How’s That
Recession Coming, Dave?
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By David Haggith August 26, 2019 , 9:00 am
Pretty good if you ask me. Most economic indicators this
year have moved relentlessly in the direction of recession, and now the Cass
Freight Index is saying a US recession may start in the 3rd quarter, fitting up
nicely to my prediction that we would be entering recession this summer.
Cass comes on board
The Cass Freight Index is one of the most robust proxies
for the US and global economies there is. If freight isn’t moving, the economy
is dying. As Cass says, their’s is a simple, fundamental approach to
encapsulating the economy:
“As we try to navigate the ebb and flow of
the economy, we don’t pretend to have any ‘secret sauce’ or incredibly complex
models that have exhaustively analyzed every data point available. Instead, we
place our trust in the simple notion that the movement of tangible goods is the
heartbeat of the economy, and that tracking the volume and velocity of those goods has proven to be one of
the most reliable methods of predicting change because of the adequate amount
of forewarning that exists.
The Cass Freight Index has now been negative for
eight months, marking 2019 as a year of recessionary decline. Cass
Information Systems notes they have been highly reserved in stating the index
reveals a recession is now because
the index periodically goes negative without the US going into recession, but
they also note the weakness has rarely gone as deep as this time or spanned so
many modes of transportation.
“We are concerned about the severe declines
in international airfreight volumes (especially in Asia) and the ongoing swoon
in railroad volumes, especially
in auto and building materials.
Are not Carmageddon and a new housing crisis two areas I
have been saying for the last 2-3 years would be helping take us into
recession, along with the Retail Apocalypse (also hugely reflected in freight)?
Have I not been saying all year the trade with Asia due to the Trump Trade War
is going exacerbate the problem?
While it is rare for Cass to come right out and say they
believe we may now already be in the first quarter of a recession; here they
do:
“Bottom line, more and more data are
indicating that this is the
beginning of an economic contraction. If a contraction occurs,
then the Cass Shipments Index will have been one of the first early indicators
once again.
As “economic contraction” is synonymous with “economic
recession,” Cass is now fully on board with my view (not that they know my
view). As they consider their index one of the first indicators to come in with
a “recession is now” view, I consider myself one of the first to have placed
recession starting as early as this summer as well — a prediction over which
many people on other websites still stridently argue with me. They are welcome
to their view, but I am holding unwaveringly to mine, even as summer is now
half over.
Now I have Cass on my side of the table.
Yield curve inversion moves solidly to recession
indicator
I’ve written a lot about how reliably the yield curve indicates a
recession, so I won’t go into explaining here how that works. The
curve typically inverts months ahead of a recession, and the curve first
inverted last fall. For those hoping this time might be different, I’ll note
that this time is exceptional in that the 30-year yield has
now reached all-time lows and is lower than the 3-month yield and even
lower than the Fed Funds Rate.
My, how the mighty have fallen! Only ten months ago, the
30-year was trading at 3.46%. Now it’s below the Fed’s bottom target interest
rate, scraping along at 1.97%? What is exceptional, then, is how extreme the
inversion is because the 3-month-over-30-year curve has inverted at the lowest
interest rates ever. Ten months ago, the Fed was trying to raise interest
rates. Since then rates fell off a cliff with the Fed doing nothing to
lower them. It merely stopped trying to raise them. This is where the market
has taken them on its own. Does that sound like the Fed is in control of
anything?
One more thing that is different this time? For the first
time ever, the entire US treasury yield curve is
inverted!
I’m just going to take a bold stab at this and say, I
don’t think this exception is likely a positive! The exceptional low yield on
30s could indicate a lot of money is running a long way out to find safe haven
for a long time to come. If the size of the inversion means anything, it will
match up to the size of the recession that is coming with it. If you have swum
in the ocean, you know how, when you feel a huge trough around you, you’re
going to turn around and see a huge wave coming right behind it. This is that.
The extent of this mammoth yield-curve inversion and the
low level at which it is happening also indicates the economy is so
fundamentally weak it cannot function, except at extreme low interest all
across the board!
According to Donald Trump, however, the economy is
thriving, and you should be ignoring this sign. The graph above is where a year
of Trumponomics gets you OR where the Fed’s attempt to unwind its recovery
efforts gets you. Or, as I think, it is where the Fed gets you and where
Trumponomics leaves you because the Trump Tax Cuts were unable to push up the
trough the Fed created when it started its Great Recovery Rewind.
To our mutual relief, however, former Fed Chair Alan
Greenspan told us about a week ago that these rapidly sinking and distorting
interest rates should not concern us. It doesn’t matter if the US sinks into
negative interest rates in order to keep the engines running. Zero, he pointed
out, is just a number. I think zero may be the space-holder
between his dumbo ears. I wonder if, when Jay Powell issued his rare gag order
about a week ago to stop all Fed bank presidents from saying dumb things…, if
he wished he could have applied that to Alan Greenspan, too.
“Appearances at conferences have been canceled, all
scheduled interviews have been abandoned and any comments on or off the record
are outlawed.” This
unprecedented action is a reflection of two pressures. First, there are growing
economic indicators that suggest the US is heading into a recession with the
Dow plunging 800 points on Wednesday…. Second … Trump.
Whoa! That doesn’t sound like crisis management, does it?
Pretty strong order when your addressing Federal Reserve bank presidents,
telling them they are not allowed to speak!
One critically watched component of the yield curve held
out until just last week and then finally joined the inversion pattern,
shocking the stock market into its worst recent drop of 800 points
(fourth-worst in Dow history). It was this sudden matching up of the full yield
curve in a consensus statement and the resulting shudder through the stock
market that kicked Powell into crisis-management mode.
Apparently, it kicked the US president into crisis
management, too. During the market’s free-fall, the president picked up the
phone and made a conference call to several of the nation’s largest bankers. I
don’t know what they talked about. Maybe Trump was extending an invitation for
a cheeseburger barbecue while they were in town; but it happened at the same
time Powell was telling Federal Reserve bank presidents to run silent, run deep.
That one component of the curve inverted again this
Wednesday just as the market closed, confirming its union with the rest of the
yield curve.
“The spread between the yield on the 10-year
Treasury note and that of the 2-year note on Wednesday turned negative for the
second time in one week, a recession warning that flashed for the first time
since 2005 on Aug. 14. The inverted bond-market spread is seen by many veteran
traders as an important recession omen, though the timing on the eventual
downturn is less predictable.
This just leaves the question remaining about timing: did
the clock start ticking toward recession when the main sweep of the yield curve
inverted last fall, or does it start now that the 2s-over-10s portion of the
curve finally joined and then confirmed? Most people time this indicator from
when the curve first inverts. In which case, recession should be starting about
… now.
Either way, this confirmation of the 2s-over-10s for the
first time in twelve years puts this major indicator in unanimous consent now
for recession, and that sent the stock market into convulsions,
which is where you may recall I said the stock market would be as soon as the
Fed’s first interest cut hit because there would be no good economic news left
in the pipeline for stocks after that. I am sure Powell is not unaware of the
connection between the stock market’s big plunge, the full yield-curve
inversion and his first rate cut.
And it is certainly in good part, the Fed’s rate cut that
triggered all these bond moves. Thus, we see the market now hangs every day on
what the Fed says, obsessively watching for hints of what the Fed will do to
create more stimulus to rerecover the economy that it crashed with its
tightening regime.
The stock market, of course, doesn’t care what happens
with the economy any more. It stopped doing that years ago. It only cares about
getting more free money for speculating about more free money. Well, apparently
it still cares a littlebecause signs of recession all around it
were a little more than it could take. It just want’s enough bad economy to
keep the Fed’s meds coming, not enough to make it impossible to continue to
support the fake narrative that business is fine.
The rapid change in the direction treasuries are pointing
this month was a four-sigma event, which was described as being an impossible
event. In this case that was explained as an event that normally occurs once,
maybe twice, in a lifetime, but that just happened ten times in one month:
“Indeed, the number of explosive moves that
we’ve seen to start the month of August in “safe havens” is on par with what we
saw during the worst months of the [great financial] crisis. We still have 2
weeks to go. What’s incredible is how little the broad investor universe seems
to care.
It’s almost as if bonds are now sprinting to catch up
with my position that the recession starts … “Oh geez, now!”
Recession is the new obsession
Recession is now the main narrative. One might say it has
become the national obsession in this sense: Since the 2s-over-10s joined the
rest of the yield curve, the word “recession” is now being googled more
than any time since the Great Recession:
Suddenly “recession” interest is nearing an all-time
peak. Even economists are starting to catch on, and we know how slow they are
about these things. Seventy-four percent of economists
now believe we are declining toward a recession. They don’t put the date as
soon as I do, but we all remember how economists were slow on the pickup last
time around. Almost none of them saw the Great Recession coming, even when they
were standing inside of it. That was one of the big reasons I started writing
this blog. Still, a move to 74% is a large number coming online, at least,
generally this year with the recessionary view. And it is all happening right
in the summer when I said it would.
“Multiple economists have said this month
that the possibility of a recession is real and growing. Recession concerns have intensified since
the beginning of August.
Don’t worry. They’ll catch up with me … after the
recession is over. At least, they are now cuing up to talk about recession. As
Lance Roberts wrote about the ability of economists to see a recession coming,
“Just as in December 2007, there was “no recession.” It wasn’t until
December 2008 that the data was revised, and the National Bureau of Economic
Research (NBER) announced the recession had begun a full year earlier in
December 2007.
Might this be why Trump, while he claimed in self-defense
this week that most economists don’t now see a recession coming, was
immediately thereafter mulling over the idea of a temporary payroll
tax cut? Sounds like an emergency measure to me.
“Several senior White House officials have
begun discussing whether to push for a temporary payroll tax cut as a way to
arrest an economic slowdown, three people familiar with the discussions
said, revealing the growing
concerns by President Donald Trump’s top economic aides.
The Hour
Oops.
While the sources there were anonymous, as is is the
media standard these days, Trump let the cat out of the bag, himself, by saying
he was considering a payroll tax cut but not anymore.
Oops.
Payroll tax cuts have typically only been granted during
economic downturns as a form of instant tax stimulus. Such a cut that benefits
the middle class would certainly have been more effective at stimulating the
economy, instead of just the stock market, than the corporate tax cut we got;
but it would still add just as badly to the national debt.
One might ask, if the corporate tax cuts were effective
as was promised and if they sent us much deeper into debt, as we now know, why
are more tax cuts even being considered? Might Trump’s consideration of more
cuts mean the previous cuts failed to deliver on their promise? Or that things
are looking more dire than the president let on?
To prove he’s not concerned about the current economic
downturn, Trump has unleashed White House Lunatic Larry Kudlow and Peter
Navarro and Kelly Ann Conway to spin up as much cotton candy in the public
narrative as possible. They seem to have been working overtime in the past week
to convince the nation that all is well. Methinks they doth protest too much.
What I find funny is how, each time Laughable Larry and
the other guy tell us the economy is doing exactly as their tax plan said it
would do, they end by begging the Fed for more free recovery stimulus money at
the end of the interview, even though the Fed is already at historically
stimulative interest rates. I think Larry is starting to sound a little
desperate.
Doesn’t Larry sound just a wee bit drunk when he says,
“What’s wrong with just a little bit of optimism?” The last time Larry didn’t
see a recession coming at all was at the end of the George Bush years. Now that
we know your code, Larry, thanks for the warning. And this is “about as good as
it gets” he tell us.
I’ve pointed this out before, but here is Larry finally
admitting he made that mistake and then trying to cover for it at the same
time:
Back then he was championing Trickledown 2.0 and trying
to convince the nation it was working when it wasn’t. Now, he’s trying to tell
us Trickledown 3.0 is working “about as good as it gets.”
Ah, yeah, nobody saw it coming, Larry. Well, except for
those of us who did back in the same month when Larry wrote there was no
recession anywhere in sight, which he wrote because some people were beginning
to ask if a recession was coming when, in fact, one was already
there! (As Lance Roberts noted above.)
On that note, notice how talk of recession now has
suddenly shifted into the present tense:
“I don’t think
we’re having a
recession,” Trump told reporters. “We’re doing tremendously well. Our consumers
are rich. I gave a tremendous tax cut and they’re loaded up with money.”
Then, this Tuesday, the inconceivable happened…
…Trump gave up the long pretense that the economy is not
sliding into recession, and said it could be sliding into
recession and it could be due to his China trade war, but it will be
short:
“President Trump has spent days arguing that
recession fears are a media construct meant to take him down. His aides have
told us that the “fundamentals of our economy are very strong” and that there
is no recession on the way. They even falsely denied that he’s looking at quick
fixes (such as a payroll tax cut) to ward off economic pain.
But Tuesday, Trump
sang a much different tune. Rather than play off the idea of a downturn, Trump
leaned into it — and even suggested that a short-term recession might simply be
the cost of waging his much-needed trade war with China….
A couple of points:
First, the entire monologue undercuts Trump’s regular assurances that the trade
war isn’t hurting the economy. He has frequently said (wrongly) that China pays
for the tariffs, and his administration has argued that the impacts are
negligible — whether on consumer prices, on the stock market or with a
potential downturn.
The fact that Trump
is now entertaining the possibility of a downturn shows he knows he can deny,
deny, deny for only so long….
He has decided
(correctly) that he’s going to have to own any kind of a downturn or recession
that might happen, so he has set about making the argument that it would be
temporary pain in the service of a long-term gain.
So, even the president, long a recession denier, is
admitting, “Yeah, OK, this could be taking us into a recession, but it won’t
last long.” Why is talk, even at the presidential level, moving in this
recessionary direction all of a sudden? Because the recession is developing
right now and can no longer be denied; so, political talk has to switch
to managing that crisis. This was the first presidential step into controlling
the narrative that is now everywhere — not by denying it but by saying it will
be short and is happening for the right reasons.
Little does Trump know (unless the conspiracists are
right) that Trump is needlessly taking the blame right into his own lap by
pinning the recession fully on his trade war when it is really the Fed to
blamer which was foreseeable all along, not inconceivable. By design of
default, as I said before the election, he will become the Trump Chump for the
Fed’s failure. (More on that at another time.)
Consumer sentiment finally joins my parade
One usually thinks of parades as a “procession,” but this
is a recessionary parade. Consumer sentiment had been holding
out on me, refusing to join the march of statistics moving in the direction of
my summer recession prediction. CNBC noted this month that consumer sentiment
remained strong as a bulwark against recession and that retail sales were up
accordingly!
Yay! Well, until it wasn’t.
Sentiment is a lagging indicator. Consumer’s feelings
don’t change until they feel problems building around them.
Those feelings can turn quickly when employment turns and hits home. As noted
many times, recessions typically begin 1-3 months after unemployment starts to
rise. Sentiment has just made such a quick turn, so let us not forget that this
is a consumer-driven economy; things speed up going downhill when sentiment
turns south and starts pushing them. It’s a lagging indicator, but a big
accelerant once it recognizes the fall has begun.
The Fed’s rate cut did what I’ve said it would do and
triggered concerns about recession (both in the bond market and the consumer
market). As a result, the University of Michigan’s Consumer Sentiment Index
fell hard in August, dropping from 98.4 to 92.1, which was worse than any
economist expected in Bloomberg’s earlier survey. Consumer
opinions about current conditions and expectations regarding future conditions
both fell to their lowest point since Trump was elected:
They’re losing faith. Consumer sentiment overall fell
6.4% month-on-month and 4.3% year-on-year. 33% of consumer’s polled also noted
without prompting that the imposition of additional Chinese tariffs had them
concerned. Consumers concluded, based on the Fed’s action, they will
likely be more careful from this point on about spending.
UMich commented,
“Consumer sentiment declined in early August
to its lowest level since the start of the year. The early August losses
spanned all Index components. Although the Expectations Index recorded more
than twice the decline in August as the Current Conditions Index …, the Current Conditions Index fell to its
lowest level since late 2016…. Perhaps the most important remaining
pillar of strength for consumer spending is favorable job and income prospects,
although the August survey indicated some concerns about the future pace
of income and job gains.
If and when employment completes the turn it appears to
have started, consumer sentiment will sink like rock.
Employment now marching with me
About this oft’-spoke idea that employment is remaining
strong: The BLS just published a revision to its count for jobs in the economy
and dropped the count by half a million jobs. It’s not abnormal for them to
revise their count down, but the size of the revisions was substantially more
than usual — the largest downward revision for a year’s worth of data (March
2018-March 2019) since 2009:
What this means is that the average 223,000 per month
gain in new jobs reported during that period was actually about 180,000 new
jobs per month, which is just above the recessionary 150,000 that breaks even
with growth in the labor pool, which takes us down to the lowest job
growth rate we’ve seen in years:
So much for trickle-down economics trickling down. The
big losers were retailers and restaurants, where I’ve been saying for two years
we were going to start seeing a lot of job losses and economic damage due to
the Retail Apocalypse. Once again we find the government statistics getting
revised downward a year later.
Business bankruptcies have been rising this year, and
that is starting to drive up job losses:
“Bankruptcy-related
job losses are grimly reminiscent of the Great Recession.”
In the first seven months of the year, U.S.-based
companies announced 42,937 job cuts due to bankruptcy, up 40% on the same
period last year and nearly 20% higher than all bankruptcy-related job losses
last year, a report released this month concluded. Despite
record-low unemployment, bankruptcy filings have not claimed
this many jobs since the Great Recession…. “It is the highest
seven-month total since 2009 when 50,258 cuts due to bankruptcy were
announced…. In fact, it is higher than the annual totals for bankruptcy cuts
every year since 2009.”
(Ever notice how everything keeps point back, to being as
bad as the Great Recession?)
So, it should be no surprise that “continuing jobless
claims” turned the corner this year and are starting to rise:
The long downward trend in continued unemployment
has clearly found its bottom. Continued unemployment is starting to rise. Note
that this is usually considered a lagging economic indicator —
a sign of where we already are.
Job openings in the US just hit a four-month low, and
hiring has dropped to its slowest since Trump became president. As you can see
job openings have formed an evident top:
Three-month, six-month, and one-year moving averages for
payroll gains are all down sharply to their worst levels … since the end of the
Great Recession: (Using the averages all of the noise and seasonality.)
I’d say that pretty much sounds like the job market is
resting on its skids, and the economy notoriously enters recession almost as
soon as unemployment turns back in the wrong direction, and overall
unemployment, too, looks like it may be forming a bottom:
Whose default is it?
According to Bloomberg, bond defaults —
especially in the energy sector — are soaring back to those 2016 highs we
experienced during a period of collapsed oil prices. At the present rate with
four months left to go, defaults should surpass 2016:
“Defaults on bonds issued by debt-laden U.S.
companies with speculative-grade ratings are on pace to reach a new high this
year for the post 2008 crisis
era, according to Goldman Sachs analysts.
