening move it's not substantial but it's two to three basis points I think works against them one of the reasons that they wanted to reduce the balance sheet was simply to to allow that curve to steep in a little bit what they've done on the other side though is to suggest on the market that increases going forward in terms of Fed Funds are still in place and the the dots suggest that they are perhaps 75 basis points over the next 12 months and so the curves flattening I don't I don't think they'll like that yeah it important if I'm gonna translate a little bit for the novice viewer who's watching interest rates like the two-year and the ten-year go up they think interest rates are rising that's good but the fact is even as they rise the difference between the 2 and the 10 is actually getting closer together and so that's not necessarily good in terms of what the Fed is hoping for and I think they have to be careful because you know most private economists look at history and they see that recessions come when the to and the 10-year yield is basically flat or the same you know to my way to thinking that's not correct to my way to thinking the leverage inherent now that they really do look at the market stocks calm but we're seeing if you look at the intraday chart of the ten year and the two year a sharp rise how is the Fed gonna like that or is that gonna bother them yeah I don't think the Fed would like it I think the Fed basically wants to normalize the curve and that is produce a steeper curve than what exists now whether they follow their own plan now up until this point Brian as you know the market expected basically nothing in terms of a Fed fund increase over the next six to twelve months maybe 20 or 25 basis points but not much and so you know the market believes they can't raise interest rates very much the Fed continues to maintain that they should that they should normalize you know the the curve and the why would they want that because that favors banks and that allows for credit to flow more easily when the curve is steeper as opposed to flatter and so you know today's flattening move it's not substantial but it's two to three basis points I think works against them one of the reasons that they wanted to reduce the balance sheet was simply to to allow that curve to steep in a little bit what they've done on the other side though is to suggest on the market that increases going forward in terms of Fed Funds are still in place and the the dots suggest that they are perhaps 75 basis points over the next 12 months and so the curves flattening I don't I don't think they'll like that yeah it important if I'm gonna translate a little bit for the novice viewer who's watching interest rates like that you should normalize the balance sheet by reducing it you know we're just gonna have to see I think they have to be very careful because it's a highly levered US economy it's a highly levered global economy and currencies in the dollar and other you know related assets like gold will move you know substantially if the Fed overstates its case what do you how do you think they're going to take today's market reaction we know now