This article does a poor job of analyzing the inverted yield curve and it's implications for recessions. A recession can follow 2 years later then when the curve actually inverts. Moreover, the actual inversion typically does not last long so that when the recession comes along, the yield curve may look perfectly "fine". Moreover, recessions typically occur after the reelection campaign of a President. This article has soothing words, but the hammer may not have come down yet. Careful is the watch word.
2
This president is skyrocketing the national debt and the yearly budget deficit to incredible, unnecessary levels. It was going down near the end of Obama's term but now is going back up during a time of plenty. This means no money for future (Democrat) proposals and no money to assist the economy during the next inevitable downturn.
Anyone can make the economy look great spending on credit.
7
Things go up, and they go down. There will eventually be a recession, how bad and how long is unknown. Just as the economy booms, it will eventually bust. Planning for this is key, but trying to use it to change a political outcome is foolhardy. Politics and policies have an impact, and bad policies can do harm to the economy, but there will always be cycles.
1
Many in the media would love a recession or at least an economic downturn as that would lower the possibility of reelecting the present occupant of the White House. I am no fan of the present occupant but wishing for, hoping for and predicting a recession is not the way to restore honesty and sanity in Washington.
1
There are always many omens related to the economic conditions of the country and the world. Analysts have a smorgasbord of indicators to reference when they make their predictions, usually dire ones about the future when they are not followers of the dominant political party and especially the president. It is well known that the US president, which ever party he/she represents, will take credit for the good times so when that president is generally held in low esteem by his/her opposing party, predicting doom is generally the stand taken by the other party and its media supporters. The media is likely to promote fear when the presidency is held by a Republican. Is it cynical to suggest that the left is hoping for an economic downturn in preparation for the 2020 elections?
I'd suggest the infatuation with a recession from some is the true indicator the situation is not understood. With leverage up so greatly and with cash being strapped in the economy what is going to bite us is not a recession; but any period where growth is low (below 2.5%) for any real period of time. The Fed rate may be around a mere 2% but for small and medium business owners that fuel this economy we are running at operational margins on our loans of 4-6%. And many corporations pay back 5-7% on their loans. Businesses have taken loans out like never before and 2.5% growth is actually insufficient to cover the cost of borrowing now. Never before has the United States business sector had so much debt. The Fed gives out loads of cash but it is not making it into the hands of business owners that need it at a competitive rate. We are in a period where growth of 2.5% is after real adjustment of inflation and rising operational costs for small businesses means we are contracting. If I could have cash at 2% I'd be expanding faster than my costs, but at 4.5% from my bank, I'm restrained. How can this administration clamor that 0.25% is "death" to the economy because it thinks 1,75% or 2% is a make or break for the USA? Small businesses are paying 4-6%, try living in our world. And perhaps. someone could do some reporting on what for a small business (a huge engine of the the US Economy) is up against.
2
@Aaron saxton As true as it is that the debt is enormous, it is also relevant that the US debt ratio to GDP is below that of some other nations. The real Chinese ratio is above 300% and the Japanese ratio is over 200% while the US ratio is just over 100% along with many other countries.
Claiming a recession was coming is another way the media trys to dimish Trump. My concern is not Trump but Presidents after Trump. Is this the new way the media will react to Presidents they don't appove.
2
Now that you've declared all's good, the crash is near.
3
Tonight I'm Gonna Party Like It's 1929
5
A preponderance of the money saved corporations and the wealthy in the Trump tax cuts has gone into stock buy backs that have directly benefitted the wealthy who own most of the stocks.
It was a money transfer to the rich that has essentially been paid for with the deficit that the tax cuts have produced. This will ultimately have to be paid for by all of us. In the meantime the corporations have not done better on the ground (in sales and profits) but only on the double entry accounting page of their ledgers which reflect the decreased number of shares and concomitant rise of the price of those shares. This has barely benefitted the general populace in wages and has only minimally increased any tangible GNP.
5
@richard
Trump and muchin are what we called LEGAL Criminals who looting the US treasury and distribute it to the 1% like they need more money. The greatest Legal wealth transfer in the world history that you ever see. There is a need to vote in Warren to redistribute this effect. And rein in wallstreet bankers and corporation greeds
2
So - yet again - we see the great Counterfactual argument - "Just because it didn't happen doesn't mean it might not have happened."
The lament of every bad forecaster since the dawn of history
Yes it does mean that they were "Unfounded".