The defaults are noted as particularly rising in the energy
sector, which, of course, is where we saw defaults rise in 2016 as part of a
big stock-market plunge that January that ended in closed-door emergency
meetings of the Fed and of the Fed Head with the president.
“Our main source of worry is the fact that
the improvement in U.S. fundamentals since 2017 can be entirely attributed to
the energy sector,” wrote Michiel Tukker, Oxford Economics’ global strategist
in a note Friday. “It is telling that oil hasn’t risen despite OPEC cuts and
tensions in the Gulf of Hormuz,” Tukker added.
Of course, corporate bond defaults will grow worse if
other industrial sectors, such as manufacturing, join in.
I don’t have to manufacture a recession; manufacturing
is doing it for me
Manufacturing has been in contraction for the past few
months now, with new orders hitting a ten-month low.
And the PMI hit its lowest since September 2009
in the middle of the Great Recession. This drove down manufacturing
employment for the first time since June 2013.
“US manufacturing has entered into its
sharpest downturn since 2009, suggesting the
goods-producing sector is on course to act as a significant drag on the economy
in the third quarter. The
deterioration in the survey’s output index is indicative of manufacturing
production declining at an annualised rate in excess of 3%.… US manufacturers’ expectations of output
in the year ahead has sunk to its lowest since comparable data were first
available in 2012, with worries focused on the detrimental impact of escalating
trade wars, fears of slower economic growth and rising geopolitical
worries. Employment is now
also falling for only the second time in almost ten years as factories pull
back on hiring amid the growing uncertainty.
That’s the broad sweep of where we are. Here is an
up-to-the-day closeup just in: (Any reading below 50 represents economic
contraction.)
How much does it matter if we go into a manufacturing
recession, as we are now doing, and how much lead time is there between a
manufacturing recession and an overall recession?
It would appear it matters every time but one, and the
lead-time is typically zero quarters!
One indicator that stopped moving my way
Housing is the only indicator I’ve seen that started
moving in the opposite path of my recession prediction. While annual housing
sales, as tracked on a month-to-month basis, fell throughout 2018, particularly
plummeting in the last half of the year, as I said last summer housing would
do, the Fed’s massive policy reversal this year has finally reduced mortgage
rates by enough that housing sales have been improving this year, though it
still remains (in terms of annual sales) below its peak:
To show that another way,
We got a blip. We finally got an uptick in year-on-year
sales of existing homes, after sixteen months of year-on-year declines.
Of course, my predictions of where the economy is going
on this website through the years have been in large part about where the Fed’s
recovery actions would take us, how their recovery would fail, when it would
fail and how they would reverse course; so, it is no surprise that course
reversal would eventually help houses out again and that it can change the
direction the stock market moves, too, as it did after the crash last fall. But
the question is how much and for how long now that the economy is moving into
recession?
My constant statements that the Fed’s policy changes will
be too little too late to save the economy from going back into the belly of
the Great Recession still stand. That move to recession will take housing back
down again, even if interest rates go lower, just as happened in the first
couple of years of the Great Recession. The Fed kept lowering interest, and
housing kept falling until well after the recession bottomed out. I’ve also
said the Fed will attempt a lot more economic bailout, but success will be
faltering, and then back down we go again.
Retail also got an upbeat note recently, but that was
largely driven by Amazon Prime Day and is not, therefore, reflective of an
overall change in the decline in retail. As noted, the current sudden reversal
in consumer sentiment is going to start weighing more on retail as consumers
specifically stated they will be watching their spending more closely from this
point forward due to the Fed’s reversal on interest rates and concerns about
trade tariffs.
Elsewhere around the world
The UK economy receded in the second quarter for the
first time since 2012. One more quarter of that puts them in recession, and
Germany’s economy took a big slide toward recession.
