There’s is one big reason why the U.S. will go into another recession eventually, but it’s the same reason you will have some time to prepare for it as well. Making money more expensive to borrow will lead to a recession, but the Federal Reserve isn’t raising rates.
That’s great news, but far too many Americans have already overspent and are in massive amounts of debts. Student loan debt is dragging down the economy and will eventually come to a head, regardless of the interest rates arbitrarily chosen by the central bankers at the Fed.
But according to Market Watch, the refusal to make money more expensive to borrow also buys the United States time before the next recession. Ed Yardeni opined that the inverted yield curve drove the Fed’s decision to keep interest rates where they are at as opposed to raising them.
In my recent book, Predicting the Markets, I wrote: “The Yield Curve Model is based on investors’ expectations of how the Fed will respond to inflation. It is more practical for predicting interest rates than is the Inflation Premium Model. It makes sense that the federal funds rate depends mostly on the Fed’s inflation outlook, and that all the other yields to the right of this rate on the yield curve are determined by investors’ expectations for the Fed policy cycle.” –Ed Yardeni, Market Watch
Yardeni suggested that after studying the relationship between the yield curve and the monetary, credit, and business cycles, the conclusion is that credit crunches, not inverted yield curve, and not aging economic expansions that cause recessions. The inverted yield curve also has a great track record when it comes to predicting recessions. It’s in our humble opinion that the Fed did not prevent a recession, they just kicked the can down the road. The inevitable will be an economic recession, possibly worse, and it’ll be because of the massive amount of debt Americans, corporations, and the government have all buried themselves under.
But the good news in all of this is that you’ll have time. Start working toward debt freedom today and you’ll be miles ahead when the economy takes a turn for the worse.
According to a July 2018 Fed study about the yield curve, the probability of a recession was around 14%. However, a February 2019 update of this study reported that the odds had risen to 50%. That recession warning might have contributed to the remarkable pivot from a hawkish to a dovish stance by the Federal Open Market Committee (FOMC), which sets the Fed’s monetary policy. –Market Watch
The Fed also recently signaled that there won’t be any rate hikes at all this year and only one next year. If they stick to this, it should reduce the chances of a recession and push the timeline out. Essentially, the Fed is kicking the can down the road, but you don’t have to. Now is the time to take action and work toward your own financial freedom so a recession becomes and inconvenience rather than an apocalyptic reality.
Student loan debt is dragging down the economy
My daughter is in college so I am acutely aware of the costs as i am paying cash as we go. It costs $20,000.00 a year, and she is going to a state college, not a private school.
So many of her friends are going through on student loans. When they graduate they will owe $80 to $100 thousand dollars…. at 6.8% interest rate.
That is like having a house mortgage with a high interest rate.
That makes it to where these kids can’t buy a house and can’t buy a car because so much of their income will be going to student loans.
Just in the last ten years college costs have risen over 200%.
This is a scam.
I bet those tenured professors looove the idea of all the female students having to do porn and escort work to pay the too-high tuitions!!
With all the political correctness on campus and the once-normal practice of banging the students now cast into the dust bin of history, the professors can at least wink at each other in the staff bar that the students are getting screwed by them in another way at least.
And, of course, if two such graduates marry…double that (or more !).
I have a family situation where my relates are in their early 40s with outstanding student loan debt (Fine Arts Degree from a Big Name Institution for one member of the couple)
This is crazy and has retarded their financial growth.
<bb
Whenever a honest person discovers that they are mistaken
They will either cease to be mistaken or they will cease to be honest.
And, of course, if two such graduates marry…double that (or more !).
I have a family situation where my relates are in their early 40s with outstanding student loan debt (Fine Arts Degree from a Big Name Institution for one member of the couple)
This is crazy and has retarded their financial growth.
<bb
Duh ! stupid fill in the blank (but my fault really)
Like Yardini, I also think that credit crunches cause recessions. This is exactly what happened in 2008. Credit froze up and banks failed (or should have). The Fed, with the blessing of a corrupt government, bailed them out instead of letting them fail like capitalism would have done. Yes, capitalism is dead.
The Fed will not make the same mistake. At the slightest suggestion of a downturn, they will crank up the printer again. There is no other choice in a debt based, compound usury, centrally planned monetary system. They HAVE to ease or it all collapses. You can’t taper a Ponzi.
Socialism for bankers but not you. I guess you should be glad they are still kicking the can. When that stops, billions will die.
I agree totally. I personally think 2008 was an engineered crisis. They knew the system was fragile and they decided to implode it on their terms and fleece the government. And this worked perfectly. They now have the system they have always wanted: the ability to gamble and bet and invest without any risk for themselves.
And because we are in an infinite debt creation system, they only have to carry it over two thresholds to keep it going for at least the next 100 years.
