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Is America Already In A Recession?

WEAK ECONOMIC CONDITIONS VISIBLE ACROSS GLOBAL MARKETS || By ROBERT ROMANO || “I believe we’re already entering a recession in the U.S.” That was investor and market analyst Marc Faber’s prognosis of the U.S. economy on Dec. 29 headed into 2016, speaking on Bloomberg Television. Since then, oil has dropped…

WEAK ECONOMIC CONDITIONS VISIBLE ACROSS GLOBAL MARKETS

|| By ROBERT ROMANO || “I believe we’re already entering a recession in the U.S.”

That was investor and market analyst Marc Faber’s prognosis of the U.S. economy on Dec. 29 headed into 2016, speaking on Bloomberg Television.

Since then, oil has dropped to about $34 a barrel, a level not seen since 2004. The Shanghai Composite took a major dive on the first trading day of the year, with U.S. stocks closely following suit.

Meanwhile, interest rates plunged as U.S. treasuries – a safe haven in times of financial stress – dropped to 2.17 percent.

Overseas, Europe continues to flirt with deflation, with prices even-steven at just 0.2 percent growth for 2016. Japan is exactly nowhere, with its economy not have nominally grown in 20 years.

These are just snapshots in time, but they offer a glimpse of weak economic conditions globally.

Faber warns that China still has a ways to go, telling Bloomberg that it still “has a colossal credit bubble” and it is not clear how it will unwind.

That’s saying something. The Shanghai Composite is about 35 percent off its June 2015 peak.

Overall, global shares are off 10 percent through November since their $70.8 trillion peak in May, according to the World Federation of Exchanges. They stood at $63.7 trillion in November.

But that may still be a very high valuation, especially when one considers it is still 135 percent higher than its Feb. 2009 low of $27 trillion.

Meaning this could very well be just the beginning of another major correction.

That is, if central banks, such as in the U.S. and China, let that happen. The People’s Bank of China is currently intervening in the China stocks, reports the Financial Times. Will it continue?

A hint may come from none other than former Federal Reserve Chairman Ben Bernanke – then a professor – commenting in 2000 on Japanese policies after their housing bubble popped in 1989. That was when he advised corporate bond and equity purchases to prop up Japan’s economy in an environment with near-zero interest rates.

Bernanke explained the rationale, quite simply, would be to raise prices. “The object of such purchases would be to raise asset prices, which in turn would stimulate spending.”

Vince Reinhart, then Fed Director of its Division of Monetary Affairs, at the Federal Open Market Committee (FOMC) meeting in June 2004 described the circumstances under which a central bank might engage in such purchases: “If the policymakers believed that deflationary forces were severe.”

Reinhart also dismissed the possibility at the time, saying, “These options would change how we are viewed in financial markets, involve credit judgments of a form we are not used to, perhaps smack of desperation, and pull us into a tighter relationship with other parts of government.”

But combine the Reinhat rationale, “if the policymakers believed that deflationary forces were severe” and the Bernanke goal “to raise asset prices, which in turn would stimulate spending,” and suddenly the possibility becomes very real in the current slow growth, near-deflationary environment.

It would also be extremely bearish. Direct central bank intervention in stock markets is a signal of no confidence in markets. And the fact that China is doubling down may be the biggest reason of all to be cautious in the coming year.

Something to keep in mind.

Robert Romano is the Senior Editor of Americans for Limited Government.  This piece (reprinted with permission) originally appeared on NetRightDaily.com.

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52 comments

Alan Greenspan January 7, 2016 at 1:42 pm

“We’re not in a recession.” George W Bush in 2006.
“We’re not in a recession.” George W Bush in 2007
“We’re not in a recession.” George W Bush in 2008, before the election.
“Looks like we’re in a recession.” George W Bush in 2008, after the election.

