Yes it is related.
Yield curve inversions (aka interest rate inversions) are a sign of a recession.
The one I mentioned is a sign of a recession but not as bad and scary a sign as I initially thought.
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Could stagflation be in the cards then?
“Our best guess is that we’re going to be in a period of stagflation for several months through maybe most of next year,” he added, referring to a toxic combination of stagnant economic growth and stubbornly high inflation."
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There is almost always a brief period of stagflation at the beginning of a recession.
Typically it is brief.
This time there is so much “cheap money” to be worked of the system
almost any scenario (including some very scary ones) are possible. The amount of worldwide QE was just nuts.
It looks like BOA agrees with you:
This year, there’s been a process of payback for the boost markets have had from decades of low interest rates and stimulus, both fiscal and corporate, Subramanian said.
“The bad news is, in 2023, the process of unwinding easy money could start to impact the economy,” she said.
And it’s not just a recession that will rattle markets next year, according to Bank of America. Rising interest rates, red-hot inflation, war in Ukraine and the environmental crisis will also carry on spooking investors.
“The biggest rate shock in history, the most aggressive hiking cycle, the biggest inflationary pressure in 40+ years, rising recession fears, wartime and ongoing geopolitical risks, urgency building around carbon emission reduction suggest macro will loom large in 2023,” the team led by Subramanian said.
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Pending home sales are down 37% Y-o-Y. That’s the biggest in history bigger than during the circa 2009 crisis.
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Pending home sales are down 4.6% Month-over-month . That ties the biggest one-month drop (during COVID). Each of those was bigger than any month in the circa 2009 crisis.
In terms of homes and home prices, this could be bigger than the 2009 crisis. It is hard to tell because this time we have crypto that time we had fraudulently-rated MBS.
I’m looking at much of 2023 being a mess. Not sure if there will be much of a recovery in 2024 either. What do you think?
Economics is economics. The national debt-to-GDP ratio is higher than it has ever been — some might say approaching bankruptcy. The Inflation Reduction Act (a sad joke on Americans), the omnibus bill that no one read, and all the other huge spending bills will drive up the debt. Printing more dollars to cover the debt is the definition of inflation. It weakens the dollar as the world’s reserve currency (a budget, trade and national security disaster), as well as drives up the price of everything for U.S. consumers, especially hurting the poor and most middle-class Americans. Those non-working or part-time working Americans cushioned by COVID relief will see it run dry. The rising debt levels of most Americans will get a crushing blow as interest rates continue to surge. Retirement accounts and home values will decline. The likelihood of rising taxes will be the final blow to American households.
Of course, continued unrestricted illegal immigration — the White House shows no real seriousness at all in fixing it — takes jobs away from poor Americans, brings in record amounts of drugs, drives up social welfare costs (i.e., spending, inflation, taxes), and destabilizes communities.
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But the CCP and the WEF are happy, so at least the Big Guy is being paid well for whittling the US down to a manageable mouthful.
Expect recent economic statistics to be revised downward. The administration has been cooking the books as much as it could to help with the mid-terms.
With the corruption so rampant in Washington nowadays it’s hard to trust any data or information with political ramifications.
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Yes, government data appears to be adjusted to further political objectives.
I expect that the economic cold war between NATO and BRICS will continue to accelerate. Biden has exhausted the Strategic Petroleum Reserve (SPR), declared war against domestic investments in oil and gas, and supported the counterproductive price cap on Russian oil.
The result is that Russian oil output is declining as the drawdown of the SPR is ending. At the same time, China has decided to end its zero-COVID policy and open back up, which increases oil demand. World oil prices are likely head higher and remain high for the foreseeable future.
Expect that economic power will continue to move away from NATO and towards BRICS. Here are the largest economies based on purchasing power parity (PPP).
The GDP of largest BRICS members (China, India, Russia, Brazil) are already comparable to the large NATO members (US, Germany, UK, France) plus Japan. Growth in BRICS is likely to be much higher than that for US allies in Europe and Asia.
