I started Pento Portfolio Strategies three years ago with the knowledge that the unprecedented level of fiat credit creation had rendered the globe debt disabled and would result in mass global sovereign default. As a consequence, there would be wild swings between inflation and deflation dependent upon the government provisions of fiscal stimulus, Quantitative Easing and Zero Interest Rate Policies…

For much of the third quarter the US Federal Reserve has avowed to raise rates. This in turn caused a sharp stock market correction on a worldwide basis. The flattening of the Treasury yield curve and the strengthening of the US dollar were the primary culprits. But then the September Non-Farm Payroll Report came in with a net increase of just 142k jobs, which was well below Wall Street's expectation. The unemployment rate held steady at 5.1% but the labor force participation rate dropped to the October 1977 low of 62.4%. Average hourly earnings fell 0.04% and the workweek slipped to 34.5 hours. There were also significant downward revisions of 22k and 37k jobs for the July and August reports respectively.

The jobs data had previously been heralded by the Fed and Wall Street as the one bright spot in an otherwise dull economic picture; and gave the Fed extra incentive to move off of zero—as if offering free money to banks for seven years wasn't compelling enough. But at least for now the weak data has caused the Fed to step back from jumping of the cliff on raising rates, which has caused a swift move lower in the value of the dollar and boosted the prospects for multi-national corporate earnings.

The reasons why Wall Street is so enamored with ZIRP and QE are clear. Here is a partial list of what will start to occur once the Fed moves away from the zero-bound range: