It appears that my prior prediction of August as the month to watch for our global recession is about on schedule to be confirmed. Today, I will cover three indicators which point in this direction for both America and the world. What happens is that there is a LAG in the response to all economic indicators. Prices tend to fluctuate as our consumers are slow to respond to changes within the bigger picture. But a recession is on the horizon and by August we should all notice the trend.
1. Leading Indicators have decreased for 14 consecutive months (pointing to a recession). In the last recession (2008-2009) this indicator continued down for some 22 months. We are now at a point where the trend is obvious but our markets have yet to respond. This will occur by August IMO.
www.conference-board.org
2. Commercial real estate is in serious trouble as our Regional banks are now sellers. This indicator points to a huge drop in value for our commercial real estate sector. It has started but the LAG continues as prices are slow to respond. This will also be obvious by August or September, 2023, however. As real estate goes so goes our economy.
3. Jobless Claims is another indicator which starts slowly and grows over time. This indicator is up for May and I predict that it will be up for June, July, and August. California is leading in jobless claims and this state is usually a leading indicator for the nation. So by August, 2023, we should have this indicator pointing to a big recession for America. What happens in America is likely to affect the planet (in time).
Conclusion: The American economy is heading for a huge recession later this year. My sense is that August will be the month that reveals this reality. It is possible that events could happen faster and/or slower. But my sense is that our key indicators are now pointing to August as the key month for America's next recession.
The last recession was over 14 years prior (2008 - 2009). The bottom of the last recession was in March, 2009. Our Dow was around 6,400 at the time. Our Dow is now near 34,000. This type of bubble has never happened in all prior American history. But it happened as our Central bank caused this event to happen.
Money from heaven emerged as QE flooded the markets. America's Central bank increased their balance sheet some 10 fold (from around $850 billion to nearly $9 trillion. As I write this Central bank is tightening and causing liquidity to disappear from our general markets. Asset bubbles will POP as the coming recession happens. So far nothing serious has happened. But all will change quickly come August IMO.
Economics is difficult to explain to most thinkers. There are so many variables that most pundits can not think deeply enough to discern the major trends. I have been teaching this social science for some 50+ years. I usually get the BIG picture as I follow the indicators closely. I now can say with confidence that a huge RECESSION is on the horizon. Liquidity is being DRAINED from our American and also our global markets.
M2 is declining. The Monetary Base is declining. Lending on commercial real estate is declining. Debt has grown to unsustainable levels. The Local economy is declining even as consumer debt is skyrocketing. Inflation has declined slightly and this event will eventually lead to Deflation (after the recession has arrived). The American dollar has survived (been in high demand) and has allowed Americans to increase consumption somewhat. America's trade deficit is still over $1 trillion (annually).
www.usdebtclock.org
The LAG situation is fooling most consumers and pundits. But the core indicators show that a huge RECESSION is on the horizon. It will arrive slowly but relentlessly IMO. I continue to predict an AUGUST date for the beginning of this event. It is possible that it might arrive SOONER. If our Fed starts another QE program it is possible that this event could be delayed a few months. I do not expect this, however!
Think for yourself as you watch events happen. Have a great day! I am: Donald B. Swenson, Economist/Philosopher, donaldswenson.blogspot.com.
http://kingdomecon.wordpress.com
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