Threshold 1: Fully passing the debt machine over to the entire world’s population. There are still many places where people are not hooked into the system. There are still billions waiting to be hooked up and fleeced. That project will keep things going for another 10 to 15 years at least (another Trump term, a disastrous AOC two terms).
Threshold 2: Antarctica and off-world. With the advances of private space and Antarctica exploration – the two remaining new territories – it will be possible to set up resource harvesting slave colonies. Once space colonies are set up, then the human trash can be sent up their to work slave colonies just like happened with Australia. This will be the fate for Indians and Africans. These two groups will do the risky stuff up there. The command and control will be handled by the US-EU-China. Just giving you a heads up.
Worried about economy? Who cares.
What about WW3 and nuclear exchange?
End of civilization.
USA border being overrun NOW.
China threatening US Navy.
Million cattle in US heartland killed by floods. Crops ruined.
Things are getting real.
“When the going get’s tough, The tough go drinking.”
Genius
Anon: Seriously, I think we are just about at the: “Perfect storm” of sorts. Between the border “Invasion” taking place right under our stinking fat noses and the nonsense with vile Chinese and Russians down the road a bit, which in fact all of it is most likely related. I truly would not be too surprised if we end up getting Invaded for real, for real. All of the elements are in place and at work. Apparently the numbers of scum balls at the border just about have things completely overwhelmed due to the sheer, ridiculous numbers of the rats. I say lock that border down 100% and put an end to this crap. Once locked down, anyone caught doing any sort of funny business will be shot on sight period but naturally you know no one is willing to do what must really be done so we will end up invaded, watch, the mess is coming, it’s almost here boys. . . Lock and Load as they say and get those mags loaded, 29 rounds each, not 30 🙂
only a fool spends money on a worthless collge degree. Jobs requiring college can be outsourced. As far as a recession ive lived thru several. they aint nuthin to even worry about. We need a real challenge that will test the mettle of the populace. a full blown 1930,s style Depression is my choice.
1930’s depression? You’re an idiot.
SW,
I agree with the old guy. Prices are too high, artificially so.
I don’t see us going through a Grapes of Wrath type of depression. But significant price reductions are in order. The market measured by P/E rations is way out of whack. Land is obnoxiously expensive( admittedly I’m in Hawaii so they are really high), Cars, housing, services are getting to be out of reach with respect to wages, thus the horrible debt load people carry. There was a time when everybody could make it on a single income. That virtually is no longer the case.
If you don’t like the term depression, perhaps deflation is more palatable.
In a period of 19 years my home value has inflated about 300%.
That is ridiculous! I’m darn sure wages have not gone up that much during that period. Anecdotally in my profession, wages went up about 200% in the same 19 years.
We need a reset.
OG: Well you will get what you are asking for – a full on Invasion is going to happen to these United States, wait and see.
The b.s. to completely stampede and over-run the border, the vile puke Chinese and Russians right down the road and all of the other ridiculous antics going round and round. Get Locked & Loaded.
Used to be if you wanted to borrow money or buy on credit. You had to almost prove you didn’t need it. Or at the very least prove how you could pay the loan. Then the easy credit became available. The credit worthiness of the Borrower was low on the list of criteria necessary to secure a loan. So folks became fiscally irresponsible. And The Government did the same. One time On a Saturday the loafers where setting on a bench in front of the country store. A guy rides up on a new to him Mule. The loafers being Mule experts looked the mule over noting all the apparent defects. One loafer ask’s How much did you pay fer it. The Reply was $50. all the mule experts roared laughing. They exclaimed in unison you got took! That mule aint worth 1/2 of that! Twenty Dollars would be a big price! The mule rider stated I bought the mule on credit. The loafers then all exclaimed Cheep enough! Cheep enough! And that’s the prevailing additude today. We need a depression to make the lenders suffer because there will be no payments made and the assets will be almost worthless. A mere recession will not make a pimple on a Truck drivers posterior. On a OT subject. I once bought a very old molly Mule at a auction for $17.50 cash. We kept her a month and sold her for $85 cash.
If we get a 1930,s full blown depression. The entire planet will be in the very same boat. Nuthing going on in the USA the illegal migrants will not want to come here. The federal Government will become powerless to help or hinder the populace. Local control and local rule will prevail. All the Mamby Pamby feel good tree hugging easily Butt Hurt rhetoric would fall upon deaf ears. Loonies like Ocaso Cortez wouldn’t be put up on a pedestal. Very hard times would do folks a lot of good. That what is wrong with manypeople . They did notget enough spankings when they where children or enough ass wooping beatings when they where teens. So they think whatever they do is Ok. There is no down side to being overbearing know it all Assholes. a good ole shock & awe 1930 style depression would level the playing field.