Relying on smoke-signals and bird-signs like an inverted yield curve are frankly as silly as getting your predictions from a soothsayer.
1
Trump's tit for tat and quid pro quo and extortion-like policies are not sound government either domestically or with foreign nations.
4
How can the expansion go on and on when there seem to be fewer and fewer people who do not have jobs and do not want them or cannot do the work? We hear more about employers who can't fill job openings that about companies that can't borrow.
The biggest economic mistake Trump is making is blocking immigration of qualified legals. Most countries are losing population. Birth rates are falling. Productivity is not rising fast enough to get economic growth without new workers. Immigration makes the US a rare country with a growing population.
Even illegal immigrants buy gas and food so they contribute to GDP.
Maybe economists should focus on what it will take to keep the expansion going instead of looking at arcane predictors of a slowdown that often do not work.
2
Drom the article: Three months later, the picture has changed. Longer-term bond yields have risen back to their levels at the start of August: Ten-year Treasury bonds yielded 1.93 percent in Friday morning trading, up from a recent low of 1.46 percent in early September. Longer-term yields are now comfortably above short-term yields, meaning the yield curve is no longer inverted.
-------------------
In other words.. an investor driven hoax.... wealthy investors that is. I'm sure they freaked out a lot of smaller investors with these shenanigans... like the always do... and scooped in later and reaped easy profits from small investor fears.
A lot of the traditional markers in the economy that indicate boom or recession are simply no longer broadly applicable. Between a corrupt White House deliberately creating giant economic issues out of nothing, and the proliferation of programmed trading and parking software..... totally new markers in the economy are needed.
4
You may be premature in declaring an all-clear for the economy. My understanding is that an inverted yield curve usually predates a recession by 12-18 months. We've only gotten through the first 3 months post inversion.
8
Looks like the fears of Chinese tariffs creating inflation and job losses were alarmism.
The yield curve inverted because our long term bonds still offer positive interest rates. So money poured into the bond market, driving down yields. Its a great opportunity to refinance both public and private debt, and make long term investments.
4
@RM They may not have created inflation, but they did cause job losses and increased deficit spending.
2
Last December there was a deep market plunge that no one saw coming three months earlier. That's actually typical.
Short memories lead to judging the economy in terms of short periods, like three months, which are not often accurate predictors of anything.
Currently, many are bullish while at the same time Warren Buffet is sitting on roughly 128 billion in cash because of the lack of good investment opportunities (i.e., everything is already bought and priced too high, which incidentally is as good predictor of recessions as anything else). In the meantime, the Fed's interest rate cuts and outrageous government debt props everything up against tweets that often have the opposite effect.
I have experienced decades of expansions and contractions that no one in the mainstream media or even many economists, who weigh more data and should have more insight, ever really sees coming. The possible exception was the recessions of the early 1980s which the Fed engineered to fight double digit inflation, something younger generations have never remotely experienced.
Otherwise, day to day predictions are mostly valueless. Articles on websites are mostly click bait filler. Everyone wants data that validates their preconceived, politically biased opinions and financial positions. Everybody wants to see the future but no one can.
I have several investments, as many do. I follow the general direction of the markets. But I know that there will be ups and downs. There always are.
13
There will always be another recession. The question is always when, not if.
We are now in the longest economic expansion in American history - 124 months and counting, the previous record being 120 months, from 1991 to 2001. Based on that alone, a recession is probably closer than we think.
The one-year and two-year bond yields exceeded the ten-year yield last August, a circumstance that has very reliably predicted a recession within the following two years - that is, before August 2021.
In other words, it's way too early to say that this year's yield curve inversion didn't predict a recession.
9
@Ecce Homo If you can predict the future, you are already the richest person in the world.
1
While nobody can predict the future, the next most certain thing is an economic crash coming.
History has taught us over and over again.
With record consumer, gov't, corporate and student debt, the end will come.
The only question is when and how bad.
11
"The underlying cause of the summer surge in recession fears was a trade war between the United States and China that seemed locked in a hopeless cycle of escalation; "
Nope.
From mid September to December 24, as the Democrats took over the House, the stock market plunged $5.5 trillion. Then consumer confidence plunged 10 points, then business investment, which had been going up $60 billion a quarter, plunged $40 billion.
Now, Trump has things back under control, the stock market is hitting new highs, consumer confidence is back up, business investment is resuming its trajectory and growth is going to move above 4%.