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Paul Krugman January 7, 2016 at 1:57 pm

“However, as reflected in many private-sector forecasts such as the Blue Chip forecast mentioned earlier, a moderate cooling in the housing market, should one occur, would not be inconsistent with the economy continuing to grow at or near its potential next year.- Ben Bernanke in 2005

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Ben Bernanke January 7, 2016 at 2:00 pm

Hey, watching the throwing stones in your glass house:

“The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance.To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”- Paul Krugman in 2002

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Rocky Verdad January 7, 2016 at 1:48 pm

WASHINGTON — The number of Americans filing for jobless benefits fell last week and layoffs in December were the smallest in 15-1/2 years, pointing to labor market strength even as economic growth appears to have slowed sharply in the fourth quarter.

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Ms.Rocky Verdud January 7, 2016 at 2:14 pm

For 7 years Obama has hammered the U.S. economy with his big Government, JOB KILLING, and Economic growth killing policies. His higher taxes, massive regulations, and refusal to support investment and jobs like the Keystone XL pipeline have just hammered JOBS for average working American and Incomes for the Middle Class. NOBODY is working folks. If we had the same labor participation rate as when Obama took office UNEMPLOYMENT would be almost 10%, a peak recession level. Those folks aren’t working they’ve just given up to live on disability, welfare, and Obamastamps. Taking those millions of working people out of the workforce and making them wards of the state is killing us, but Obama and the democrats love it. They figure anybody trapped on the Government dole is a vote for them. With China now in Meltdown, devaluing their currency, and exporting their UNEMPLOYMENT its hard to see how things get better. We had 1.45% growth on average for the first half of 2015 despite all that Trillions in DEBT, Funny money, zero interest rates, and lower energy prices could do. The stock and real estate market bubbles may well burst in the near future, and its hard to see how productivity increase when Obama and the democrats treat success and hard work like a moral failing or a disease.

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9" January 7, 2016 at 2:17 pm

Can this marriage be saved?

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Ms.Rocky Verdud January 7, 2016 at 2:21 pm

Only if he buys me a razor so I can shave my mustache. :)

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9" January 7, 2016 at 2:28 pm

I know you,baby boy

mamatiger92 January 7, 2016 at 1:52 pm

Per the commercials on conservative talk radio stations, absolutely. Buy gold & stock up your bunker with freeze dried food.

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Rocky Verdad January 7, 2016 at 1:55 pm

Hey Mama – didn’t get to say it yet – Happy New Year!!!

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mamatiger92 January 7, 2016 at 2:00 pm

Why, thank you. Right back atcha, my friend!

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Ms.Rocky Verdud January 7, 2016 at 2:16 pm

The President’s desire/goal to diminish, erode, destroy American Exceptionalism is in “full steam ahead’ mode.

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American Unexceptionalism January 7, 2016 at 2:18 pm

America is dying thanks to welfare queens like yourself who refuse to work and instead suck on the tit of government welfare so you can sit here all day long.

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Ms.Rocky Verdud January 7, 2016 at 2:20 pm

I am an American success story.Fought the state controlled public school agenda in the classroom for 25 years saving hundreds of children from becoming brain dead liberals and then started my own business.

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American Unexceptionalism January 7, 2016 at 2:21 pm

You mean spent 25 years being a lazy bum and then went on welfare right? Yeah you succeeded because America carried your lazy fat ass. We still do, that’s why you’re here instead of at a job.

Jack January 7, 2016 at 2:23 pm

So now we know you have always lived on the back of the taxpayer. Government employee, government health care, government retirement, government welfare.

Ms.Rocky Verdud January 7, 2016 at 2:25 pm

Thank you for my new motor home!

Flip the Socialist January 7, 2016 at 2:25 pm

This fits in perfectly why he loves taxes being raised and why he supports big government Republicans, he’s just looking out for himself.

Ms.Rocky Verdud January 7, 2016 at 2:26 pm

I create jobs for people.They love me (Trumpism).

Flip the Socialist January 7, 2016 at 2:27 pm

Yes, the people at the government building who print and mail your welfare checks thank you kindly for your “service” you leech.

