Welcome to a Brand New U.S. Recession!James Cordelaine
Consumers ordinarily go by their own economic pain to gauge whether we’re in a recession. Then, if our own pain seems tolerable – at least for the moment – we look to official figures and projections to reinforce our perceptions.
After all, when Fed Chair Janet Yellen says she and her colleagues are carefully monitoring our economy, she wouldn’t give us a bum steer, would she? And our President speaks from the heart when he assures us our unemployment rate went from ten percent in 2009 to its current level of just under five percent, doesn’t he? So apparently we’re back on our feet, and on our way to recovery.
Not so fast. Something’s absolutely not right here.
According to CNBC commentator, Michael Pento, while we’ve been congratulating ourselves on our recovery from the Great Recession of 2007-2009, the fact is we’re already immersed in our very next recession. While there is no one official definition of a recession, it’s the designation respected economists worldwide generally assign to two consecutive quarters of economic contraction.
Pento makes it disturbingly clear we’ve been slogging along knee deep in a recession since the end of the first quarter of 2016. As he points out in the CNBC article, “[W]hen adjusting nominal GDP growth for core consumer price inflation for the average of the past two quarters, the recession is already here.”
Pento further identifies other alarming economic trends that underscore a conspicuous recessionary pattern. For example, copper, normally a reliable barometer of economic vitality, has been in a bear market for the last five years – its rate of production down, all told, fifty-five percent.
Copper is a significant base metal used widely in manufacturing. As one reference source notes:
“Children born in 2014 are likely to use 1,750 pounds of copper during their lifetimes for transportation, housing, consumer items and electrical purposes…. Copper is soft and able to transmit electricity and heat very effectively. It can’t really be damaged by water and is widely used in construction. Because bacteria can’t grow on it, copper is also used in hospitals.”
Another metric cited by Pento is the Baltic Dry Index, which fixes on the cost to transport dry commodities overseas. If there’s any blatant indication of a lagging global demand for commodities, it’s this one, which has declined a colossal 75% since 2013.
Pento’s also concerned the stock market is attempting to price in a recovery from the four consecutive quarters in which the S&P 500 has racked up negative earnings. Another year of declining equities earnings could very well bring us a severe bear market. (Editor: This data prior to the market-decimating 6/23 Brexit vote)
Understandably, he warns the next (or, more accurately, the current) recession could last even longer than the previous one. And, this time around, the Fed’s “bloated balance sheet” might just prevent it from being able to throw us a rope.
What’s particularly devastating about our current economic malaise is we’re not alone. If there’s a possibility of a fix, we can’t achieve it on our own. The copper and Baltic Dry indices are signals of significant global contraction. Which means, in addition to corrective measures we would have to take at home, the U.S. will need to be especially smart in its international negotiating and trade activities.
Clearly this is not the time for individual investors simply to wait and see what happens. Markets will be in disarray for long after you can afford to wait.
In today’s post-Brexit panic the world is once again seeking the protection of physical gold – one of the few avenues of wealth protection the super-rich haven’t been able to co-opt for their exclusive use. And with physical gold protecting your portfolio, long after the Dow and S&P tumble you’ll own a hard asset that will only grow in value during the worst recession and market crashes.