Can we rule out a severe recession? Deutsche Bank believes there is a major crisis in the making. The problem is the huge (and predictable!) inflation Big Left has created.
When the problem is bad enough, the Federal Reserve raises interest rates when the financial situation gets more difficult. It’s not possible to fix the problems caused by such behavior.
According to Street: The Fed claims it can raise interest rates enough to end inflation but not enough for economic recovery from the disastrous COVID-19 policy. Deutsche Bank economists doubt it. The Fed’s current federal funds rate is 0.25 to 6%. Economists stated that rate increases and a reduction in Fed’s balance sheet will “push the economy into severe depression” by next year.
“Something stronger than a mild recession will be needed to do the job” of controlling inflation. They see unemployment ultimately rising by several percentage points. It totaled 3.6% in March.
Economists stated that while we have attained the highest level of inflation, it is likely that the Fed will take a while to reach its 2% target
New York’s Goldman Sachs is more positive, saying that inflation can be controlled without creating a recession. The bank’s economists stated in a Friday report that while a recession is not necessary, growth should slow to a slightly less than its potential rate. This would increase the chance of a recession.
UBS, a Swiss company, stated Monday that inflation should drop from current levels and that rising interest rates do not cause a recession.
It would seem amazing if Bidenflation was eliminated, and we could avoid a severe recession. There have been indicators that indicate a downturn.
One thing’s certain: The demand for trucking services has dropped in the last month. Fox Business reported that Bank of America strategists think that a sudden decline in trucking demand beginning March 1st could indicate a recession.
Ken Hoexter is the Managing Director of Bank of America’s Trucking Research. He released Tuesday’s analyst notice. The gauge which measures truckload demand fell for the fourth consecutive month, hitting its lowest level since June 2020.
Hoexter said that this is “near freight depression levels”. Each year, the gauge has fallen by 23%.
Fox stated, “Trucking can be a reliable indicator for the U.S. economy and is often considered to be a bellwether.” Convoy analysis (a trucking company that tracks trucking data) revealed that 6 of the 12 recessions in trucking were followed up by an economic downturn.
Another alarming development was April’s inversion of yield curves. Morgan Stanley reported: The yields on 2-year Treasuries are higher than those on 10-year Treasuries in recent years. Morgan Stanley strategists think the 2s10s curve inverts further and will continue to invest throughout the year.
Morgan Stanley, BlackRock, as well as other investors, quickly dismissed the inversion’s significance. Gargi Chaudhuri, BlackRock’s head of iShares Investment Strategy, Americas, stated that she doesn’t expect a recessive event in the near future. While she hesitated to state that this time was different than the past but stated that “we note many factors now that differ from previous yield curve Inversions.” ” Let’s hope.
There are also psychological issues. Europe is currently in a civil war. This will have a lasting impact on economic activity.
Anyone who’s lived for a generation will know that these events have happened before. The Democrats’ next move is simple: Blame the decline that they caused on the Republican Congress they’ll be swearing-in after the midterms.
You can bet on it.