Using models with little relation to reality, the economic and financial commanders and controllers think they can pull the economy out of the hole they’ve dug for it. From Hunter Hastings at lewrockwell.com:
Economists and Wall Street analysts are using the word recession to describe the looming plunge in output in the US economy. We’ll just make the point early that economists, exhibiting the typical emptiness of their failed science, can’t even agree on the definition of recession.
Undeterred by lacking a definition, the geniuses at Goldman Sachs and elsewhere on Wall Street are unrestrained in predicting the imminent arrival of the condition they can’t describe.
As is always the case, people understand the condition that economists can’t even describe in theory. They understand the lost jobs and wages, the reduction in activity at the businesses where they work, fewer shifts, fewer hours, a smaller paycheck, or layoffs or furloughs, unemployment and the need to ask the government for handouts to get by and to feed their families, when they’d rather be helping themselves. They understand uncertainty and disruption, they feel the fear of not knowing their own economic future. Recessions, like all economics, are subjectively experienced in the human mind, in individuals, in families, in communities.
Jeffrey Gundlach is one of the world’s most astute bond fund managers and economic prognosticators. From Martin Luscher at Finanz und Wirtscaft via zerohedge.com:
Central banks are easing, and stocks have reached a record high. But that doesn’t mean that everything is okay. Jeffrey Gundlach sees big trouble ahead. The CEO of the investment firm DoubleLine is worried about the development of corporate debt. But also the levels of government debt and the US equity markets are not sustainable. According to Gundlach, investors have to brace for significant disruptions.
Mr. Gundlach, what would you recommend to investors?
They need to position themselves for the next global downturn because it will lead to substantial changes in the markets.
When will the downturn come?
It doesn’t matter whether it comes in one year or four. If you don’t start preparing now, you will maybe do better while the economy continues to do okay, but whatever gain you get from that will be overwhelmed by problems with your investments in the downturn.
Michael Snyder is usually pessimistic, but he’s got hard evidence to back up his pessimism. From Snyder at theeconomiccollapseblog.com:
There should no longer be any doubt that the U.S. economy is slowing down, but most Americans still don’t realize what is happening because the major news networks are completely focused on the endless impeachment drama that is currently playing out in Washington. And without a doubt that is important, because it threatens to literally rip our entire nation in two. But meanwhile, economic activity has taken a very ominous turn. Hiring is slowing, consumer confidence is plunging, defaults on auto loans are rapidly escalating, the “transportation recession” continues to get deeper and it appears that the housing bubble is popping. Everywhere we turn, there are signs of economic trouble, and many are deeply concerned about what this will mean for us as we head into a pivotal election year in 2020.
Sometimes you have to take a system down completely to have any hope of coming up with anything better. From Charles Hugh Smith at oftwominds.com:
Does anyone really think The Everything Bubble can just keep inflating forever?
What do I mean by a profoundly shattering recession? I mean, a systemic, crushing recession that can’t be reversed with central bank magic, a recession that only deepens with time. The last real recession was roughly two generations ago in 1981; younger generations have no experience of a profound recession, and perhaps older folks have forgotten the shock, angst and bitterness.
A profoundly shattering recession leaves tremendous damage and pain in its wake. Millions of people who reckoned their position was secure get laid off, businesses that looked solid melt into air, large corporations flip from hiring thousands to firing thousands, and everyone on the edge of insolvency gets a hard push over the cliff.
Profoundly shattering recessions feed on themselves in a self-reinforcing dynamic: the first domino could be a supply-shock, or a decline in demand due to credit exhaustion. Since businesses have cut everything to the bone in the past decade, there are no buffers left: layoffs begin immediately, and those layoffs further reduce demand as households have to tighten their belts to survive as even those who escape the first round of layoffs find bonuses and overtime have been slashed.
Since the problem isn’t high interest rates, central banks reducing rates or pushing them into negative territory only reveals their impotence. If negative interest rates boosted the real economy, Europe and Japan would be experiencing rapid expansion instead of stagnation.
Layoffs, the failure of central banks and soaring fiscal deficits trigger a drop in consumer and investor sentiment which feeds back into declining sales and profits, which then trigger more layoffs as businesses must cut expenses as revenues crater.
The media is admitting to the recession threat because we’re heading into a recession. From Brandon Smith at alternative-media.com:
One thing that is important to understand about the mainstream media is that they do tell the truth on occasion. However, the truths they admit to are almost always wrapped in lies or told to the public far too late to make the information useful. Dissecting mainstream media information and sifting out the truth from the propaganda is really the bulk of what the alternative media does (or should be doing). In the past couple of weeks I have received a rush of emails asking about the sudden flood of recession and economic crash talk in the media. Does this abrupt 180 degree turn by the MSM (and global banks) on the economy warrant concern? Yes, it does.
The first inclination of a portion of the liberty movement will be to assume that mainstream reports of imminent economic crisis are merely an attempt to tarnish the image of the Trump Administration, and that the talk of recession is “overblown”. This is partially true; Trump is meant to act as scapegoat, but this is not the big picture. The fact is, the pattern the media is following today matches almost exactly with the pattern they followed leading up to the credit crash of 2008. Make no mistake, a financial crash is indeed happening RIGHT NOW, just as it did after media warnings in 2007/2008, and the reasons why the MSM is admitting to it today are calculated.
Before we get to that, we should examine how the media reacted during the lead up to the crash of 2008.
Multiple mainstream outlets ignored all the crash signals in 2005 and 2006 despite ample warnings from alternative economists. In fact, they mostly laughed at the prospect of the biggest bull market in the history of stocks and housing (at that time) actually collapsing. Then abruptly the media and the globalist institutions that dictate how the news is disseminated shifted position and started talking about “recession” and “crash potential”. From the New York Times to The Telegraph to Reuters and others, as well as the IMF, BIS and Federal Reserve officials – Everyone suddenly started agreeing with alternative economists without actually deferring to them or giving them any credit for making the correct financial calls.
A recession in the near future would doom Trump’s reelection chances. From Antonius Aquinas at antoniusaquinas.com:
With the recent ominous inversion of the 2-10 year yield curve and its near infallible predictive recessionary power, the consequences for the economy are plain to see, however, what has not been spoken of by pundits will be the effect of a recession on US foreign policy. If a recession comes about prior to November 2020, or if economic indicators such as GDP plummet even further, the chances of a Trump re-election is extremely problematic even if the Democrats nominate a socialist nut case such as Bernie Sanders or Pocahontas.
Elizabeth Warren has been the most vocal about coming economic troubles:
Warning lights are flashing. Whether it is this year or next year, odds of another economic downturn are high – and growing. . . .
When I look at the economy today, I see a lot to worry about again. I see a manufacturing sector in recession. I see a precarious economy built on debt – both household debt and corporate debt and that is vulnerable to shocks. And I see a number of serious shocks on the horizon that could cause our economy’s shaky foundation to crumble.*
There’s a real economy out there that’s a lot different, and worse off, than the one suggested by Washington’s statistics. From MN Gordon at economicprism.com:
One of the more disagreeable discrepancies of American life in the 21st century is the world according to Washington’s economic bureaus and the world as it actually is. In short, things don’t add up. What’s more, the propaganda’s so far off the mark it’s downright insulting.
The Bureau of Labor Statistics (BLS) reports an unemployment rate of just 3.7 percent. The BLS also reports price inflation, as measured by the consumer price index (CPI), of 1.8 percent. Yet big city streets are lined with tents and panhandlers grumble “that’s all” when you spare them a dollar.
In addition, good people, of sound mind and honest intentions, are racking up debt like never before. Mortgage debt recently topped $9.4 trillion. If you didn’t know, this eclipses the 2008 high of $9.3 trillion that was notched at the precise moment the credit market melted down.
Total American household debt, which includes mortgages and student loans, is about $14 trillion – roughly $1 trillion higher than in 2008. Credit card debt, which is over $1 trillion, is also above the 2008 peak. To be clear, these debt levels are not signs of economic strength; rather, they’re signs of impending disaster. Moreover, they’re signs that American workers have been given a raw deal.
How is it that the economy’s been growing for a full decade straight, but the average worker’s seen no meaningful increase in their income? Have workers really been sprinting in place this entire time? How did they end up in this ridiculous situation?
The political agenda isn’t hidden at all: the mainstream media would love a recession to arrive before next year’s election and they’ll hail any new negative economic development. From Michael Snyder at theconomiccollapseblog.com:
All of a sudden, it seems like the mainstream media just can’t stop talking about “the coming recession”. If you go to Google News and type in the word “recession”, you will literally get dozens of articles from the last couple of days with “recession” in the headline. And of course it is true that there are signs of global economic trouble all around us, and I have been documenting them on my website all throughout 2019. So we don’t want to criticize the mainstream media when they actually decide to tell the truth, because a recession is definitely coming, but could it be possible that there is also a hidden political agenda at work? The economy is generally regarded to be one of the bright spots for President Trump, and political operatives on the left clearly understand that a major economic downturn now would spell almost certain doom for Trump’s chances of winning the 2020 election. And when mainstream reporters talk about the possibility of a recession as we approach the next election, many of them almost seem gleeful as they describe how it could hurt Trump politically. Ultimately, when things start to really get bad it is inevitable that the mainstream media will place the blame directly at the feet of Trump. It is easy to imagine a narrative along the lines of “Trump’s handling of the economy has plunged the nation into a recession” being relentlessly pounded into the heads of American voters over the next year. And if the end result is Trump being voted out of office, more than 90 percent of those that work for the big news companies will be just fine with that.
There are all sorts of indications that a recession is coming. From Sven Henrich at northmantrader.com:
Yesterday’s announcement by the Trump administration to delay some of the new tariffs on China it just announced a few weeks ago was initially greeted with relief by equity markets across the globe. This proved to be mistake as reality is dawning and global stock markets are selling off hard just a day later on ever weakening economic data in Europe and Asia and further yield curve inversions.
Call it a major hangover as the reversal in tariffs was not coming from a position of strength, it was coming as a result of global economic reality sinking in, a reality that is making its way rapidly to US shores as well. The collapse in global yields has been a theme since October of 2018 with the US 10 year dropping to 1.6% from its October 2018 high of 3.25%, but only now that the 2 year/10 year yield curve has inverted are the official recession alarm bells ringing. Why? Because every single recession in the past 45 years has seen a 2 year/10year yield curve inversion preceding it.
To believe no recession is coming is to argue that this inversion is defying history. And indeed let’s look at history, because it is now used to argue that this yield curve inversion leaves room for further market rallies to new highs. Does it?
If history is a guide, then the answer is yes but market relevant timing can vary quite a bit and depending on how the data is framed up you can get different conclusions.
The crash is going to be worse than what’s happened in the past, simply because debt levels are higher. From Sven Henrich at northmantrader.com:
They’re right. It IS different this time. It’s worse. Much, much worse. What is? Everything. In terms of preparedness for the next recession that is. Debt is higher than ever, be it corporate debt, government debt, central banks balance sheets, available ammunition to deal with a new recession, wealth inequality, the social divisions and political extremes, and now trillion dollar deficits, everything points to a much more fragile system. Oh yes on paper low rates keep it all afloat, but the context is as ugly as it gets.
Here we are, the great collapse unfolding in front of us. With yesterday’s Fed meeting we witnessed a confirmed breakdown in central bank narratives over last the year, an utter capitulation to market realities that are forcing central banks to commence the new easing cycle. No, this is not a temporary little rate cut event they are promising, it’s a new cycle. The Fed yesterday offered a 3 rate cut outlook, precisely what markets had been pricing in. The Fed bowing before market demands. Give us drugs. Yes, whatever you want, you got it.
The response: An overnight collapse in yields to now below 2% on the 10 year, the lowest reading since the US election in 2016.