The media always need something to glom onto for news when they don't have a real story, and much of 2022 was about the impending next Recession when it wasn't about something that actually was newsworthy. Now that the U.S. midterm national election is dominating the news waves until next Tuesday's vote, we probably won't hear much about the financial R-word topic. However, but next Friday the R-word will be back, front and center. And I really have to ask the basic question - are we really in another Recession?
I've lived through three Recessions. The first I can barely remember in the 1970s. I was too young of a kid to give a darn. If had my school recess time, plastic army men and Hot Wheels, and cartoons on Saturday morning, I was good. I'm sure my parents thought things were bad, but it didn't resonate for me one bit. Then came the end of the 1980s and the Bush Recession in 1992. Now that one sucked. I was that generation that came out of college and there were no jobs, period. The old myth of go to school and have a guaranteed career was shattered. At the same time, my parents were getting laid off, their retirement pensions gutted, and it was an economic shit-fest all around.
The third Recession, some might argue was right after 2001 and the Twin Towers attack, but that really wasn't an economic downturn at all. It was more of a slowdown. No, that third Recession that really hit hard with the real estate bubble crash in 2009. That was a bloodbath. When you see big banks falling off a cliff every three days, you know something is going wrong. I was one of those in the minority who held onto my house, and the term "under water" was a real thing.
So here we are, sitting at the tail end of 2022, and thanks to an inflation rate we haven't seen in the U.S. since I was that 70s kid and a crypto winter, everybody is running around saying the market and finances are going to bomb just around the corner. But will they really?
The fact is, this market was supposed to have imploded in 2019. Critics were arguing at that time the economy was well overheated and due for a serious correction. What happened? It went the opposite direction and higher. We all saw one of the highest reaches of the crypto market as well with Bitcoin cracking $68.7K per coin last year. Yah, that one didn't follow the script.
Here's how I define a Recession:
- Everyone is getting laid off and fired, big companies and small.
- No one is hiring.
- Companies can't sell and are closing on main street.
- Politicians can't fix anything.
- Nobody has time to divorce or get into a fight because we're too busy trying to pay the rent or mortgage.
- Only people with ready cash are rocking and scooping up all the fire sales.
- Gold is hot.
So far, aside from Twitter, people aren't getting laid off or their paychecks cut. So that's definitely not a Recession. In fact, last week's report has at least two jobs for every person looking. Companies are still selling a boatload of product and services; their slowdown is because people aren't sitting at home with social distancing shopping online all day long as we were in 2020. Politicians still can't fix anything and that will always be the case, so it's not a good criteria for Recession-testing. And people are still divorcing. Just look at Tom Brady. Gold isn't quite hot, but it's not cheap either. Actually, it's been pretty stable, all things considered.
As a result, I don't think we're in a Recession. I think we're in a laundry machine of round-the-clock media bullshit trying to gin up the next thing people should be afraid of. The election was good a shift for this week. I'd be afraid of that too.
That said, it is a delicate time. Inflation is a serious problem, and if it isn't dealt with, it will erode people's buying power with the related downstream affects on the economy. At the same time, jacking up the interest rates just speeds up the same problem as people find their credit more expensive and won't buy big ticket items since the financing has shot through the roof in costs.
The government's typical approach to inflation is to do exactly what people don't need because it usually thinks that by shrinking income availability, inflation will go away [remember, inflation is typically associated with too many dollars in the market]. Instead, what it should be doing is giving people places where to spend those extra dollars to produce value, so they can then turn around and produce more value. But government doesn't think like that. By the time such a program gets off the ground, the elected officials have all been pushed out or retired, and a new batch is voted in to screw things up. The bureaucrats under them who go from administration to administration defend the status quo and hate any kind of change, so they can't be depended on to be creative with inflation either.
We're not in a Recession right now, despite what the idiots on the news say, but we sure aren't standing on safe ice either. I'm hearing cracking, but I'm not sure who's going to fall into the water first.