Trump's trade volcanic trade negotiations have been going on for 21 months, all to the good.
4
@John Huppenthal
The stock market went up on the day of the election when the Democrats took the house. The stock market crash in late 2018 began with the escalation of tariffs against China in September and ended with the truce in December. The stock market then recovered in January-April 2019 and abruptly started falling again in May when that deal with China was called off. Trump’s trade actions alone are to blame for the stock market volatility and worsening economic conditions since 2018.
21
@HO , you also forgot the fact the GOP basically erased 0.2% of GDP in the 1st quarter just because they wanted to have a hissy fit over the budget and the border wall.
The budget STILL has a $950,000,000,000 hole in it this year and the wall is more like a mirage in the desert heat.
1
@John Huppenthal
I know you really really really want us all to slurp up your narrative here, but the fact is.. your narrative is counter to the facts. But that is what happens when you live inside the Trump bubble... you begin to believe every lie he feeds you.
Fed is buying 360 bi dolars in treasurys plus injecting 100 bi dolars in liquidity in the repo market. Almost 500 bi dolars in liquidity in the market. So, I don't think things are that good. What will trigger the bubble to pop is unknown but I am confident this actions aren't healthy and don't work on the long term.
12
@Carolina
NOT every expansion is a bubble waiting to pop. This is particularly true of long running moderate expansions.... such as the current one. And as such.. long running moderate expansions most often are followed by fairly mild recessions.... though recessions that sometimes linger for longer then normal (just like the current expansion is abnormally long as well).
Unlike the lead up to the 2008 recession, I don't see some exotic and overheated binge cycle in action. As such.. the fuel for a really bad recession simply is not present at this time.
In 2006 and 2007... it should have been obvious to any observer that the real estate market was being over fueled and over speculated, yet many people insisted it could go on forever. This time around... there does not appear to be an over-fueled and over-speculated component of the economy. Rising debt in some categories is worrisome, but not to the degree back in 2006/7 and it is not speculator driven at this point in time.
1
@Chuck True, but not every recession is bubble popping either. It's just a slowdown.
1
@Chuck You don't see $188 TRILLION of global debt as a problem? You don't see the leveraging used by private equity to overload business balance sheets with debt? You don't see the $19 TRILLION of corporate debt that the IMF said is at risk of default if a slowdown half the magnitude of 2008 happens? You don't see that businesses have been incentivized by near-0% interest rates to turn into financing machines -- with multiple companies (automotive, computer, cell phone, etc.) making the majority of their money from their financing arms?
We don't need exotic derivatives when we have an incompetent fed that has created the Greenspan put which allows the financial sector to engage in moral hazard and immoral behaviors and know that they will be bailed out. The Fed took a historic step when it decided it would be complicit with Wall Street.
There is not a single bubble. It is almost all a bubble and until we eviscerate the financial sector, we the people will continually be taken advantage of by the Fed and the financial sector.
Granted, I'm just a millenial, but recessions rarely happen when everyone thinks they will. Rather, they tend to happen when everyone thinks good economic times are ahead.
This one is going to be terrible. Central banks in the EU are already at negative interest rates. we dont have any runway with respect to monetary policy. Three of the world's largest economies are under the stewardship of leaders that couldn't lead their way out of a paper bag (US, China, uk).
27
I don't understand why so many people commenting here seem to believe that a recession was definitely predicted when every column on the topic that I read in the NY Times merely discussed the probability of a recession occurring (which was always reported as less than 50%).
I don't understand why a high proportion of commenters keep referring to Paul Krugman in response to a column written by Neil Irwin.
I guess I just don't understand economics.
2
@Stan Sutton
The inversion of yield rates between short term and long term Treasury notes has historically been a very good indicator of a recession within a year.
But the fundamental rules of the economy have changed now days, and we have an economic terrorist in the white house... so all bets on markers or predictors are off.
As far as naming one economist vs another.. that is par for the course in economics... because there are in fact different schools of thought in the field of econmics.. and it makes economics look quite partisan in nature.
2
If Recession fears are unfounded, then why does the FED continue to pump billions of dollars daily into the Repo market? Market liquidity is clearly dry, and we approach December and year-end reporting large banks will attempt to show that they are liquid and out of trouble. This is not the case.
