Great News! Yellen Says No Sign of Recession, Krugman Says Economy Will Shrink

Hip, Hip Hooray! Perhaps the recession has left town, according to Janet Yellen, who sees solid growth and a strong labor market as positive signs the Fed's efforts to fight inflation are not hurting the economy significantly. I guess she doesn't drive, fill up her car, eat food, or buy groceries. 

Janet Yellen said she doesn’t see signs of a recession, but Nobel laureate Paul Krugman argues the worst is yet to come | Fortune 

But the good news is Paul Krugman speaking up in disagreement with the Treasury Secretary. Krugman sees an upcoming downturn: "While this report made all the people who screamed 'recession!' look as foolish and partisan as they were, it was not, if you look under the hood, a sign that the worst is over," Fortunately the Krugman prediction phenomenon can be put into play here. He does not get it right everytime, or some say, even most of the time. So, in fact, he may be in agreement with Yellen, using some obscure prediction logic analysis. Be keep in mind, past performance does not indicate future performance.

The Daily Caller has categorized the Krugman prediction phenomenon. Here Are Paul Krugman’s Worst Predictions Ever–They’re Really Bad | The Daily Caller

Recession Alert! Bloomberg Calls It 100% Certain! Prepare!

Bloomberg has predicted the absolute certainty of a US economic recession in 2023, most likely before October. The economic model may mean the Federal Reserve has gone too far in raising interest rates in their thus far futile attempts to constrain inflation.

No model is certain, just an educated guess disguised as a mathematical projection by experts. Have faith, these experts are not always right. But this one seems pretty dire any way you look at it, especially when we have a flock of other experts parroting similar outlooks. 

Your best bet? Beware and Prepare! The next Fed meeting November 1-2 may give us some direction. 

The stock market is highly volatile right now. Be careful! Watch for a 'risk-off' flight to quality. And CD's are becoming more and more attractive for safety and income. 

Bloomberg: https://www.msn.com/en-us/money/markets/forecast-for-us-recession-within-year-hits-100-in-blow-to-biden/ar-AA133nzh

But be sure of one thing, when the rate hikes stop, there will be a few months of wait and see, then we might just see one great stock buying opportunity.

Future Fed Forecast. Interest Rate, Inflation, Housing, Employment Pedictions

Inflation and Interest Rates are the two main concerns for most working class people taking money out of their pockets, taking food out of their mouths, and too often taking hope out of their lives. 

Will the Fed succeed in bring some relief? Not for quite a while. Expect interest rates to continue to rise for the rest of 2022 and into 2023. Inflation won't be whipped for a couple quarters, unless we get pushed into a deep recession. Housing prices will continue to drop and the unemployment rate slowly rise.  

NerdWallet has some good insights: https://www.nerdwallet.com/article/finance/timeline-for-lower-prices-and-rates

Be aware and prepare! Pay off those high interest rate credit cards, save up some emergency funds, and keep a few bucks on hand, there will be a sale on some quality dividend stocks.  

The Fed Will Pivot - First They Must Find a Way to Save Face.

There is no question the consensus of the Federal Reserve Board is to slow rate hikes and quickly restart a quantitative easing program to avoid a 2008 style international financial crisis.

No Question.

So, will they do it? Of course, just as soon as they can manufacture a plausible reason for their sudden reversal. Ah ha, here we go. October 13 brings the newest inflation report for September. Prepare for it to be spun like a yo-yo doing walk the dog. Whatever the number is, it will be 'positive news on inflation, proof the Fed is winning the battle' or something similar. 

But that's ok. The USA economy will benefit, and so will all the citizens, except maybe the Democrats who have been in charge of the country for the last couple years. 

Here's a good take from MarketWatch. (Long but good read)  

Investors are dismissing --- or maybe even welcoming --- signs of cracks in the global financial system. Here's what's at stake. - MarketWatch

Will the Fed finally get it right, or are we doomed with a deep recession starting soon?

The only way out is to reverse these interest rate hikes and again began a program of quantitative easing - and do it soon! 

The US Dollar is near the stratosphere and headed higher at a rocket pace. International economic disruption could be just a Fed meeting announcement away. 

Business Insider has it right. Soaring US Dollar to Spark a Fed Pivot, but That's Not Enough for Stocks (businessinsider.com) 

And what you really need to know?

The real rate of inflation.  Alternate Inflation Charts (shadowstats.com)

The Fed's Fatal Flaw - Using a Wrong Measurement to Fight Inflation.

The Fed has won the Battle against Inflation. They just don't know it. 

Opinion: The Fed has won a major battle against inflation but doesn't believe it because the data have a fatal flaw - MarketWatch

By keeping on the track to raise interest rates and to reduce buying mortgage backed funds, they may be forcing the USA, and maybe the world, into a severe, prolonged and deep recession. 

The Enemy Approaches Unseen - and Will Strike Soon!

Inflation is a killer. In more ways than most imagine, by higher prices up the chain from manufacturing, food production, then transportation, distribution, and final delivery. With the QE Train at full speed, it is only a matter of time before it strikes, and strikes hard. The only question is whether there will be a brief deflationary period before the monster surfaces.

And now we find the 'experts' are predicting 'explosive inflation'.

Quoting the article at Zerohedge, 'In short: the Fed's DSGE models fail when applied in real life, they are unable to lead to the desired outcome and can't predict the outcome that does occur, and furthermore there is no way to test them except by enacting them in a way that consistently fails. But the kicker: the Fed's own model predicts that if the Fed does what it is currently doing, the result would be "explosive inflation."'

Read more: Explosive Inflation Predicted

Beware and Prepare!

WSJ: Fed Buying 61 Percent of US Debt

Don't expect interest rates on savings deposits to rise at all over the next several years, or more, if the Fed keeps on buying up the majority of US Treasuries at this rate. And most likely they will, since no one else seems to want them anymore.Julie Crawshaw and Forrest Jones at MoneyNews give us this recap of the original Lawrence Goodman WSJ article here: Federal Reserve Propping up US Economy and presents a dire scenario. In the original article at the WSJ by Goodman Demand for U.S. Debt Is Not Limitless  (Possible Paywall) he makes the point that " Federal Reserve purchases of Treasury debt mask reduced demand for U.S. sovereign obligations." this creates the impression of stronger demand for US debt  and could be especially dangerous.

In consensus, Crawshaw and Jones make the point that the Fed, by propping up the treasury sales, may be delaying action on fiscal responsibility, perhaps even postponing "serious attempts to curb spending and narrow its gaping deficits" by the US Government.

"Without foreign buyers and a shrinking base of U.S. corporate and bank buyers, the Treasury has had to resort to the Federal Reserve itself to make the purchases. The Fed purchasing not only makes up the shortfall, but can keep long term interest rates artificially low."

So for now don't wait for the banks to start offering any reasonable interest rates soon, and look to the market for investments in solid stocks. But take care, the bulls are here for a short term, leading up to the elections. Then pay attention, because the results of this one will determine the financial future of not just this country, but of the world.