Citibank Calls For Helicopter Money Drops Across Globe

A quietly panicking Janet Yellen and the Federal Open Market Committee (FOMC) decided the U.S. economy still isn’t ready for an interest rate hike last week and left the Fed funds rate at essentially zero – the same level to which the Fed’s credibility has now sunk.

After incessantly hyping the notion an economic recovery would allow the “normalization” of interest rates, the decision not to act suggests the economy is much weaker than they have attempted to persuade us.

And it may be getting worse.

Injecting monetary stimulus is easy – any old fool can do it. Removing the extraordinarily easy money after cultivating an addiction in bond and equity markets over most of the past decade, turns out to be hard. Maybe downright impossible.

In any event, precious metals, which were shunned in the futures markets throughout the summer, finally got some love. Silver gained nearly 4%, and gold prices rose nearly 3% for the week.

Stock prices also rallied initially on the Fed’s decision not to hike rates. But equity markets relinquished all of those gains on Friday. Wall Street has begun grappling with the possibility of a worldwide recession.

Citibank (C) Fears a “Global Recession” Looms

The Chinese economy is sputtering and close to an outright stall. Brazil, Russia, and India – the other BRIC nations – are already in serious trouble. The malaise in emerging markets may well spread to Europe and the U.S.

Queue up the Keynesians…

According to Willem Buiter, chief economist at Citibank, “A global recession starting in 2016 led by China is now our Global Economics team’s main scenario. Uncertainty remains, but the likelihood of a timely and effective policy response seems to be diminishing.”

Here in the U.S., investors are once again taking note of storm clouds on the horizon. The S&P 500 fell 8% from its highs this summer. Buiter would like to see central bankers pouring on more monetary stimulus. In fact, he is calling for central bankers to pull out all the stops this time: