Society & Politics

Are we headed for double dip recession?

Are we headed for a double dip recession? The recession of 2021/2022 already happened. We had our negative growth and nosedive in some sectors of the economy like housing. We had a sharp decline in household wealth and a failure to increase employment back to 2019 levels that seemed like it was going to be a sure thing two years ago. The big question is, is a second round of recession coming that will be even worse?

The overwhelming consensus among “experts” (I’ve come to always think of that word as worthy of air quotes) is that a 2023/2024 recession is inevitable. And the majority think it will be worse than the one in 2021/2022.

If you look at the fundamentals of where we are after the first recession, real wages down, household debt up, household wealth down, inflation still at historic highs, record level of out-of-control government deficit spending on waste, fraud and abuse and its subsequent continued upward pressure on inflation, the loss of energy independence, a record invasion of welfare dependent illegal aliens and the 2022 stock market’s worst performance since 2008, it is sure looking like the elements are in place for a whopper of yet another recession ahead. Vanguard reported recently that an all time record number of people are taking hardship withdrawals from their retirement plans. None of this points to consumer led economic bliss ahead and its hard to find a case for that ,absent some kind of counter offensive against current failed economic policies, that the economy won’t suffer even more on the road ahead. Some are predicting a “slowsession” meaning instead of a sharp decline in growth followed by a boom recovery you get a protracted period of little to no growth and a slow loss of jobs. Which is worse I am not sure.

It seems incredible that just two short years ago we were on course for an epic economic boom and recovery from the pandemic with an incredible pace of 6.3% GDP growth and 1.4% inflation! It seemed unstoppable. But somehow Washington found a way to derail it against all odds. How quickly the financial media forgets.

As I’ve previously noted, I think the Fed has the pretty impossible task of cutting the size of the fed funds rate increases while at the same time convincing the public that their attack on inflation will be relentless regardless of the effects on the economy. It’s hard to place a bet on that effort being successful. If you look at Jerome Powell’s track record from the last rate cycle 2018/2019, there isn’t much there to indicate that he will continue to tighten for long and force millions of more people out of work, especially in an environment where there are already fewer people working than there were 3 years ago, where supply chains are broken due to the lack of workers and where the government is incentivizing people not to work with constant handouts and threats of higher taxes rather than incentives to get to work such as tax cuts.

One unknown however is how effective the new congress will be in mitigating some of the government spending corruption that is crushing American household wealth and buying power. While a change of hands in the House is significant, the majority is slim and unlike the Democrats, Republicans allow descent in their ranks and free thought. That has proven a difficult challenge for them as while, consistent with their ideology, Democrats generally vote in lockstep with the way their leadership tells them to vote, Republicans, also consistent with their ideology, exercise their own free thought. The core of their belief is that freedom will ultimately triumph over authoritarianism in spite of what appears to be the weakness of allowing descent. This congress will be an interesting test of that belief.

So will there be recession? Still too many unknowns to determine in my view. The fundamentals for it are well in place, but there is some hope that some of that may change with the new congress or at least be prevented from getting worse. I still give it a 50/50 stamp in spite of the overwhelming consensus for it although I admit I may be erring on the optimistic side. It’s a new year. Keep hope alive.

Result of Democrat Economic Policies
Result of Democrat Economic Policies
Are we headed for double dip recession?
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