I agree…the only time the Fed ever engineered a soft landing was 1994-95…and the conditions then were far easier to read and decipher than they are today.
I tend to agree with economist you cited. And I hope I am wrong. Much of what they article said I agree with. I think people like former congressman Ron Paul are going to look very smart when this bubble bursts.
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That’s the debt I was largely referring to. Over the past few decades or so we have had the government generate about 31 trillion dollars, which has help contribute to our current economic situation.
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You probably know this but:
The borrowing part of government borrow-and-spend is deflationary. IOW it causes unemployment.
That deflation/unemployment happens because the money does not come from nowhere (broken window). It comes from money that would have been spent either for consumption or to increase factory space etc… Borrowing 31 trillion from the free market would have had a huge negative impact on consumption and/or factory expansion etc… So the Fed “prints up” new dollars to offset that buys back the debt (adding it to the “Fed balance sheet”) and Viola! Free money.
But that “free money” has limits. Interim limits. (don’t print too much at any one time) and overall limits. Conservative economists (Monetarists, supply-siders, Austrians etc.) have bene warning for some time that we are fast-approaching the overall limit. It appears the broken clocks, (myself included) are finally right.
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Oh I see it now. Commercial bank holdings of MBS did trend to the negative, and because teh happens rarely it is somewhat disturbing. But (see chart below) it is coming down from a very high level and, ion that context, may not be all that disturbing.
“So where’s the economy going to be in two years?”
In China.
China is like a car with the engine on fire.
If you ignore the whole engine-on-fire thing you might think that is will be an economic leader in two years.
My answer did not assume China would be an economic leader in two years. But under Xiden, the US goes where China wants the US to go. If China crashes snd burns, the US economy will be a passenger in the wreck.
Extreme energy costs are forcing European industries to either shut down or move to lower energy costs. The US is likely to see some benefit. Their pain is our gain.
The war on fossil fuels is continuing. Grid collapse is increasingly likely in California where the state is mandating electric vehicles and electric appliances while shutting down power plants.
I found this perspective as well:
But investors shouldn’t put too much stock into a potential pivot by the Fed, he added. That’s because an earnings recession is imminent, and potential stock market downside from a sizable earnings decline would likely outweigh the potential upside from a Fed pivot.
According to Wilson, the earnings decline will be driven by several macro risks that companies have been forced to navigate in recent months, including China’s COVID lockdowns, a surging US dollar, higher interest rates, and weakness in Europe’s economy.
I do agree with this outlook. As I indicated before I believe the era of exponential growth is done. I think we will be in for a sluggish two years and likely beyond.
If the Dems hold the White House and Senate and take back the House in 2024 don’t you think they are going to just double down on what they have done in 2022? The reality in the minds of most, if not everyone on the Left, is that government spending (i…e. investments) is always positive. Prosperity comes through government.
I hope this answers your question:
The GOP is definitely better for the economy, including the working and middle class than the Dems are. Still I have little faith in the GOP to do what what is necessary and at this time there is no GOP leader who has even attempted to position himself as a spending hawk.
Words don’t always mean action, but so far we are not even getting the words.
1970"s here we come baby (according to this)!
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Jimmy Carter, Winston Churchill etc. became beloved statesmen by talking honestly. “it’s gonna be tough, here’s what you should do. We’re going to make it.”
The opposite is “The economy has neve been stronger. Everything is super-fine. My fellow Americans . . . half of you are greedy racist bastards. We need to start fighting against each other attacking the greedy racist bastards amongst us. My most fervent wish is for you to attack attack attack each other.”
So much of politics today is about spin and messaging, especially regarding the economy. Whenever there’s good news the message is that Joe Biden is doing a great job, and when there’s negative news it’s always someone else’s fault. The fact of the matter is, as you know, that one person (even the POTUS) has very little control over a complex Global Economy with numerous moving parts.
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Hopefully,
now that the midterms are over President Biden will change his “everything is fine come out of the storm cellar” message.
Sounding the “all clear” when things are not “all clear” is very dangerous, no less dangerous than causing an unwarranted panic.
Before the mid-terms… the economy is recovering under us. After the mid-terms… we were doing well before the mid-terms and everything was looking great, but Republicans in the House and MAGA…
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Is this related to what you are talking about?
https://finance.yahoo.com/news/global-yield-curve-inverts-signal-034130611.html
