With many economic forecasts becoming increasingly negative, one wonders: Where could our economic future be heading? Some are suggesting a deflationary depression is on the horizon. Others say that the Federal Reserve (Fed) will handle the inflationary issues, and all will be fine – just a minor recession – nothing to worry about.
Another scenario suggests that this time, it will be different. There is an assumption by many that recessions (or economic hard times) are deflationary. Don’t tell that to Turkey (73.5%) or Venezuela (167.15%), who are experiencing extreme economic hard times in highly inflationary environments.
But what is going on in the American economy? First, interest rates were at zero, now they’re skyrocketing. Recession and inflation talk dominate the narrative. The other assumption is that economic recoveries are “V” shaped. Economies go down then up – as they have many times before. Another scenario says that this time, it is different. Perhaps we will have a double-dip recession. And no, I am not talking about Joe Biden’s love for double-dip ice cream.
Certainly, I am not the only one thinking a double-dip recession is on the way – even CNN is suggesting that there is a risk of a double-dip recession. First off, what is a double-dip recession? A recession is a significant downturn spread across the economy that lasts more than a few quarters. A double-dip recession, as the name suggests, is a sort of dual-edged decline in which the economy falls into a recession, starts to recover, but drops back into another recession before the economy can fully recover.
The US economy is likely to slip into recession by the end of 2022, says the large financial holding company, Nomura. Others are saying similar things – see here. What is interesting is Nomura’s call on Fed interest rate policy expectations. The Fed is currently on a historic quickening pace of a rate tightening cycle to combat the equally historic inflation. Only to be equally unwound on the backend in such a short time frame? See this in the chart below.
It has taken us years to create this problem. Does anyone believe the Fed can stamp out a historic inflation cycle with a few rate hikes and jawboning the markets over just a few months?
"*" indicates required fields
Remember, markets are forward-looking to what might happen 6 to 18 months into the future. Most of the Fed’s rate hikes are already priced into the markets. The market is already thinking that the induced recession caused by the rate hikes will force the Fed to only lower them to fight the evident recession they created. More free money is coming – fuel for the markets. This is what the markets are digesting now.
President Biden is on the case. He says that an independent Fed is his top manner to tackling inflation. See his comments in the below video.
But is this true? Is the Fed really acting independently? Let’s lay out the scenario for the Biden double-dip recession and see how nicely it fits into the Biden political agenda – especially the timing. There was a reason Biden re-appointed Chairman Powell to the Fed and Powell will need to repay his debt to his masters. Consider the following Biden double-dip recession strategy and look at this strategy present in a conceptual framework form in the pictorial below.
- With the backdrop of years of terrible government spending and monetary policies, Biden put these policies on steroids with the help of near-zero interest rates by the Fed. Using Covid and other government initiatives, printing historic levels of money supply, he created historic inflation.
- After months of reluctance, the Fed knows they must raise rates to stamp out the 40-year high inflation. However, with the midterms coming in 2022, the last thing they need is high inflation or a recession. So, the Fed must act quickly in shock-and-awe to break the back of inflation immediately. The goal is not to bring prices down but instead get prices to plateau at current levels and bring in a good inflation (CPI) print in October of 2022 for the important 2022 midterm election. Yes … then Biden can say, “I have solved the inflation problem!”
- However, this is short-lived. The induced recession has not hit full force at the time of the 2022 midterms. The Biden administration will declare economic doom and gloom forecasters as looney conspiracy theories. But to ensure those conspiracy theories don’t come true – the Fed must backpedal on the rate hikes as fast as they put them on. Expert market watchers are seeing this rate manipulation which is displayed in the Nomura chart above.
- So the first dip of the double-dip recession could be fairly mild in terms of job losses, though wage losses will accelerate as workers lose pricing power in a weakened economy, with many areas of the economy still raging with inflation – energy being one of them due to geopolitical and green agenda issues.
- As the Fed cuts rates, markets once again soar – more free money – yippee! Unfortunately, this will only extend the previous inflation story we are seeing today – we could see significantly higher inflation relative to 2022 – even surpassing the inflation rates of the 1970s. Again, job cuts will be minimal – they just won’t pay much, forcing a rethink of many average Americans on how they live. For the rich, all will be well. For the rest, they will be engulfed in an inflationary wage depression, as they will see their standards of living reduced by as much as 20 to 70%.
- Calls of a Great Reset on currency and many other things will come. No doubt that this economic upheaval will intersect with the culture wars, as elites try to get the masses to blame each other for the problems they have created. Where we go from here is another story.
In many ways, an inflation wage depression that may be coming is worse than a normal recession/depression. A recession has a recovery phase – a wage depression is systemic and can be more permanent. Though you may have a job, your standard of living will change to the point it will force changes in your life. “You will own nothing, and you will be happy.”
It doesn’t have to be this way. We need true patriots to wake up and begin to take a stand against what our elites and politicians are trying to do to us. And by” take a stand,” it should be implied by legally and peacefully ways to redress our government. We are getting close to the point of no return. Time is of the essence.
By Tom Williams at Right Wire Report
Enjoy HUGE savings at My Pillow with promo code BSC
The views and opinions expressed in this article are solely those of the author and do not necessarily represent those of The Blue State Conservative. The BSC is not responsible for, and does not verify the accuracy of, any information presented.
Notice: This article may contain commentary that reflects the author’s opinion.