With the economic stress caused by government spending and deficits, there is no cushion left for “bad policy or bad luck” when it comes to avoiding a recession, says National Review’s Douglas Carr. Carr points to key recession indicators, such as real final sales to domestic purchasers, manufacturing production, and the yield-curve inversion—all of which have been ringing the warning bells. Gene Marks, founder of The Marks Group, is looking toward consumer-driven demand as his predictor. Sales for key consumer items are trending lower, pipelines are less active, and a recession is on the way, says Marks. In other news, economist Jared Bernstein is raising concerns over China’s move away from the dollar, and US debt is a big talker: “One thing we could really do to help both the dollar maintain its reserve currency status but also to protect the value of the dollar would be to raise the debt ceiling,” he told Tennessee Senator Hagerty.
National Review/Douglas Carr
On the Brink of Recession
Staggering under the weight of bloated government spending and deficits, the U.S. economy has steadily weakened during the Biden administration. As shown in the chart below, growth slid from 12.5 percent for the four quarters ending in June 2021 to just 0.9 percent as of December 2022 (see chart in link):
With this minimal growth, there is no safety margin to offset bad policy or bad luck in order to avoid a recession.
As evidenced by a long trail of incorrect predictions, forecasting a recession is one of the more difficult tasks in economics. One of the best indicators is a statistic called Real Final Sales to Private Domestic Purchasers, which measures total private-sector demand without distortions from sometimes-erratic inventory and foreign-trade statistics. As of December’s GDP, this statistic was on the brink of recession, illustrated below (see chart in link):
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The Hill/Gene Marks
The one metric that matters when predicting a recession
Every day I get bombarded with economic information from well-meaning economists who are trying to predict whether or not a recession is coming.
There’s housing prices and construction data. There’s inflation and interest rates. There’s consumer confidence and small-business optimism. Is the national debt too high? Are the markets too low? Is GDP slowing? Is unemployment growing? There are countless economic metrics that individually could mean something yet collectively only add to the confusion. No one seems to know if the country is heading into a recession or, if it is, whether it will be mild or severe.
And yet it’s an issue that’s of core concern to most businesses in this country. Investment, hiring, spending and management decisions need to be made based on where the economy is heading. A wrong bet can be costly, even fatal for some businesses.
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Market Insider/George Glover
China wants the dollar’s dominance to fade – and the US should defend its reserve currency status, Biden nominee says
China wants the dollar’s dominance to end — and the US must act to defend it, according to the Biden administration’s nominee for a top economist position.
Jared Bernstein said Tuesday that Beijing is likely hoping the greenback’s supremacy will fade — and hinted that’s because its reserve currency status helped the US to sanction Russia after it invaded Ukraine last year.
“I think there’s some evidence that it does,” he told Tennessee Senator Bill Hagerty, who had asked whether China wants the dollar’s dominance as the global reserve currency to fade.
You can read the full article, here.