Yesterday, “the Federal Reserve, the New York Fed, paid out $35 billion in 14-day term loans to Wall Street’s trading houses. The problem was, this morning the banks wanted $41.15 billion or $6.15 billion more than the Fed was offering. That’s a very clear sign that liquiBetween the term loan and the overnight loan, the New York Fed paid out $115 billion this morning to unnamed securities firms on Wall Street. (The Fed won’t say who is doing all of this borrowing and Congress can’t summon the willpower to hold a hearing.)”
8
@Ted
The FED turns and adjusts various levers and knobs in the financial liquidity of the economy all the time. So do other central banks around the world. And they use different levers and knobs at different times, and in different degrees... because the economy is not monlithic, but rather a complex aggregate of different aspects of the economy.
What should scare you is when they stop... because that means the levers and knobs have frozen... like what happened in late 2007.
1
@Chuck As long as you note that the economy isn't based on capitalism and free markets but on the fine tuning of markets by central planners. What could go wrong?
1
@Ted
Fed is monitized debt cause no one have money to buy treasury
Everyone should know fracking for oil has been a game changer for the global economy. So Moody’s election predictor that predicted Hillary winning in 2016 failed to take into account low oil prices are now bad for America in the short term because of America’s growing oil production.
1) With the use of more platform-type corporations by many US firms, cash and near-cash securities substitute for other assets, in order to reduce the risk of investing in physical assets, that changes in demand and technology can make obsolete. As a result of these redirected investments to more short-term assets, the supply of funds to be invested in short-term assets should have increased, tending to drive down short-term interest rates.
2) Many manufacturing firms in China have contracted with US platform firms to supply the physical assets needed by these US-based firms. Chinese manufacturing firms assume the risk of investing in physical assets while US firms maintain their options by avoiding these risky physical assets and opting for short-term investment vehicles, instead. By having the option of putting cash to work in Vietnam instead of China, say, US firms increase their leverage in these negotiations.
3) Patents and other intellectual property are the type of assets that empower these US platform companies to prosper and gain a competitive advantage. Without respect for this "barrier to entry," profits for many US platform companies will be driven to smaller, more normal levels by new entrants, who will not need a "licensing agreement" to produce a good substitute.
[11/08/2019 Fri. 2:04 pm Greenville NC]
1
Some other perspectives:
Duke University's CFO recent global business survey has signaled that business optimism is at its lowest level in three years and that a recession within the next year could be on the horizon.
53% of American CFOs believe that there will be a recession by the 2020 election and 66% see one coming by the end of 2020.
https://www.cfosurvey.org/press-release/optimism-sinks-to-3-year-low-recession-expected-before-2020-election/
Also, Russia, China and other central banks are buying gold at a greatly accelerated rate this year, signalling that the usual safe investment (the US dollar) may not be so safe.
And earnings have diverged from the S&P 500 to a degree not seen since 2000. Maybe time to step back and look at what's likely coming.
https://www.marketwatch.com/story/carnage-awaits-investors-if-this-chart-is-anything-to-go-by-2019-10-28
Corporate debt in the form of bonds and loans are now at $16 trillion the equivalent of about 75% of U.S. GDP. This is an over 50% rise since 2007. A huge percentage are junk rated.
https://www.forbes.com/sites/mayrarodriguezvalladares/2019/08/17/investors-face-intensifying-credit-risks-with-u-s-high-yield-corporate-bonds/#44d8d2a97cbb
So lots of reasons to be concerned. I don't think there is any doubt a significant recession is coming ... when of course is always the tough one to answer. But probably in 2-3 years, or sooner.
6
@dre , because of the Financial Crisis, people tend to focus on mortgages but that's not where the risks are today. There's no one single loan market as big as mortgages but there are several of them that collectively add up to a similar size and those areas have rising risks.
Most people didn't understand the first signs of stress occur in the invisible plumbing of the system. By the time the publicly visible parts of the systems see stress, it's too late to act.
3
In case you haven't been paying attention the whole world is on fire and you write Recession fears are abating. Really?
7
There's always a crash!
No one ever seems to see or hear it coming.
3
No matter how you look at it, to expect a 10-20% return on stocks for the next 5 to 10 years is just plain crazy, and reflects the blatant dishonesty of financial advisors. Add to that a trillion dollar deficit, trade wars and complete madness of the guy in charge . It’s so obvious that the market will remain propped up till election to help the madman win...no thank you....I’m staying out of this...!
6
@Hobo Who expects 10-20 percent market returns for the next 5-10 years. I haven't read anyone who expects that.
