Despite fear of cash crash, a recession in US may not happen
By Carlo Barbieri
Since the 2016 election of President Donald J. Trump, the mainstream media have asserted that the United States is taking a headlong leap into a recession.
Well, we’re still waiting for it to happen. Some economists are chewing their nails, swearing the financial floor will drop out either this year, in 2020 or 2021. Maybe even before the November 2020 presidential election.
Others are taking more of a wait-and-see attitude. They aren’t recession deniers, they are just saying it probably won’t happen this year, or maybe not next year, or maybe not the following year, but….. sometime.
An article recently quoted on the internet offered the following expert financial predictions. The share of economists expecting a recession this year dropped from 10 percent in February to 2 percent in Auguste. In addition, 34 percent now expect a recession to take place in 2021, up from 25 percent in February. Still, about 4 out of 10 economists expect a slowdown in 2020, roughly unchanged from a previous report.
It still appears that those who do more than dabble in economic data continue to throw recessional Jello at the wall, hoping something will stick, giving more than a just a hint of when and if a recession will materialize. So far, no good.
The idea that recessions are inevitable is steeped in tradition. Financial prognosticators say the economy must correct itself every seven years, much the way Leap Day must be added to the calendar every four years to balance the slight discrepancy in the length of each year. Without such a correction, we’d probably be welcoming spring in January and celebrating Christmas in August.
Economists feel that because recessions have always happened, they must continue to happen at regular cycles, like the moon and the tides.
The actual President is very, very different from any previous national leader. And he has accomplished things many people said no president could ever bring about.
Naysayers were predicting nationwide economic disaster as soon as Trump became president-elect in November of 2016. They said the stock market would crash, that the flagging job market would likely worsen, that trade would go boom and that war would continue to sap American strength and dollars.
But with tax reform, reduction in the federal bureaucracy and stimulation of domestic industrial production, the US has achieved solid economic growth rather than a recession. It has brought back manufacturing jobs that President Obama said would never see the light of day in the US again and an unemployment rate that’s the lowest in 50 years.
Ironically, the talk of recession today – despite the nation’s success — is louder and more widespread than ever. Statements from economists all over the country are more intense the more that political opinions have become mixed in.
Perhaps Lou Crandall, chief economist at Wrightson ICAP, has stated the case most clearly. The economy is OK, he said, but political risks could cause a recession by the end of next year.
“There’s absolutely no economic or financial reason for a U.S. or global recession to occur in the next year or two, but we’re likely to experience one anyway because of political risks,” said Crandall.
“Recessions are always hard to predict,” he added. But after looking deeply into economic data, he concluded that “there’s no reason” for the economy to topple into recession. “The usual suspects are missing. For instance, there’s no inventory overhang, nor is monetary policy too tight.”
However, “political risks have a logic of their own,” he said, talking not only about Donald Trump’s trade war, but also such geopolitical risks as Brexit, North Korea and Iran, among others.
“I think we’ll continue to take risks on trade and push us over the edge,” he predicted, putting the odds of recession by the end of 2020 at slightly more than 50-50.
It’s not inevitable, though. “We could have a solid year” if businesses get some clarity about global trade rules.
Recently, the New York Times made the bold assumption that all these dire predictions of an impending recession in the next few years are wrong. The Gray Lady said there will be no disastrous financial downfall ahead, only a decline in economic progress based on sustainable and healthy growth of 2% per year, which for an economy that has recovered strongly and significantly from one of the most dire money collapses in history in 2008 and 2009, is pretty darn good.
xxxxxxxxxxxxxxxx
