My stocks today look like my bank accounts did before I served my first wife with divorce papers. Are we headed towards recession? How long will it last?
Well, there are any number of contingencies that could impact events, thus making a definitive answer somewhat problematic. However, overall, the odds tend to favor a recession if for no other reason than the current high rate of inflation will tend, over time and all other things being equal, to depress aggregate demand and thereby induce an economic contraction.
Indeed, there has already been one economic quarter - the most recent - where economic growth declined. (By about 1%.) Technically speaking, two quarters in a row of negative economic growth meets the academic definition of a recession. So in that sense the nation is already half way there.
More important, the historical precedents do not augur well.
The current economic period resembles nothing quite so much as the late 1970s. Rising energy prices and lagging productivity resulted in a high inflation rate. Indeed, in 1979 the inflation rate hit 14.5% - the highest ever recorded in peacetime since statistics began to be kept and 13.1% in 1980 - the first time the nation recorded a two years of back to back double digit inflation in peacetime. (Just for comparison, the current rate of inflation is 8.5%.)
Also set against this backdrop, the international scene became quite tumultuous. The USA was not, at this point, energy independent. OPEC raised oil prices to the then unheard of double digit levels per barrel. The United States was facing the Iran hostage crisis and the (then) Soviet Union invaded Afghanistan. These things adding further uncertainty to the global economy.
To this, the Federal Reserve responded by raising the prime interest rate - the rate banks charge to their best customers - to 21.5%. The result was the 1980-1982 "double dip" recession, where the unemployment rate peeked at the highest level since the Great Depression at 10.8%. (This being even higher than the 10.1% level reached in the so-called "Great Recession" of 2007-2009.)
The other relevant precedent going back to 1919. President Biden has blamed the pandemic for part of the inflation rate. To be sure, while some of this is simply an attempt to avert responsibility for the state of the economy, there is no doubt that the pandemic has been a factor. Similarly, in 1919, there was the Spanish Influenza pandemic and what was, to that time and in the wake of World War I, a short but extremely severe economic depression. (Now called the "Forgotten Depression" after the Great Depression of the 1930s hit.)
These precedents in the rear view mirror, and with the Federal Reserve belatedly raising interest rates as inflation has already gotten away from it, the odds are for a recession - and potentially, if the past is prologue, a fairly deep one. It is not impossible that unemployment could hit double digit levels. This being particularly devastating given that the economy is currently at statistical full employment.
Indeed, this being ironic is that the high level of employment is pushing up wages and therefore demand even as productivity and supply chain issues are increasing shortages in the economy. Inflation, it being noted, is classically defined as too many dollars chasing too few goods.
The Democrats, as the party of the New Deal-Fair Deal-Great Society especially harbors the idea that it is capable of managing the economy. The current failing about of the Biden Administration calls that into question. Put that all together and if a recession is avoided, it will likely be more a matter of luck than skill.
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Anonymous
(45 Plus)
+1 y
The economy of man rises and falls... but the economy of God is always abundant. Ever asked yourself why the economy fluctuates so much? Strange how Governments can always find enough money for wars, useless 'vaccines' that do nothing, and money to build anything they wish... yet not enough money for housing the homeless... it's all an illusion. Look toward the economy of God... both the natural and the supernatural. To learn more read the book 'Prayers and Promises for Financial Breakthrough by Joan Hunter'.
Try seeding small amounts based on scripture and see what happens... then invite the super natural element of finance into your life and you will understand why the News Broad... casts poverty to make you think that's all that exists. Pro tip... a broad cast is a spell cast broadly... most of you are under it.
Arguments can be made that what we're seeing is actually just the 2008 crash, can-kicked into today/the next several months.
A housing and an asset (stock) crash are both imminent. Housing crash in China is imminent/in progress. Sixth COVID wave with Omicron variants is incoming with more crashes.
We're about to hit an age of strife not seen since WW2, soon worry about finances will give way to real existential threats. Do what you can to prepare and pray I am mistaken.
I could list a dozen civilization ending threats that are all reaching a crescendo right now.
Try to enjoy the now, as I suspect things are going to get much worse before they get better.
This is only the start. With Biden and his DEMOCRATIC COMMUNIST PARTY running thing it is going to get very very expensive very fast. bread if you can get it will be around $4 a small loaf, milk will be $6.50 to $7.50 a gallon of gas will be by summer for regular, eggs $5 a dozen. Speaking of which did you know that 18 major food processing plants have burned to the ground in over a year. I think 1 or 2 fires might be normal but 18 is a stretch of the imagination.
Yea we are honestly, Trump said this would happen if Joe biden came into office. Looks like he may be right. I don't why its happening but i hope it fix's itself
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Anonymous
(30-35)
+1 y
We’ll be lucky if it isn’t twice as bad as 2008. This pandemic and the government spending has reached unfathomable levels. Shutting down the economy for covid will cost us generations of suffering. And for some reason the climate change spending is still being pushed as if it won’t cause a Great Depression. Housing is expensive now, but a lot of people will be living on the streets soon.
Yes. Interest rates are rising quickly and the purpose of the rise is to slow the economy down. This almost always slows things down too much, resulting in a recession.
My coworker and I have been making bets for the last year on when it’s going to free fall. It’s been propped up since 2019 and I think they are starting to lose control of it. Contrary to popular belief, Covid and lockdowns are not the primary cause.
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