Because rates have been climbing all week, I got an email that asked me where the recession is that I have been “harping about” for the last year…
Why Rates Are Climbing
I first want to address why rates have been climbing all week, and it has to do with the debt ceiling issue.
Banks are concerned it won’t be resolved in time, so they are dumping bonds on the market to raise liquidity (that they will need in the event of a prolonged crisis, and that they fear they will not be able to raise during the crisis).
In any case, this enormous extra supply of bonds is pushing down prices, which in turn increases rates.
Why the Recession Is Taking So Long to Show Up
Bob Elliott, a former Bridgewater senior manager and current CEO of Unlimited (a financial services firm) was on this Hidden Forces podcast this week: Why Is The Recession Taking So Long to Show Up?
Bob said that our current business cycle is taking much longer to play out because it is “income driven” and not “credit driven” like previous cycles.
According to Bob, when an economy (particularly spending) is driven by credit or borrowing, the Fed’s rate increases tend to adversely impact the economy much faster.
But our current economy is unusual in that it is driven by income – from stimulus and from wage increases – and that is what is keeping spending up.
Labor Market B*llsh*t
Here is my favorite recent video: Employment Numbers Are A Lie With Millions of Fake Job Postings (only 6 minutes at 2x).
Politicians love to point out how robust our job market is right now by illuminating all of the job openings.
But, the video by Joe Brown points out that millions of those openings are simply fake.
Among other reasons, employers post fake jobs because (1) they are looking to replace current employees – so the job opening doesn’t represent a “new” job; (2) they want to keep employees motivated; and (3) they want to convey the impression that they are growing.
Joe also points out how the “Establishment Survey” that the government relies on is ridiculously flawed compared to the more accurate “Household Survey” that does NOT double count employees.
And finally, the government is playing statistical games to ignore the massive wave of layoffs we have been seeing this year by posting way too high of numbers every month, and then revising them downward later on (when people are less likely to notice).
Layoffs are so bad in fact that Joe outright recommends that viewers keep their current job until things turn around.
Recessions: “Slowly and Then All at Once”
The above subheading is exactly what Jeff Snider said in this recent podcast, in which he explains how recessions seem to be at bay… until they suddenly sneak up on us.
And, all the data we are seeing now is screaming “get ready” (very similar to the data we saw in early 2008 when many people still believed we might avert a recession).
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