Well here’s what’s likely to happen in 2023:
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Yet no one in government cares, I have heard no one except a few senators want to even try to slow down the spending outside of that, the message is clear.
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Well, the thread title reads “two years” so, maybe. But as a general rule of thumb socialism hurts economies it does not help them. It would take some exceptional sequence of events therefore, for BRICS to gain economic power vs NATO long term.
Of course this can happen, Russia was once a relatively minor player in the oil industry. The US education system is tanking etc., so, anything is possible.
It’s going to be interesting to see how other countries position themselves as the US declines as an economic superpower. I do agree with Gaius that this is going to take some time to play itself out as most other countries have many of their own problems to deal with. I’ve said this before that I do believe that we are unfortunately headed for a period of stagnation in regard to economic growth, and I’m not the only one:
“There is no doubt the economy will struggle in the coming year as the Fed works to rein in the high inflation, but the baseline outlook holds that the Fed will be able to accomplish this without precipitating a recession,” Zandi said in the note.
According to a set of forecasts, Zandi expects U.S. gross domestic product to grow by roughly 1% or less on a year-over-year basis during all four quarters in 2023.
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The reason economic predictions are all over the dartboard right now is that we have NEVER been in a situation like this. Specifically the money supply (M2) has NEVER deviated so far from the norm.
When a pandemic happens, or when towers fall, or when the Japanese bomb Pearl Harbor, people get scared and stop borrowing and spending, the money supply falls. The gov’t spends money. The Fed prints money, and if they both do their jobs “just right” the money supply increases back to, but only exactly back to where it would have been.
Well, they overdid it. The gov’t spent too much. The Fed printed too much. The M2 money supply is now so far above normal it looks like none of the other catastrophes in the modern economy ever happened. Tiny little things like 9-11 or the housing crash are, by comparison, tiny little things.
It’s a truly WTH? moment.
With any luck in about 12-14 mos the M2 will be back to normal and then all the normal economic projections will start to be reliable, well as reliable as they have ever been.
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You probably know this but just in case but just in case
- If I have $100 in my wallet or in the bank, the money supply is $100 —That’s M1
- If you the bank keeps $10 and lends you $90 the money supply is $190
(Either because you kept it or you spent it, does not matter.) — That’s M2 - Right now we have so much M2 any and all economic forecasts are based on situations so different we are comparing apples to oranges.
To further complicate this situation is that the deficit is not likely going away anytime soon:
In our simulation below, debt will continue to grow faster than GDP during the next 30 years if no action is taken.
Which raises the question, at what point will the deficits and debt genuinely matter? And what’s going to happen when they do matter? The current plan from the Left to address the economy is largely the same as it’s always been, which is tax and spend. The significant additional component to this is to flood the nation with poverty from all over the world and to provide them free stuff at the US taxpayers expense. There are some projections that over ten million people will have crossed the border by the end of Biden’s first term.
These are absolutely unprecedented times and I absolutely agree that the usual projections will not work like they used to.
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Just one random example
Here is an article about a University of Chicago (famously conservative place) economist, who says that his own work,
- indicates a recession
- but might be wrong this time.
He says “this time it’s wrong.”
We have never been this far off the monetary baseline
so no really knows.
The countries in BRICS have market-based economies that are among the fastest growing in the world. In addition, BRICS membership is expanding:
While not show on the map, Turkey is also considering BRICS membership. It is likely that the only way Finland and Sweden can join NATO will be if Turkey leaves NATO.
If you consider the countries on that map to have market based economies. . . then the term is includes.
Iran, Saudi Arabia. Egypt, and Algeria are near the hard core rock bottom of the list
Russia and China market-based economies? come on . . . out of 184 countries in the world nearly every one of those countries except India (which is #131) is in the dirty 30.
I cannot express how ridiculous that assertion is.
I dunno . . . imagine 187 people ranked tallest to shortest. You have taken a group of people from the extreme short end of the line and called them “tall.”
Here