@Hobo
It is folly to ever expect multiple year 10-20% returns pm stocks.
1
Pity. The planet could use a recession right now.
8
As the saying goes: You aren't panicking if you are first.
3
This is a story about an irresponsible and reckless media, not the economy.
2
Well this is good news for the guy who hasn't gotten a decent raise in ten years, the single mom with two jobs and the family deciding between medicine and food. The problem is not what is happening on the road ahead, the problem is we have an infant driving who is determined to put us in a ditch if he can just get around those pesky guard rails. As long as he is in charge I'll stay liquid.
11
There are signs in the data! Yield curve inversion! Head-and-Shoulders pattern of the S&P500!
or
Investors and banks moved interest rates hither and yon based on irrational expectations of interest rate cuts being idiotically fulfilled for Wall Street sociopaths bellied up to the public trough of free money.
3
As I've previously reminded Times editors, your economists have correctly predicted nine of the last five recessions (with a bow to Paul Samuelson).
2
In 2008, the US experienced the largest financial collapse since the Great Depression a direct result of multiple tax cuts for the wealthy, job outsourcing, financial deregulation, lack of investment in new plants and equipment, spending $ trillions of taxpayer money on the Pentagon and war. Since 2008, the FED has provided Wall St. with > $ 5 trillion of ultra-cheap money for share buybacks, stock futures and to sustain [still] insolvent banks. This money also inflated bond markets and trendy real estate in Boston, NYC, SF, Seattle, etc. Despite over a decade of Central Bank largess- debt levels have exploded- US government debt exceeds $22 trillion (does not include municipal, corporate or consumer debt) and increasing circa $1 trillion/year, while US government backed mortgage debt has ballooned to $7 trillion and global debt exceeds $250 trillion. Further, the global economy confronts continuing stagnation/decline characterized by slack demand and excess capacity, as highlighted in the recent IMF report. For many working Americans, they have been in a recession for over a decade.
Notes
1. World Economic Outlook, October 2019-Global Manufacturing Downturn, Rising Trade Barriers; Link: www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019
2. CEO Compensation has grown 940% since 1978. Typical worker compensation has risen only 12% during that time. Economic Policy Institute 8/14/19; Link: www.epi.org/publication/ceo-compensation-2018/
7
The US is now $22 trillion in debt, and the debt has grown by $2 trillion since Trump's inauguration and Republican Sunshine Band showed tax cuts on billionaires and charged it to a credit card.
Just borrow your way to prosperity.
What could go wrong ?
Nice GOPeople.
7
I don't think recession fears have abated. They've just fallen off the front page and been drowned out by Trump's other foibles. Manufacturing has continued to decline as the world economy has slowed. The trade war continues – albeit with tensions eased not because of Trump – who just today is busy once again contradicting his own advisors on the Phase 1 agreement, but because China is taking a less aggressive approach for the moment. No doubt partially in the realization that Xi could be hurt politically if his own economy tanks too much and the fact that he/China can afford to wait Trump out while they watch the election polls and impeachment inquiry. The bond market has quieted down a bit which is good – but I just read recently the banks are firing up interest again in mortgage backed securities just at a time when the GOP crippled a lot of the protections put into place after the 2008 meltdown. And as far as the preemptive rates cuts go, I think the Fed went too far. Those cuts help the speculators, the shadow bank lenders snapping up real estate, while they hurt everyday savers and people on fixed incomes.
23
The massive income inequality of today reminds me of the roaring 20’s. That decade did not end well. I hope I’m wrong, but I fear the next economic downturn will be worse than anything we’ve seen before. We’ve had plenty of opportunity to fix things and plenty of good reason to do so but the greed keeps the wheels turning unrestrained and unregulated.
17
I must have missed something. How are things fine, the GDP which Trump claimed would go to 4% never made it and for the past year has been on the downslide last reading !.9% and headed lower. Manufacturing is in a recession. Cummings engines the big maker of snowblower, lawnmower and military equipment has had declining sales and layoffs. The 8th major coal company just went bankrupt. RV sales fell through the floor notice the lots full workers laid off. There is a new report that jobs are declining so it that because everyone has a job or that companies are putting the brakes on. What is always interesting is how the jobs are equated like they have been all high paying jobs, I think not. Many friends work two and sometimes three to make ends meet. Health care do we want to go there. Now it seems Wall Street is always employed and since stocks or some are so high things are great. Pardon me many major corporations used their tax cut not to purchase new equipment raise wages but to buy back stock which drives the price up. Even one wants to study major stocks are so overvalued just like houses were in the last crash in 08. Kraft, Mattel, Armourale all with cooked books. Boeing can't make a new aircraft fly. I always remember economists and Allan Greenspan a week before the crash of 08 that the housing market was just a little air being let out. How did that work out. By the way the average American is in hock to their eyeballs. Jim Trautman
36
It is WE Consumers who are keeping the economy afloat despite the trade wars, global economic slowdown and domestic manufacturing slowdown.
