Where’s the Darn Recession?
The comments below are an edited and abridged synopsis of an article by James Rickards
The US has some of the lowest unemployment rate readings since the 1960s. Real wages have begun to grow slightly after years of negative readings.
Inflation is still too high (and damage from past inflation will be permanent), but the dip has been undeniable.
The stock market has been on a tear and some major indexes are inching toward new all-time highs or already there.
Still, the negative side of the picture is clear: US industrial production has been declining for over a year.
Bank lending is contracting, and credit conditions are being tightened. This means that a trend toward reduced liquidity is in place and will likely grow worse until it leads to business failures and bad debts.
The EU is already in recession and Japan and the UK are close to zero growth and heading toward recession. Within the EU, recessions have hit in Germany and Ireland, with Italy and France showing growth barely above zero.
The idea of a real recession in China may seem unbelievable, but we may be witnessing one.
With the China, Japan, the UK, the EU and others in recession or close to it, how can the US expect to remain afloat?
Globalization is still the dominant path to global production. Aggregate world trade may be shrinking, but it’s still a large part of global GDP on a country-by-country basis.
How can the world shrink while the US grows?
That won’t happen unless US growth is so strong it pulls the world out of a collective rut, and here’s no evidence for that.
Ample signs of growth are surrounded by growing signs of an economic stall. The US is showing relatively strong growth, while the rest of the world coasts to a halt.
How do we reconcile the data and where do we go from here? Jim provides the answers within.