“All of these are signs that the risk of a
global recession is a clear and present danger…. Call it a major hangover as
the reversal in tariffs was not coming from a position of strength, it was
coming as a result of global economic reality sinking in, a reality that is
making its way rapidly to US shores as well…. Every single recession in the
past 45 years has seen a 2 year/10year yield curve inversion preceding it. To
believe no recession is coming is to argue that this inversion is defying
history…. The massive tax cuts of 2017 have produced little in the form of
growth other than a temporary sugar high. Growth is slowing and has been
slowing. Long gone are the promises of 4% GDP growth. Rather growth is looking
to drop below 2% in lieu of a trade deal. The only thing that has been growing
are deficits on pace to hit $1 trillion this year already….. The system will
aim to defend itself and it will do so with further rate cuts, currency
interventions, and perhaps with a surprise end to the trade war. But reality is
dawning and the bond market has been signaling this reality all year.
In conclusion
There is too much evidence for me to present in support
of a recession either sitting right on top of right now or being imminently
close. The evidence I’ve gathered for this article is probably already going
beyond anyone’s reasonable attention span, so I will just lay out the rest in
headline links. Almost everything in the news now fits my statement a few
months ago that there would be no good news left in the pipeline for the stock
market after the Fed’s first rate cut.
Since there is so much bad news clogging the pipe in
August after the Fed’s rate cut, I’ll skip the hundreds of articles that say
essentially the same thing in different publications and just list those from a
variety of publications that build the evidence of recession:
“Brace for a 2nd wave in
stock-market volatility — and this one could be ‘Lehman-like,’ says Nomura“
With that constant drone of headlines streaming in, it
may not be long until you’ll see something like this on the front pages:
Whether I prove right about recession starting in the US
this summer once GDP stats come in months from now and then get their normal
downward revisions months after that, one thing is certain: recession definitely became theheadline
news this summer and a sudden big concern for the Fed and for the
president and for consumers who follow the Fed.
I don’t know how it sounds to you, but to me this parade
of data reports and headlines that I expected would show up like this right
after the Fed’s first rate cut this summer, sounds an awful lot like recession
could already be here. If not, it is certainly close by and breathing down our
necks.
That is why the Fed is cutting rates and saying there is
no recession in site (lest it assure there is one by saying there is — a
self-fulfilling prophecy if the Fed says it). That’s why the president is
putting all of his mouthpieces on the street and in the airwaves to proclaim
there is no recession while saying, himself, he doesn’t believe we are
currently in a recession, and then changing to, “OK, well maybe, but….” That is
why the bond market, deemed “most reliable indicator” by the Fed, is sprinting
as if to catch up with where we are, and why the Cass Freight Index has been
screaming so long that Cass finally made the call and said, “Economic
contraction (recession) is probably here now.”
Suddenly, summer came, and recession is in the air everywhere.
It’s become the talk of the town. If it turns out further down the road that I
missed my summer timing, I sure did get close because no one can stop talking
about it now right when I said it would become the theme of
the year.
Why was this so predictable? The Fed’s Great
Recovery Rewind, spoken of often here.
This is what rewind looks like after an unsustainable
recovery that has always been kept alive solely by the Fed’s artificial
life-support, just as I was writing in the first days of this blog would prove
to be the case once we finally got to the Fed’s full removal of life
support. Pull the plug, and the patient is dead because he died in
2009. This is what recession smells like on its way in and what a dead patient
smells like on his way out.
This is why I’ve been writing all these years, so that
when we finally got to this point, no one could say, “No one could have seen
this coming.” They can say it, but this site stands as a
testament to the fact that the present economic collapse upon the recovery
effort’s termination was always foreseeable.
It has always been easy to see this coming if you have
any understanding of economic fundamentals, which the entire world has strayed
far from, and we will never have lasting recovery unless we bite the bullet,
pay the cost. leave Wonderland and return to solid economics.
Making that message stick is why I hope you’ll keep me
writing, and why I thank those who already have. The time to make sure we don’t
misunderstand what is happening all around us and why it is
happening is now. If the lesson is missed, we’ll do it all over
again.
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