Once we stop spending, it's recession time.
18
As written before, former Fed Gov. Richard Fisher admitted a couple of years ago that the Fed's zero interest rate policy and subsequent quantitative easing were done solely to jump start Wall St. in the aftermath of the Wall St.'s created economic debacle in 2007-08 with the hope that some of the gains would trickle down to Main St.
Rates remained near zero for 7 years...yes 7 years along with $4trillion in QE. The Fed raised its rate by 1/4 point in Dec. 2015 and its 8 subsequent 1/4 point rate hikes through Dec. 2018 represented the slowest pace of Fed increases in the modern day.
Jerome Powell indicated in Oct. 2018 the Fed would raise rates 3 more times in 2019. The Fed funds rate was between 2- 2.25% at that time and the 10-year treasury bond then peaked at 3.25% a year ago this month. There was NO INVERSION a year ago.
The Fed raised its rate by 1/4 point in Dec. 2018 and Wall St. had its worst Dec. sell-off since the 1930s, taking the proceeds and buying massive amounts of treasury bonds in order to drive down interest rates. By Jan. 2, 2019 the 10-year treasury bond had dropped to the point that the word "inversion" and recession was being bandied about.
Powell waived the white flag the next day. The Fed would not raise interest rates, but did not indicate it would begin to cut either. Hence more massive treasury bond buying took place, driving the 10-year yield to under 2%, then under 1.75%, creating the inversion and subsequent Fed cuts.
It's all on Wall St
14
The Wall Street Masters of the Universe are all just fine. No worries. No recession. Ever. For them. Because we'll pony up again, just like we did in the fall of 2018.
People will lose their jobs. People will lose their houses.
But the too-big-to-fail banks soldier on.
35
@Kevin Brock fed already print 120 billion a month to bail out the goverment and make bank book look better. This is what we call silent QE4 ever for wallstreet only
3
@Kevin Brock
I assume you meant the fall of 2008.
2
California has the fifth largest economy in the world and the USA economy is the world's most successful. The qualifier is that the USA's economy is also the most unequal of all western economies. It is in terms of appearance it is the most at variance with the norms of what we call liberal democracy and every day the inequality gap widens and the USA is more like China than it is like western Europe.
The USA began with the words "We hold these truths to be self evident, that all men are created equal." The original read; We hold these truths to be sacred and undeniable.
Those words have no meaning in a nation where money and speech are synonymous.
I grew up in ultra conservative Quebec where all men were not created equal and there are still many that think that was when Quebec was great. We had men of great wealth and power and women were chattel. We had the Montreal and Canadian stock exchanges and many corporate head offices and a robust and success economy for the few. Seventy years later we are a liberal democracy the corporate head offices never returned but the wealth is growing dynamically and is widely distributed and the poverty has largely disappeared.
I have no say in whether or not America's economic success is what I want. All I know is America's economy grows every second and only Americans can say if this is what they want.
The only thing we can say for sure is that unless America changes its economy the rich will get richer and the gap will grow wider.
24
Recession fears are only fading momentarily for the wealthy investor class. The average American finds themselves in the worst economic condition they have been in since 1976.
40
I know what the experts say, but I also know what I am seeing on the ground. It does not feel right. We have one side demanding we acknowledge that the economy is the greatest ever. We have the other side predicting that the bad trade policies will cause the economy to slow down.
My opinion: This is a fake economy surge propped up on deep tax cuts and increased wealth of a few. Essentially it is trickle down.
My gut feeling, since the spring is that it is time to save and move money to safety. The wealthy will survive an economic meltdown. The rest of us might not.
67
@Dr. Girl Agreed, and I've already moved most of mine. The rest may soon follow.
10
The recession pattern is repeating now.
