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

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.  

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.