Are we headed for a world wide meltdown?

[Tiny]

We’re now officially in a recession. GDP growth in the second quarter was -0.9%. So we’ve had two consecutive quarters of negative GDP growth. The Fed, thanks to being slow to the game, is faced with raising rates into a recession.

[WTF]

Originally Posted by Tiny

We’re now officially in a recession. GDP growth in the second quarter was -0.9%. So we’ve had two consecutive quarters of negative GDP growth. The Fed, thanks to being slow to the game, is faced with raising rates into a recession.

Well at least our middle class and above are better off than all others!

[Texas Contrarian]

This is the first time in memory that the Fed has undertaken a substantial pivot toward tightening just as an incipient recession is getting warmed up! Not sure I'd be expecting the next 6-12 months to go especially well.

The first to take a hit will likely be the homebuilding industry. Knock-on effects will thereafter hit appliances (refrigerators, dishwashers, air conditioning systems, etc.). Then flooring and roofing materials, lumber, drywall, glass, and cement -- as well as accessories and various homefurnishings. And second derivative effects in a few sectors. Where are various elements on the curve at any given point, where are they going, and at what velocity? (The rate at which the rate of change is itself changing, and all that.)

Of course, clouds often have a silver lining. Some attractive investment opportunities for contrarian investors should arise!

[lustylad]

Originally Posted by Texas Contrarian

Tightening into the Emerging Teeth of a Recession Never Goes Well

And GUESS WHO wants to worsen the contractionary forces by raising taxes too?

Originally Posted by WTF

The Fed is raising rates to slow inflation. Raising taxes will do the same thing! I do not know why congress hasn't done so sooner.

[WTF]

Originally Posted by lustylad

And GUESS WHO wants to worsen the contractionary forces by raising taxes too?

You were the one saying inflation wasn't transitory!

Plus I'm trying to pay for Tiny and DeSantis money give away to fight inflation!

[WTF]

Originally Posted by Texas Contrarian

Of course, clouds often have a silver lining. Some attractive investment opportunities for contrarian investors should arise!

Damn straight!!!

[lustylad]

Originally Posted by WTF

You were the one saying inflation wasn't transitory!

Your highly elastic definition of "transitory" is as worthless as your lame, pathetic attempt to redefine the definition of "recession".

Originally Posted by WTF

Plus I'm trying to pay for Tiny and DeSantis money give away to fight inflation!

I'll tell you what - henceforth, each time you troll-talk about DeSantis spending a puny, insignificant $35 million of "use it or lose it" fed dollars, I'll repost the following FACTS:

Originally Posted by lustylad

You look incredibly stupid when you try to depict Ron DeSantis as a big spender.

He just closed the books on the state fiscal year ending June 30th with a surplus of almost $22 billion. Rather than bribing voters (like Gov. Gruesome did in California), DeSantis is prudently using much of this money to add to Florida's rainy day reserve fund.

Florida has roughly the same population as New York State, yet it spends 1/2 as much as the Empire state while delivering a much higher level of services to its residents. Hmm... is Florida an efficient provider of taxpayer services or is New York just hopelessly wasteful & inefficient? Must be a combination of BOTH!

And when did DeSantis "hike taxes"? Oh wait, he didn't!

Lookee here, folks! Read this if you want to become familiar with the FACTS instead of WTF's completely false narratives!

https://www.flgov.com/2022/05/06/gov...ridas-history/

[eccieuser9500]

Originally Posted by The_Waco_Kid

this is the world wide meltdown

Now we are.

[CPT Savajo]

Originally Posted by Tiny

Exhibit 1 below was written by Bill Dudley, who formerly was Vice Chair of the Fed and before that Chief Economist for Goldman Sachs.

Exhibit 2 is my observation.

