After today's jobs report the prospect for a rate hike in 2016 remain dismal at best.
September rate hike odds have dropped to 25%, December to 55%, and odds are those odds will drop to even further as 2016 winds down.
Which leaves us wondering just when interest rates will normalize? Or is normal these days the abby-normal.
The unconventional and untested policy of the Central Banks have created a monster, one that can only be tamed via abby-normal rate policy.
Raise rates and the equity market collapses. A mere .25% rate hike last December led to the sharpest decline for the equity market in its history.
The monster can only survive if interest rates remain low. That monster, the massive debt bubble, needs low interest rates to remain serviceable.
The excuse for low interest rates remains a viable one. Inflation is low, defying all the calls for a massive spike in inflation due to the easy money policies of the central banks.
At this stage of the game central banks would welcome inflation. It would mean their real-time global asset price inflation experiment would be working. But alas, it remains lackluster at best. Lining the pockets of executives and directors via higher share prices and dividends, has done little to help the other 99% of the world.
Perhaps inflation will remain low... forever. The global debt bubble can grow.... forever.
The Pandora's box was opened many moons ago. Since then Central Banks have moved from the periphery to the forefront of asset price discovery.
Central Banks are buying bonds, junk bonds, ETF's, manipulating their currencies... but the game has ticked up a notch.
The ECB through its bond buying program has taken the market out of the bond market. In order to manipulate it even further, they need to buy bonds from themselves.
How will this all end down the road?
If we are to learn anything, it's that the Central Banks remain hell bent on keeping asset prices aloft. They will go through any and all means to do so, even if it means swapping assets from one hand to another to increase prices. Central Banking has officially gone Ponzi.
It's 2017 or bust! I think 2017 is the year we find out just how much longer the Central Banks can manipulate asset prices.