As the Atlanta Fed came out with another downgrade for Q1 GDP estimates earlier this week, the reality is that the U.S. economy is or has been in recession for at least the past two years. And just as former Fed Chairman Ben Bernanke refused to admit that the country was in negative growth in 2009 despite the fact that during that period the downturn would become known as the Great Recession, central banks in the U.S., Europe, and elsewhere are hiding the real risks of the global economy moving into a completely new recession.
While analysts place the chances of a global recession in the near future at around 10 percent, investment firm Saxo ranks the risk closer to 60 percent, as borrowing reaches unsustainable levels across the Western world, and US President Donald Trump loses his market luster.
The bank’s global macro outlook maintains recession is more likely than not in the next 12 to 18 months. Moreover, Saxo is concerned about a significant “perception-versus-reality gap” in the market in respect of recession — namely, present economic conditions should inspire caution and conservatism among consumers, businesses and governments alike, but economic actors are appearing distinctly unaverse to risk.
The bank said high expectations of economic stability, or prosperity, in the years leading to 2020 were based purely on hope — and “hope belongs in church on Sunday.”
Saxo attributes the potential for a global recession to dwindling investor faith in President Trump, whose election originally inspired a wave of bullish buoyancy in markets and pushed the S&P 500 to historic highs, and Western dependency on borrowing. – Sputnik News
As you can see from the above chart, the real core GDP without the myriad of phantom variables added to the data model shows the U.S. economy has been in recession ever since the end of the Dot Com Bubble, excepting a small respite in 2004 when the Housing Bubble was being geared up by the Fed.
Despite the central bank’s symbolic raising of interest rates over the past 18 months, the credit fuel that has helped create bond, housing, stock, auto, and student loan bubbles has not slowed down, nor has the government’s appetite for debt ceased to any real extent. And this means that with economic conditions not only in the U.S. but in many other economies around the world being hidden from the public by government officials and by central banks, when the next crash happens it will come as much a surprise to those in power as it did for them nine years ago when the financial collapse nearly saw the death of all the world’s major banks and economies.
Kenneth Schortgen Jr is a writer for The Daily Economist, Secretsofthefed.com, Roguemoney.net, and Viral Liberty, and hosts the popular youtube podcast on Mondays, Wednesdays and Fridays. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.