Ms.Rocky Verdud January 7, 2016 at 2:27 pm

I got 4 checks in the mail today from clients.God is good!

Flip the Socialist January 7, 2016 at 2:33 pm

Wow, you get four different welfare checks? Sounds like someone needs to investigate that.

Ms.Rocky Verdud January 7, 2016 at 3:00 pm

Come on by.

Rocky Verdad January 7, 2016 at 3:27 pm

Gotta pay for those legal fees.

Ms.Rocky Verdud January 7, 2016 at 2:23 pm

Funny how our wage growth has stagnated ever since moron like YOU elected a hack Chicago machine politician who has NEVER worked a day in his life in the private sector to run our country, then also allowed an equally moronic Dumocratic Congress to pass Obumblercare during the recession. Between the imbecilic regulations Obumbler has enacted and the anemic economic policies he and his fellow dimwit have implemented, we are having the WORST recovery from a recession in our history.
This is ALL happening during the reign of your incompetent, racist President.

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American Unexceptionalism January 7, 2016 at 2:26 pm

Don’t look at me sunshine, who said I voted for Obama? Sounds like you did, welfare queen.

Ms.Rocky Verdud January 7, 2016 at 2:38 pm

Are liberals evil? No, they’re stupid or perhaps more accurately, close-minded, emotion-driven people with no common sense and a wholly unjustified superiority complex.

I just defined you.

Now I will pray for you:

Forgive them for they know not what they do. — Luke 23:34

Jack January 7, 2016 at 2:27 pm

If you were not a brain dead, multiple personality disordered nut you would know that on an inflation adjusted basis middle class wages have not gone up since Carter administration, except under Clinton.

Ms.Rocky Verdud January 7, 2016 at 2:29 pm

Jack-are you an angry homo living in Alabama? I don’t agree with Judge Moore.You faggots should be able to marry and the constitution and rule of law followed!

American Unexceptionalism January 7, 2016 at 2:30 pm

Wow, you are a terrible person. Please don’t insult other Christians by calling yourself one.

Ms.Rocky Verdud January 7, 2016 at 2:31 pm

A terrible person for speaking up for queers and the sanctity of marriage?

American Unexceptionalism January 7, 2016 at 2:32 pm

Your foul mouth would never be tolerated in any decent church in America. You sow the wind, so you shall reap the whirlwind.

Ms.Rocky Verdud January 7, 2016 at 2:32 pm

ok

Don't Forget Ammunition January 7, 2016 at 2:17 pm

Don’t forget the guns and ammo before Obama confiscates them all in his 7th term!

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Tazmaniac January 7, 2016 at 3:54 pm

Ammo is the new gold.

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Sic Semper Tyrannis January 7, 2016 at 8:27 pm

Not so friend Taz. Everyone can have spewing AR’s, AK’s. Plans and intelligence, experience, and the old way will win the day.

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Tazmaniac January 8, 2016 at 5:45 am

Adapt, improvise, overcome!

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west_rhino January 8, 2016 at 9:37 am

unless you have #CartelPrivlege and get them delivered by ATF or have #ISISPrivlege and have them catered by candidate #Benghazigate

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Never flee in the face of fear January 7, 2016 at 4:23 pm

There’s some great deals in the stock market right now. Time to go in balls deep.

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Manray9 January 8, 2016 at 11:32 am

It’s Y2K all over again — and just as realistic.

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Che January 7, 2016 at 2:16 pm

The low oil price indicates that real industrial production is down.
The labor market is changing character and part time work, uber driving and bartering is becoming a way of life in post- industrial US.
The sh/t will hit the fan when Apple and Google adjust their projections – then some people will look up from their screens and realize that ‘we are in this all together’ – meaning the shareholders run to the hills ( cash) and the average middle class family is told to ‘tighten their belts’.
Secondary sectors like higher education will see their business model of higher and higher tuition and more and more students collapse and real pain will result in a further radicalization of the general public – sell your Hoover boards now.

