All the indicators point to a recession on the horizon (some think it has begun already)…rising prices, food shortages, housing problems, markets unstable, all the indicators are there….
As the economic issues get worse and worse many are asking what is happening and what can we do…..
We all want answers so we can cope…..maybe this will either terrify you or help with your questions.
The stock market actually rose Wednesday in the immediate aftermath of the Fed’s decision to raise rates by a whopping 0.75%. Thursday, not so much. Major indexes fell more than 2% in early trading and sent the Dow below 30,000, its lowest level in more than a year, reports the Street and CNBC. In short, the new bear market only deepened. Now the big question: Will a recession follow? A look at coverage, including some of the many advice pieces now moving:
- Context: A recession might well be on the way, if it hasn’t already arrived, writes Jeff Sommer in the New York Times. Its dry definition—”a significant decline in economic activity that is spread across the economy and lasts more than a few months”—doesn’t capture the “grim” economic toll it will take on households. But Sommer puts things in context, noting that recessions and bear markets might be more common than you think. The US, in fact, has been in recession 14% of the time since WWII. Among Sommer’s tips: Consider putting cash into I bonds from the Treasury Department, as well as money market funds, which will now be paying more interest.
- Impact: Among other things, the steep rate hike means home and auto loans will continue to get more expensive, and you’ll pay more in interest on credit card debt, per Axios. The average rate for a 30-year fixed mortgage, for example, is now about 6%, double last year’s figure. And the average rate for credit cards is now 16.7% (and rising), up from 16% last year.
- How bad? CNBC rounds up the opinions of economic strategists, and they seem pretty certain a recession is imminent. For example, Andrea Dicenso of Loomis Sayles puts the chances of a global recession at 75%. The silver lining: Dicenso and others say the Fed’s aggressive action could make the recession a “shallow” one and thus less painful. “If it’s a shallower recession, which I suspect it would be in the third quarter, the Fed actually has some room now to come back off of some of those rate increases,” says Michael Yoshikami of Destination Wealth Management.
- Advice: A Washington Post column by Michelle Singletary has tips on handling a bear market and a possible recession. The first is in the don’t-panic vein. “Just shift your view a little bit and look at this as an opportunity if you’re a longer-term investor,” says one strategist. But in terms of tangible things to do: Eliminate credit debt, perhaps with a low-interest personal loan or a balance-transfer credit card. (See a related point in the item below.) Also, consider a side gig to boost emergency reserves, because “the standard advice of having three to six months’ worth of living expenses may not be enough.”
- What not to do: Veronica Dagher at the Wall Street Journal digs into three common mistakes people make at such times. One is dipping too deeply into emergency funds to pay off credit card and other debt. It’s a balancing game that requires more finesse. A lot of people also reduce or eliminate allotments into their 401(k) funds, but that has some drawbacks, including the loss of employer matching funds. A third is not changing spending habits at all.
I hope this will answer few of your questions for the coming days…..and helps you prepare.
I Read, I Write, You Know
“lego ergo scribo”
In Saner Thought 
The last recession that I can remember was called “The Great Recession” and it went something like this:
“The Great Recession was the sharp decline in economic activity during the late 2000s. It is considered the most significant downturn since the Great Depression. The term “Great Recession” applies to both the U.S. recession, officially lasting from December 2007 to June 2009, and the ensuing global recession in 2009.
The economic slump began when the U.S. housing market went from boom to bust, and large amounts of mortgage-backed securities (MBS) and derivatives lost significant value.
So what can the Feds do, if anything to slow or stop a recession?
“High inflation comes with a heavy economic price, but so can the Federal Reserve’s attempts to get it under control.
The Fed has a tried-and-true method for curing inflation: raising interest rates. But it’s a blunt instrument, with no room to fine-tune specific corners of the economy. Hiking borrowing costs is only successful because it slows demand across the board — and along with it, the economy and likely hiring, experts say. That’s despite U.S. central bankers projecting 10 rate hikes by 2023 yet unemployment holding at a half-century low, according to their latest economic projections.” — (https://www.bankrate.com/banking/federal-reserve/will-the-fed-cause-a-recession/).
I believe it doesn’t matter what the Feds do and that the recession is inevitable and is an unalterable part and parcel of the ordinary life cycle of our national economy. So it is here and there is nothing we can do about it. It happens on a regular schedule and a lot of it is based on the cavalier way that citizens approach their spending habits and on the ever-increasing relentless greed of the giant corporations seeking to fleece Americans out of every cent of their living income.
What we really need to do is to stop sending billions of dollars to places like Ukraine and all the other nations of the world … we can no longer buy the favour of nations with goods and services and cash … that has long since been proven … to give all those freebies to other countries in the hopes of currying some kind of favour with them is an exercise in pissing in the wind. We need to draw in our horns, stop trying to be the breadbasket and the police force of the world and do a little more to secure our own safety and security as a nation.
I say, “Let us be thankful that the looming recession is not (as yet) a looming “Depression.”
The government can do many things….but what they choose helps no one but those that do not need the help. chuq
I was at the supermarket today, and a similar shop to last week had increased from £88.50, to £109. From where I sit, that’s a recession for me.
Best wishes, Pete.
I see the same here…..chuq