SLL’s money is on an extremely “hard” landing. From Michael Maharrey at schiffgold.com:
There is a growing consensus that the Federal Reserve can slay price inflation while guiding the economy to a “soft landing.” In fact, Fed economists now project the US economy will not spin into a recession. Other mainstream pundits and prognosticators have taken up this narrative. But there are plenty of reasons to doubt it.
Folks who are sanguine about the economy rely primarily on three metrics. First, we saw relatively strong GDP growth in the second quarter and the Atlanta Fed recently upped its Q3 GDP estimate to 5.9%. Second, the official labor market numbers continue to reflect strong job growth. And finally, despite rising interest rates and sticky price inflation, consumers have continued to spend money.
We can certainly question the veracity of some of this data, but even taking these three metrics at face value, there are plenty of reasons to believe the economy is quickly spiraling toward a recession. Consumers and businesses are being stretched to the limit by a combination of enormous debts, rising interest rates and persistent price inflation.
Here are 10 reasons to doubt the soft landing narrative.
- Excess savings are running out. One of the reasons consumers have been able to keep up with price inflation is the fact that they piled up a lot of excess savings during the pandemic year. But that savings is nearly gone. Aggregate savings peaked at $2.1 trillion in August 2021. As of June, the San Francisco Fed estimated that aggregate savings had dropped to $190 billion. In other words, Americans have blown through $1.9 trillion in savings in just two years. At this pace, all of the excess savings Americans accumulated will be gone sometime during the third quarter.
