There’s a 70% chance the U.S. economy will sink into a recession, according to former Treasury Secretary Larry Summers. “As I put together the lags associated with monetary policy, the credit crunch risks, the need for continuing action around inflation, the risk of geo-political or other shocks affecting commodities, 70% would be the range that I would be in,” Summers said. Summers’ view seems to be backed by new Federal Reserve data released, in which it was shown that the U.S. money supply contracted for the third consecutive month, declining at its fastest rate since the Great Depression. “The contrarian position isn’t that a recession will come later, but rather that it’s already started,” said Mike Shedlock, economist and investment advisor for SitkaPacific Capital Management. According to analyst Dave Kranzler, the United States must now accept a Hobson’s choice: the Fed’s path to financial collapse via its recent de facto bank bailouts.
Business Insider/Zahra Tayeb
There’s a 70% chance of a US recession thanks to the Fed’s fight against inflation and risks of a credit crunch, says Larry Summers
Former Treasury Secretary Larry Summers has warned there’s a 70% chance the US economy will slip into recession.
In an interview with Foreign Policy’s Ravi Agrawal, the former Harvard University president discussed a range of topics, including the global economic outlook, the dollar’s strength, and the West’s handling of Russian sanctions.
“The chance that a recession will have begun this year in the US over the next 12 months is probably about 70 percent,” Summers said,
“As I put together the lags associated with monetary policy, the credit crunch risks, the need for continuing action around inflation, the risk of geo-political or other shocks affecting commodities, 70% would be the range that I would be in,” he added.
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Epoch Times via ZeroHedge/Andrew Moran
Recession Risk Grows After Money Supply Shrinks At Fastest Pace Since Great Depression
The U.S. money supply contracted for the third consecutive month, and is declining at the fastest pace since the Great Depression, new Federal Reserve data show.
In February, the M2 money supply—a benchmark for how much cash, bills, bank deposits, coins, and money market funds are circulating throughout the national economy—tumbled 2.24 percent from the same time a year ago, down from negative 1.7 percent in January. This represented the third straight month of a contracting money supply.
Early indicators point to another contraction in March, as the M2 money supply tumbled 3.13 percent year over year for the week ending March 6.
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Inflation, The Debt Ceiling And Hobson’s Choice
Most people mistake rising prices for inflation. Inflation occurs when a Central Bank creates money at a rate in excess of the rate of wealth creation that theoretically “backs” the additional currency. Simply stated, the ratio of additional money supply to additional “widgets” is rising.” Rising prices are the evidence that inflation has occurred. The amount of money created (“money” as defined by Austrian economics) has dwarfed the amount of wealth creation since 2008. This is why rising prices have not become a “transitory” phenomenon.
The Government and the Federal Reserve is faced with a tough choice: immediate systemic collapse or death by a thousand cuts. If the Fed caves in to political and public persuasion and “pivots” by abandoning QT and rate hikes, it will further defer the inevitable and further fuel rising prices. If it continues on its course, in all likelihood 2008’s great financial crisis will become this year’s great financial collapse. But the Fed (and the Government) has already signaled its decision when it engineered the recent de facto bailout of the banks. And the uninsured depositors at SVB and Signature bank were not only ones bailed out. Citibank fed prolifically at the FHLB loan trough (which is part of the Fed’s balance sheet) over the last several months. And now this country must accept a Hobson’s Choice, which is to say there is no choice other than the path offered by the Fed.
You can read the full article, here.