Exhibits 3 and 4 are observations of a colleague who fancies himself a macro thinker. He's smart, although not on the same plane of brilliance as Lusty Lad and Captain Midnight. (Lusty Lad is highlighted to annoy WTF as part of my strategy to cure him of his Stockholm Syndrome.)


Exhibit 1:

The Fed Has Made a U.S. Recession Inevitable

By Bill Dudley


U.S. Federal Reserve Chair Jerome Powell has made two ambitious assertions about the central bank’s management of the economy. In his latest news conference, he said that the Fed’s new, more inflation-tolerant monetary policy framework bears no responsibility for the recent sharp surge in consumer prices. Then, the following week, he cited three historical examples — the tightening cycles of 1964, 1984 and 1993 — as evidence that the Fed can achieve a “soft landing,” slowing growth and curbing inflation without precipitating a recession.

I disagree with both. The Fed’s application of its framework has left it behind the curve in controlling inflation. This, in turn, has made a hard landing virtually inevitable.

Under the monetary policy framework, introduced in August 2020, the Fed is supposed to target average annual inflation of 2%, which means allowing for occasional overshoots to make up for previous shortfalls. Yet in the current recovery, the central bank translated this into a more specific commitment. It would not start to remove monetary stimulus until three conditions had been met: inflation had reached 2%; inflation was expected to persist for some time; and employment had reached the maximum level consistent with the 2% inflation target.

This was a mistake. As I wrote last June:

This means monetary policy will remain loose until overheating begins – and cooling things off will require the Fed to increase interest rates much faster and further than it would if it started raising rates sooner. […] The delay in lifting off, for example, is likely to push the unemployment rate considerably below the level consistent with stable inflation, increasing the odds that the Fed will need to tighten sufficiently to push the unemployment rate back up by more than 0.5 percentage point. Over the past 75 years, every time the unemployment rate has moved up this much, a full-blown recession has occurred.

This scenario is playing out now. The labor market is “extremely tight” (Powell’s words), inflation is running far above the Fed’s objective and the central bank is only beginning to remove extraordinary monetary accommodation. Powell blames bad luck — surprises such as snarled supply chains that officials could not have anticipated. To some extent he might be right, but the Fed nonetheless bears responsibility for being so slow to recognize the inflation risks and begin to tighten policy.

So can the Fed correct its mistake and engineer a soft landing? Powell is correct that the central bank tightened monetary policy significantly in 1965, 1984 and 1994 without precipitating a recession. In none of those episodes, though, did the Fed tighten sufficiently to push up the unemployment rate.

1964: The federal funds rates rose from 3.4% in October 1964 to 5.8% in November 1966, while the unemployment rate declined from 5.1% to 3.6%.

1984: The federal funds rate rose from 9.6% in February to 11.6% in August, while the unemployment rate declined from 7.8% to 7.5%.

1993: The federal funds rate rose from 3% in December 1993 to 6% in April 1995, while the unemployment declined from 6.5% to 5.8%.

The current situation is very different. Consider the starting points: The unemployment rate is much lower (at 3.8%), and inflation is far above the Fed’s 2% target. To create sufficient economic slack to restrain inflation, the Fed will have to tighten enough to push the unemployment rate higher.

Which leads us to the key point: The Fed has never achieved a soft landing when it has had to push up unemployment significantly. This is memorialized in the Sahm Rule, which holds that a recession is inevitable when the 3-month moving average of the unemployment rate increases by 0.5 percentage point or more. Worse, full-blown recessions have always been accompanied by much larger increases: specifically, over the past 75 years, no less than 2 percentage points.

The Fed needs to adjust how it puts its monetary policy framework into practice. It shouldn’t be completely reactive, waiting passively until inflation exceeds target and the labor market is extremely tight. Such extreme “patience” forces it to slam on the brakes, increasing the likelihood of an early recession. Also, officials need to be more forthright about the road ahead: Getting inflation down will be costly, in terms of jobs and economic growth.

https://www.bloomberg.com/opinion/ar...-it-inevitable

Exhibit 2: Like the Fed, the European Central Bank is behind the curve in responding to inflation. Western Europe is also handicapped by out of control prices for natural gas and coal. And Europe is not ENERGY INDEPENDENT like the USA. I wonder if perhaps there's an analogy to us in 1973, 1982 or 1991, when high oil prices helped push the U.S. into recessions.

