Technically, the United States is in a recession. The technical definition is any time the Gross Domestic Product of the country goes negative for two consecutive quarters. Just don’t say that around the Biden White House. You’ll probably get shocked with a cattle prod if you do.
They are doing anything possible to avoid having to admit that we are indeed in a recession. That throws Joe Biden’s claims that his low joblessness numbers indicate a “booming economy”, and that’s just not what most Americans feel right now.
The White House Council of Economic Advisers Chair, Cecilia Rouse, and member Jared Bernstein have issued the following statement, “While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle. Based on these data, it is unlikely that the decline in GDP in the first quarter of this year—even if followed by another GDP decline in the second quarter—indicates a recession.”
In other words, we didn’t like what was coming our way as far as another recession during Joe Biden’s term in office, so we’re going to redefine it in such a way where we don’t have to call it a recession. That’s like saying there is no crisis at the southern border, even though there is a crisis at the southern border. It’s something that Joe Biden can’t blame on Vladimir Putin, or COVID necessarily, since we’re a solid year away from the pandemic, so he has to find a new way to deal with it.
Here’s the problem the Biden administration faces. The FED is going to be raising interest rates again some 75 basis points (3/4 of a point). They did that back in June for the first time in 30 years…and they need to do it again because inflation edged up to over 9%. Wall Street is sitting on pins and needles because they hate interest rate hikes (it costs more for companies to do business when interest rates go up). So, if that happens, the markets will most likely drop. That signals to those folks with 401k’s and investments in the marketplace that they are losing money. That’s not a good thing when you are trying to tell people that everything is hunky dory.
The other problem Biden has is that the yield curve is inverted. Now, that means that the interest rate on the 10 year notes are lower than the yields on the 2 year notes. That has been the case in every single recession we’ve gone through in the last 67 years. It’s a harbinger of bad financial tidings to come, and yes, our yield curve has been inverted for quite some time now. It does show that we are heading to, if not already in a recession.
Regardless who’s definition you want to use to define if we are in a recession or not, the American people feel pressure. They feel that they are worse off today than they were a year ago. In fact, they feel they will be worse off next year at this time than they are today. That is what a recession does. And people have a tendency to pull in the spending, putting off buying a new car, or new furniture. They don’t invest in new houses (housing costs for existing houses are already down about 5% in the last month). And they don’t go on vacations, or go out to eat as often. That means supply outpaces demand and that’s never a sign of growth. It’s a sign of contraction. It’s a sign of recession.
So, forget what you’re hearing from the Biden administration. We are indeed in a recession. We weren’t in a recession last year. We are now. It’s not Trump’s fault. It’s not COVID’s fault. And you can’t blame Vladimir Putin for this one. This one is squarely on the shoulders of Joseph Robinette Biden. Remember that next time he tells you the economy is booming!
Carry on world…you’re dismissed!