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Tarrifs are not all bad January 7, 2016 at 2:20 pm

Actually I think much of the low oil price indicates that the Saudis are trying to drive American and Russian oil producers out of business. Our “allies” want to re-establish their domination over world wide oil prices. They are using their low cost of production to run high cost producers out of business. They may even be buying up their stock at basement prices.

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Bible Thumper January 7, 2016 at 6:04 pm

They are trying to hurt Iran also, but if the prices rise again American producers can ramp up production again. The Saudis don’t realize how flexible American industry is. Now with the ability to export oil, they are even more resilient Texas oil has been through booms and busts before.

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Lone Ranger January 7, 2016 at 2:57 pm

Is America already in a recession ?….DUNHHHHHHHHHHHHHHHHHHHHHHHHHH !!!

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itsbushesfault January 7, 2016 at 4:50 pm

As a non voting registered republican it was NAFTA that was the death nail of this country.This begat the outsourcing that ensued.That being stated i would feel more comfortable with a republican in power as opposed to a cowering democrat.

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Ross Perot January 7, 2016 at 7:09 pm

I told you, you should have voted for me.

Btw, it’s “death knell”, not nail, my pointy headed friend.

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Bible Thumper January 7, 2016 at 5:46 pm

If we have a recession it will probably be because of China and there is little that the US Fed, Congress or the President can do to prevent it. Chinese demand helped alleviate our recession and US strength may alleviate the rest of the world’s recession this time. We may not even go into recession now.

Americans act like China is so smart and is taking advantage of stupid Americans in financial and trade policies. That’s not true know. It is China that is pursuing foolish self defeating policies. They think that they can manage growth, command the economy and ignore market forces.

Chinese Mistakes:
1. They have 7% circuit breaker on the Chinese stock market. This has caused sellers to flood the market early in the session causing steep 7% declines and markets closings twice this week. They have announced an end of this policy. Hopefully, stockholders will be reassured.
2. Hoping to prevent stock declines, the Chinese forbid stock sales of 1% of holdings or more in a 3 month period by state owned companies or large percentage domestic owners and a 15 day waiting period when they do. At first glance, you would think preventing sell offs would protect from stock price declines, but real market forces dictate that a stock that is difficult to sell is less valuable to own. In other words, Chinese policy devalued stocks.
3. Contrary to popular belief, China has been trying to strengthen their currency as opposed to devaluation. They are trying to prevent capital flight. Their efforts are fighting natural market forces and creating fear which only encourages people to fine ways to get capital out of the country.

Chinese policies have been inept and self defeating. They have appropriately allowed the currency to decline, but Americans are falsely calling it currency manipulation.

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tomstickler January 7, 2016 at 9:26 pm

Some of that flying capital bought the golf course behind my back yard.

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Bible Thumper January 8, 2016 at 1:03 am

A blind squirrel found a nut.
The author of this short article agreeing with me was published after my comment. He can’t possibly be reading Fits. Could he?
http://www.cnbc.com/2016/01/07/china-market-regulators-pboc-scorned-for-muddled-handling-of-market-yuan.html

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west_rhino January 8, 2016 at 9:42 am

Recession hell! the Obama Depression is it. We have more homeless on the streets since the Kenyan took office and payoffs to his amigo that ran “too big to fail” Wells Fargo and as part of a giga-scam bundled off worthless ACORN inspired loans to suckers, like the Wachovia that Wells Fargo since inhaled like Hillary’s husband didn’t.

Alas, never mind, the end is coming, Republicans get raptured and the Dems, with no one to restrain them bu Bernie Sanders will just print more money and use it as confetti or toilet paper.

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ELCID January 8, 2016 at 11:40 am

Already in a Recession???
We were in a Depression and have only arrived at a Recession in the past 2 years.
The PC Police want you to feel better by not telling you the financial truths.

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ImpaledNazarene January 8, 2016 at 3:31 pm

We’ve been in a recession since 2008.

Reply

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