In all previous recessions, except for the Volker-made 2nd dip, after the yield curve inverts it begins to steepen as it returns to normal, with longer dated treasuries yielding more than shorts.
Stocks do well as interest rates increase and investors grow more confident. Surveys of consumers show they're likely to keep spending.
If this pattern holds, we'll begin to see weak jobs numbers in 4-6 months and a negative print on GDP sometime between May and November of next year.
18
@Chris Manjaro But interest rates aren't increasing?
2
The risk of recession isnt exacerbated by a China/US trade war as much the affect of lowered tax rates on the national treasury where it is hyped to encourage consumer economic activity that results in recklessly squandering paychecks. It is reminiscent of factory workers spending their take home wages at local taverns drinking and gambling, ultimately wasting a substantial portion of it before getting home and having enough to pay bills and keep food on the table. The treasury is not being replenished and the national budget and debts arent being adequately reduced.
14
Stock market valuations (PE) are at some of their highest, closing in on 30 at the S&P 500. One of the longest runs on economic growth. In other words, that object we just missed in the road, well there are more ahead, and we likely won't miss the next one.
Remember 2008, and how the world was blindsided by Wall Street.
36
@cherrylog754
Our deep state rescued us in 2008 and with 67% of Canadians supporting a leftward move away from American neoliberalism I hope we can escape the next US downturn.
I see little difference in the two parties as with regard to American isolationism. It seems to me that for Canadians as much as we are sickened by Trump and his GOP sycophants the Democrats are as big if not a bigger threat to Canada which is a major supporter of globalization and a more integrated global economy.
I expect GM and Toyota to see growing insignificance in our car markets as Ontario, Quebec and BC see hydro electricity and solar generation not fossil fuel become the energy choice of Canadians for driving, heating and cooling.
3
The opening analogy operates on the fallacious notion that the government and/or Fed exert massive control over the economy, to the extent they can steer growth. Historical evidence supporting that basic premise is flimsy. We saw a near-identical scenario in 2015/2016. The Fed didn't cut rates and the economy rebounded. Like, on its own! Like magic, I guess, except that the economy has never moved in exactly the direction the Fed and government would hope.
7
I think we will see anemic growth. Maybe technically not a recession but it feels like one.
20
With all due respect, the left was praying for a recession. They wanted it to come. Like Russian collusion, emoluments, 25th amendment, and all the other aspects of Trump Derangement Syndrome, they built it into a house...until it collapsed like a house of cards. But don't expect a "sorry." Being on the left means ever having to say you're sorry.
16
@Snowball Troll speech, my friend. Tell me exactly WHO is praying for a recession. I am afraid I do not know of any person or organization called “The Left”.
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@Snowball nobody prays for a recession. And theres nothing to be sorry about except this poor reference to Love Story.
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@Snowball
I can only speak for myself but 67% of Canadians voted to move left last month. Nobody talked about a recession being good for Americans or Canadians. We talked about sustainability and an economy that benefitted as many Canadians as possible. Our conservatives are an ever more regional power as economically low oil prices are turning their great wealth into a remembrance of when small government and Big Oil made them great.
Times change, ideology is sometimes good and sometimes brings only anger and depression. Canadians never wished ill for our resource rich provinces but blaming us for 60 dollar a barrel oil will not change reality. In a world where knowledge is power conservatism is simple folly.
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Oops, the economy did not die.
Sorry Paul Krugman, try again, maybe when Warren is president, then you can blame it all on Trump anyway.
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@AutumnLeaf Oh you mean like the Right blamed the crash on Obama?
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Wishful thinking by our progressives wing does not a recession make. We do not want to be the party who appears to be advocating for and wishing for bad economic times.
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Actually, they were unfounded. Both a year ago, when the media began talking about a possibility of a recession starting in 2019, and this year, when it got pushed off until 2020, the narrative seemed more of a political one than economic.
The Fed never said that it was taking its actions because of a risk of a recession. Since they attempt to be proactive, they take actions in anticipation of what they expect to happen. Interest rate increases were to ward off inflation. Of course that had an impact, with a lag time, of the strength of the currency and economy. When it became obvious that they had erred, they backtracked to a certain extent.
Not at all the same as the Times trying to poormouth every economic statistic, or columnists such as Krugman claiming that Trump would bring in a global recession without end. Stick to reporting the facts and their likely implications, and quit trying to impress your colleagues.
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Hear Hear! Bravo.
