The Recession Is Coming

The Fed stated repeatedly in interviews that they were going to do everything to rein in inflation. This put a recession on the table. The Goldilocks soft landing or muddle through option is the dream, but it is hard to look at data and see it as an emerging reality. Whether Thursday’s GDP report confirms it, the recession is coming, and in some spots, already here. It is just not distributed evenly.

Inflation was baked into the cake with the massive multi-trillion dollar 2020 covid aid package. Adding fuel to the fire was the muni and state bailout of ’21. This was an electoral thank you to the states that locked down the hardest in 2020 to sabotage the election. It has been analyzed elsewhere, and the obvious angle is that a second term Trump would not have played as nicely with those blue states that stayed locked down compared to others (blue and red) that re-opened in various degrees. Biden’s team made things worse with the non-infrastructure infrastructure bill that was another trillion spread out over many departments and economic sectors with maybe a quarter to actual infrastructure. The Biden admin made the infrastructure spending even worse by slapping on environmental regulations and requirements to make those projects much slower to roll out. Along with small covid relief checks, this pushed dollars all around in a moment of supply chain dysfunction. It was a recipe for inflation.

To combat inflation, the FED is going to destroy demand. It’s sort of working as rates rise, choking off consumer credit and increasing the cost of borrowing. We are a debt fueled consumer economy. Each notch higher on the interest rate ladder means some marginal borrower is now unable to spend money. Auto loan delinquency is rising for all under age 40. This is all while student loans are still on pause. Consumers are reacting by shifting spending to needs rather than discretionary items. Discretionary consumer goods will take the brunt of this but so will discretionary services. We are a service economy after all, so this should start showing up in employment (a lagging indicator).

It has. Almost half of small businesses have frozen hiring plans. Small business revolving debt has risen in cost as have all raw inputs. Labor costs are the cherry on top. Big firms are not immune either as Big Tech is now pumping the brakes. Ford is laying off 8,000 as it transitions to EV production. Consider the down-market effects for all contractors and vendors of Big Tech and Ford. Auto parts suppliers will face adverse future planning. That’s next. Not reported is that these firms were already not backfilling for Boomer retirements this calendar year as outlooks changed early on for the economy with the rise in inflation in late ’21 and the Russian sanctions throwing everyone into confusion. Customer service has declined since covid hit, and we will likely not see a return to pre-covid days except for those who can pay for it with higher priced goods and services.

America will face generational highs in inflation as it faces rising pink slips. Note that the flood of illegals will strain social service consumption, requiring more funds to states and even the health care sector. There is no political will for more covid checks as covid itself is now endemic and in a new phase of the pandemic. Trillions have been tapped so that states do not face the music for their prolific spending and pension nightmares. All left-wing special interest groups have been paid off for their service in 2020. Metrics will be manipulated to prevent outright confirmation of the worst stagflation fears for television focused Americans, but the truth will be undeniable.

How to address this? One option is to paper over this with some backdoor financial pass through for consumers. The expansion of student debt in the Obama era was by over $100 billion in six consecutive years. As many news articles reported, students were often approved for more money than the classes they signed up for cost and were encouraged to take the fully allocated amount. These loans funded consumer spending for years. This option is gone, but the bureaucrats in DC will have to find a new mechanism for such a transfer of wealth or new debt trap. Maybe climate credits for urbanites without cars will be a way to thread the needle to fund the in-group and boost spending under cover of green goals.

The other option is the one that we know ideologically they cannot enact. America must on-shore more manufacturing, more components of the supply chain and expand energy production to provide cheaper energy inputs. Cheaper energy means not green sources of energy, although recent German moves could justify using West Virginia coal again. If German Greens can do it, why not America? This rewards the wrong state and is not ideologically sound. Why else would Biden beg the rest of the world for more oil while simultaneously shutting down domestic opportunities? Who-whom all the way down. As far as bringing manufacturing back home, picking winners means states friendlier to business, and those states skew red. Those states already have the manufacturing infrastructure and lower labor costs as well as no additional employee costs like the rapidly expanding state mandated leave programs across blue America. Keeping tariffs in place is a bare minimum, and a next step would be deeming more industries strategically important to national security.

This is why we will be stuck and the option selected will be a cope, not a cure. Watch for the re-emergence of universal basic income. It will likely be reworked to be a consumer credit so that you have to spend it and cannot save it, but it fits the ideological requirements and will be hoovered back into the consumer and debt-based economy of modern America. America can re-orient its economy, our leadership just chooses not to. That is why America has the potential for a renaissance, but will instead enjoy a managed decline.

10 Comments Add yours

  1. bluecat57 says:

    It has been here since January 20, 2021 and will last until January 20, 2025 at noon.


    1. crabe-tambour says:

      If we’re lucky–and that’s a big IF.


    2. Andy says:

      Red team isn’t coming to save you. Pull your head out of your ass.

      Liked by 1 person

  2. Hurdle says:

    Email PowerPoint creators (she/her) will be whoring themselves for a loaf of bread in Weimamerica. Lmao

    Liked by 1 person

    1. Earl Shetland says:

      OnlyFans will team up with Instacart by 2025


  3. Eric says:

    Reblogged this on Calculus of Decay and commented:
    Like the words vaccine, woman…they now will change this definition to suit political gain


  4. NC says:

    Its already here, noone seemed to notice.
    If you want to build, back better….you must destroy it 1st.
    Locally at work the HR dept DESTROYED the safety department. Now we are BBB. That’s not what it called, but when head of dept starts saying it will help us with our ESG score….You know its WEF shitte rolling out.


  5. Lon Spector says:

    But the Devil Dems and their Devil media shills will say there’s no recession, and the brainwashed ones will have no
    alternative to believe them.


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