Larry Horist | Nov 18, 2022 | 52
Good economic report … but it won’t last
The first two quarters of 2022 indicated that the American economy had slipped ever so slightly into a recession – according to the classic definition of two negative growth quarters. As anticipated by the economic gurus, the third quarter was going to have growth. They estimated it around 2.3 percent. It did better than that at 2.6 percent.
Politically that is great news for President Biden and the Democrats. They can claim – on the eve of the Midterm Election – that the economy has turned around and their programs are working.
Unfortunately, that is not the case. What we are experiencing is a “double-dip inflation.” If you look at the last month of the quarter, you will see the beginning of another slowing down. The Federal Reserve is still expected to increase the interest rates again by 75-basis points.
If anything, the third-quarter good news is bad news in terms of inflation … and that means the Fed needs to cool down the economy … and that means a very probable future recession. How bad it will be is being debated by the economists, the bankers, and the politicians – but there is almost universal agreement that there will be a recession in the near future.
The just-released economic report is a lot like the difference between today’s weather and climate change. The third quarter produced some sunshine, but the economic storms are still on the horizon.
While Biden will praise and take credit for today’s good news – as any President would — it is still not all good news. The inflation is still raging – prices are still climbing. And the Fed’s “cure” is not going to help the average consumer in the short run.
Raising the interest rates hits hardest on those using credit cards – or planning to make a major purchase, such as a car or a house. In fact, the increases in mortgage costs are already depressing the housing market.
To understand the severity of the impact, consider this. Your monthly payment on a $400,000 house today would have purchased you a $700,000 home at the beginning of the Biden administration. Put another way, mortgage rates have almost doubled – and are likely to go higher.
While the voters may be HEARING the good news from the economists and the Democrats, they are not experiencing it. The economic problem for the average American is still getting worse. Biden says things will now be getting better in the future. The economists and the bankers – even the Federal Reserve – are anticipating a worsening economic situation in the future.
In planning your economic future, you would be wise to listen to the economists and the bankers.
So, there ‘tis