Exhibit 3: Real estate accounts for almost 30% of China's GDP:

https://www.cnbc.com/2021/11/09/chin...ge-magnus.html

Real estate developers in China have way too much debt. Evergrande alone owes $300 billion, and it's effectively bankrupt.

Chinese people historically have invested in real estate the way, say, WTF and The Waco Kid invest in stocks. They'd rather invest in houses than pieces of paper.

President Xi, who believes he's an economic genius, has decided Chinese people should only own one house to live in. He's shut off bank financing for real estate developers. The developers aren't really able to borrow from foreigners either, because of sentiment toward the sector.

My colleague looked at monthly sales of the developers, and January and February of 2022 look nasty -- they're down 50% YoY.

Is a meltdown in real estate about to set off a meltdown in the Chinese economy? Will China go into recession?

Well respected fund managers like Kyle Bass and Jim Chanos have been betting on this for years. Maybe it's about to happen.

Exhibit 4: Japanese national debt as a % of GDP is something like 250%. The Japanese economy has been moribund for years. The Japanese central bank has been trying to create inflation for years, as a way to increase GDP growth.

Well, it looks like now they've got it. Or they're about to anyway. Producer Prices are up 9% YoY. The Yen has weakened to around 124 to the dollar, which means the cost of imports will be up. Japanese wages are next.

So what's the central bank's response? They've decided to cap 10 year government bond rates at 0.25%, come hell or high water, by buying bonds to keep the yields down. What happens if they eventually have to jack interest rates way up to control inflation? Well, given they're drowning in debt, it won't be pretty.

Interesting times we live in.

Are we headed for a world wide meltdown? Yes.

This post was created a month after Biden began the war in Ukraine in Feb 2022 which was the start of the war between NATO vs. BRICS.

Fast forward to Feb 2026 and it's still NATO vs. BRICS as Iran is a BRICS+ member nation supported by Russia and China militarily and economically. Take note.

East vs. West / NATO vs. BRICS ✔

Ukraine war still raging ✔

Straight of Hormuz closed ✔

Foreign Central Banks (BRICS) hold more gold as a reserve asset than US Treasuries/Bonds ✔

China/Taiwan war looming ✔

[Unique_Carpenter]

Wait a min....
Headed for a meltdown?
Or
Already melting down?

I can smell the melting mannequins (politicians).

[VitaMan]

No meltdown

[royamcr]

Biden didn't start the war in Ukraine, Russia did and the build up was years in the making. Trump ran on ending it day one, hmm, no new wars and lets keep the old ones going just for fun.

Originally Posted by CPT Savajo

Are we headed for a world wide meltdown? Yes.

This post was created a month after Biden began the war in Ukraine in Feb 2022 which was the start of the war between NATO vs. BRICS.

Fast forward to Feb 2026 and it's still NATO vs. BRICS as Iran is a BRICS+ member nation supported by Russia and China militarily and economically. Take note.

East vs. West / NATO vs. BRICS ✔

Ukraine war still raging ✔

Straight of Hormuz closed ✔

Foreign Central Banks (BRICS) hold more gold as a reserve asset than US Treasuries/Bonds ✔

China/Taiwan war looming ✔

[Porcelain Punisher]

The only meltdowns will come from those with TDS. Trump could cure aids and they would say its racist

[Turner2099]

Originally Posted by Porcelain Punisher

The only meltdowns will come from those with TDS. Trump could cure aids and they would say its racist

Any racist who cures AIDS remains a racist.

[Precious_b]

After 4 years you don't have the answer????