Economic scenarios have not materialized due to manipulation of the economic impacts. Look at the Federal Reserve Bank's balance sheet size between 2007 $0.9 trillion to 2022 almost $9 trillion. Further manipulation of reality could be due to the $632 trillion in the notational value of outstanding derivatives (source).
In addition, how do we know if key economic indicators (e.g., inflation, unemployment, etc.) are relevant or accurate; who is auditing these indicators and disclosure of assumptions/estimates? Using current economic indicators, we could be stuck in the past, particularly due to modern technology's availability of information and ability to execute trades, decisions, etc. so quickly.
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Matt Johnson
CFO
Premier Bank
Omaha, NE
Posts reflect my personal opinion and do not represent any organization in which I am affiliated.
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Original Message:
Sent: 02-27-2023 16:35
From: Rob Blackwell
Subject: Tuesday Topic: Why Haven't Doomsday Economic Scenarios Materialized?
Warnings about the U.S. economy on the verge of a major recession began about a year ago, around the time the Fed began hiking interest rates in earnest and Russia invaded Ukraine. By the start of the summer, none other than JPMorgan Chase's Jamie Dimon was sounding warnings about an "economic hurricane." By late fall, 75% of Americans were convinced that the country was already in a downturn. But as we now know, the economy expanded last year and may again this year. Overall, despite tighter monetary policy, high inflation, and geopolitical tensions, consumer spending continues to increase and unemployment remains at an all-time low.
This article from Barron's takes a stab at explaining what central bankers, macroeconomists, hedge fund managers, Wall Street titans, and so many others got wrong. It argues that old tools and ideas no longer apply to an economy that was fundamentally altered by the pandemic, a decade-plus of ultra-low interest rates, fiscal stimuli and other factors.
To be sure, nobody is saying we are out of the woods or that a recession definitely won't happen. A number of banks, payments companies, and other financial services companies have all announced large-scale job cuts in recent months. Meanwhile, as pandemic savings evaporate, more people are relying on buy-now pay-later for basic goods and services, and credit card debt hit an all-time high in the fourth quarter of last year. While a recession is certainly possible, however, economists keep pushing out the timeline for when one might occur. Many are now forecasting a "no landing" scenario, where the economy will keep growing despite tighter policy.
What do you think-are we headed for a soft landing, hard landing, or no landing? I'd love to hear your predictions.
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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