Will there be a recession soon in USA?
Yes, very likely. I hate to be pessimistic but all data points to it. Let's hope I’m wrong!!
re·ces·sion — a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
Let’s look at 3 things and the data points:
GDP in Negative: First the most important measure of economy. The GDP calculation accounts for spending on both exports and imports. Thus, a country’s GDP is the total of consumer spending C plus business investment (I) and government spending (G), plus net exports, which is total exports minus total imports (X-M). So GDP = C + I + G + X-M.
The American economy contracted an annualized 1.4% on quarter in the first three months of 2022, well below market forecasts of a 1.1% expansion and following a 6.9% growth in Q4 2021. This indicates shrinking growth.
Last time negative GDP growth happened was at the peak of the pandemic in Mar 2020 and for 2 successive quarters resulting in a brief recession.
Inflation and Federal Monetary Policy: The Federal Reserve is guilty of monetary policy malpractice, aided and abetted by Congress’ bipartisan support of the administration’s massive pandemic relief spending. Inflation is running hotter than it has in more than 40 years. We’ve gone from post-pandemic boom to risk of recession in less than two years. Huge downside of President Biden’s March 2021 American Rescue Plan. The $1.9 trillion spending package was overkill, especially with Fed Chairman Jerome Powell keeping interest rates at near zero since the start of pandemic.
“There is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation”
Larry Summers, the Harvard economist and former Clinton administration treasury secretary warned with far more prudent phrasing in a Feb. 4, 2021, column in The Washington Post.
Economic Stimulus since March 2021:
$1.9T: Cost of the massive stimulus passed in March (American Rescue Plan).
$2.3T: Cost of infrastructure makeover proposal (American Jobs Plan).
$1.8T: Cost of the social spending plan unveiled this week (American Families Plan).
$6T: The total tally
Economy of Russia and USA: Russia’s invasion of Ukraine has led to a different kind of Cold War between 🇺🇸 and 🇷🇺. USA led NATO anticipated Russia to face deepening isolation and economic turmoil as it continues to be hit with an array of sanctions that effectively cut off Moscow’s major financial institutions from Western markets in giving all kinds of economic sanctions to Russia. Even historically neutral Switzerland has so far frozen 7.5 billion Swiss francs ($8.03 billion) in funds and assets under sanctions against Russians, including money in frozen bank accounts and properties in four Swiss cantons.
But the economic reality seems to be different two months into the war. Russia doubles fossil fuel revenues since invasion of Ukraine began.
The Russian ruble is stronger than ever and steady at 70 per USD in late April, hovering around 22-month highs despite a strong dollar as strict capital controls by the central bank stabilized the currency despite surging inflation and sharp economic contraction brought by sanctions.
Meanwhile at the financial markets in USA, The benchmark S&P 500 fell 3.4 percent and finished April with a 10 percent loss, its worst monthly slide since March 2020. The Dow slumped 6 percent. The Nasdaq composite, heavily weighted with technology stocks, bore the brunt of the damage this month, ending April with a 14.48 percent loss, its biggest monthly decline since the 2008 financial crisis.
But now the administration developed a new message to counter the impact of soaring consumer prices: It’s Vladimir Putin’s fault. The White House has all but trademarked the phrase “Putin price hike” in recent weeks, blaming the Russian president’s invasion of Ukraine for a spike in gasoline prices that turbocharged the already sizzling US inflation rate. The move is an attempt to overcome a political liability and hold onto the Democrats’ slim congressional majorities in the face of relentless criticism from Republicans of what they’ve branded “Bidenflation.”
But US Economic Data paints a different picture towards the “R” word