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No worries. The current administration changes its mind every day. Some days trade wars are easy to win; some days they're in negotiations; and at other times they're declaring us all winners; the day after that, it's back to the drawing board because the great victory wasn't really one. Oh, and, don't forget, the failure of negotiations and tariffs and any other administration policy is always someone else's fault. I'm sure the U.S. business community is very happy to stop planning ahead and just live one day at a time, right in step with the current administration. Got to support the president, after all, even if he and his advisors have no idea what on earth they're doing, aside from running a Twitter account and complaining about persecution.
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Maybe no recession, but how much longer will our bonds be purchased to finance our debt? When Japan and China and pension plans stop buying our treasuries---because they have less and less value---what happens then? Catastrophe.
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@Ed Spivey Jr
Print baby print! And print some more!
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@Ed Spivey Jr
Didn't the fed said repos madness because dealer don't have funds to buy up treasury or trade it for cash in the system and fed need to be a buyer of last resort to absorb these t bill mean foreign are not buying
Artificial stimulus is the engine for this economy. If the tax cut that has ballooned the debt and the politically pressured reduction in the federal reserve rate were removed from the equation, the chance of a recession surely would increase. There is little doubt there's a bubble out there. The question is where and when will it poke it's head out? If it does, look out below.
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@Ralph Braseth
Exactly. One quibble, not if it does, when it does.
Money is fungible, the federal government passes a tax cut, not tax reform. The corporate taxes not collected to run the operation of the government are used overwhelmingly for stock buybacks (only made legal in 1982 during the Reagan administration). Stock prices are pushed up, options that have not been exercised now represent a greater share of ownership than before the buyback. Classic rent seeking.
The fed rate is running neck and neck with the CPI and is below the average CPI for the past few years. This further exacerbates investors taking on too much risk to try and stay whole. Compound that with the manipulative effect of dramatically lowered taxes on earnings. How are stocks reliably valued with everything shifting under the economy's feet like quicksand? The tariff story changing minute to minute. Perilous times.
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Recession fears were totally unrealistic, despite dire warnings from the experts, including Paul Krugman who saw a recession around every corner since Trump took office.
What these “experts” failed to consider was the fact that the reason bond yields plummeted was because US bonds were in essence the only game in town for foreign investors who plowed money into them as the safest bet. That made them increase in value thereby reducing yield.
In addition, there was a strong dose of anti-Trumpism which quite clearly skewed the “analysis” of these experts
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@Romeo Salta
Personally I am happy that Dr Krugman seems to share more of what so many of us have seen for a long time and the status quo is a formula for failure.
Trump is a symptom not the disease.
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The recession fears are only receding to the financier class and the stock market bubble that is created by trading according to the ill-advised and hopelessly profit-seeking emotions responding to the mercurial whims of a mad man. Nothing in the latest economic data suggests that a slowdown has already started and will continue. Wall Street believes what it wants to believe from jobs data that is not as terrible as they expected while they actively ignore contraction in manufacturing, severe losses in agriculture, a slowdown in construction, mining, and home-buying, and a still completely stagnant change in the national wages. In addition, the belief that there is going to be a breakthrough in the trade war with China demonstrates the absolute ignorance that is governing trading on the stock market. Stagnancy and perhaps an outright recession are still coming. They might be delayed by a few months, but as long as the country is being run by a gaggle of inept psychopaths and the economy is overly influenced by amoral, destructive banking and finance policies, the fall is all but inevitable.
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@Jason "...amoral, destructive banking and finance policies..." are the real dangers, at least the way I see it. We did not learn anything from the last debacle.
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@Jason I agree with you, rather than the author. All a person has to do is a little research. The author seems to believe his press releases. The average Joe & Jane might not see the world the same. More and more power and wealth continues to grow in a smaller and smaller segment of the U.S. population. Build up of U.S. and personal debt, working longer or with more than one job just to keep up, businesses and farms going under, city, state and federal infrastructure waiting to be supported and fixed, and the day-to-day over saturation of distractions has many of us in not quite a rosy setting as his article seems to be saying. And when the fall happens, the current political climate will make it difficult for any leader to bring the country together.
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I like the dynamic you’ve pointed out here between reality and fantasy. Both Wall St and the White House are in fantasy bubbles, meanwhile the real world has noted market behaviors indicating things are slowing down.
And in the end, a recession is inevitable. What goes up must come down in an economy of this size. The only remaining question is, how far down?
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