Since the beginning of the year, the White House has refused to acknowledge that the country was in recession. This is despite growing economic activity at an alarming rate (-1.6%) in the first quarter. There was also no evidence that it had recovered in the second quarter. From Treasury Secretary Janet Yellen, to Karine Jean-Pierre, officials of the administration insist everything is fine.
Things are not going well, unfortunately, according to Atlanta Federal Reserve growth tracking.
According to Atlanta Fed’s GDPNow gauge, the second quarter is expected to be negative 2.1%. This is in addition to the 1.6% decline experienced by the first quarter. https://t.co/4Pfb5j2cDt
— Nick Short (@PoliticalShort) July 2, 2022
An increase in the likelihood that the U.S. has entered recession according to a Federal Reserve tracker for economic growth.
Most Wall Street economists have been pointing to an increased chance of negative growth ahead, but figure it won’t come until at least 2023.
However, the Atlanta Fed’s GDPNow measure, which tracks economic data in real time and adjusts continuously, sees second-quarter output contracting by 2.1%. Coupled with the first-quarter’s decline of 1.6%, that would fit the technical definition of recession.
“GDPNow has a strong track record, and the closer we get to July 28th’s release [of the initial Q2 GDP estimate] the more accurate it becomes,” wrote Nicholas Colas, co-founder of DataTrek Research.
While a recession doesn’t become “official” until a group of nameless government officials says so, no one should be naive enough to believe that the Atlanta Fed’s tracking is so wildly off that the second quarter actually saw positive growth. Even looking at the fundamentals, there’s just no argument to support that assertion. What is the possible explanation for US GDP growth in the middle of a supply crunch, inflation boom, and national gas prices of $5 per gallon? These are all factors that depress economic activity. Such suggestions make little sense. We have already suffered two quarters straight of economic decline with another likely quarter ahead. That, by definition, means we are in a recession, whether those married to “the narrative” admit it or not.
With that reality front and center, there’s every reason to believe things will only get worse from here. The Fed’s quantitive tightening has barely begun, with interest rates set to rise precipitously over the next several years. In the past, rising interest rates have led to slower growth. This should be a way to reduce costs, but it is best for stagnation.
This is why we are here: Joe Biden.
The economy might have made a better landing if the president had not pursued an unwise strategy of excessive spending such as the $2 trillion American Rescue Plan. This would have reduced inflation and made the journey through this minefield easier. Biden instead refused to tolerate a small amount of temporary pain. This led to the country being stuck in a difficult situation which will require much more effort to overcome. Why? Because he was afraid of political consequences. It’s insane that we’ve arrived at a place where we have to choose between double-digit inflation, negative growth, or some combination of the two, otherwise known as stagflation.
What’s more insane is that you can expect the White House to continue gaslighting the issue, not admit that we are in a recession, and pretend your eyes are lying to you. The pain is here, and Americans will not be spared by any obfuscation. There’s only one way out of this malaise, and that’s a period of economic degradation. Biden won’t be the first president not to ignore the laws of economics.
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