What's happening to the U.S. economy?

In My Humble Opinion
1

Here’s a graph showing four interest rates over the past 45 years. Two weeks ago, the 30-year Treasury yield fell below 2% — that’s a record, son! — and the 30-year/1-year difference is on the verge of “inverting.”

Over the 35 years, the 30/1 differential did invert exactly five times, and there were exactly five recessions: in each case the recession started 1 or 1½ years after the inversion. Pundits seem to agree the odds of a recession in 2020 are about 50:50.

Note that for the Bush-41 recession, the 1-year rate was driven down from 9.6% to 3.1% over 3+ years; for the first Bush-43 recession the rate was driven from 6.2% to 2.1% in less than 2 years, and continued to fall. For the second Bush-43 recession (the “Great Recession”), the 1-year rate was over 5% when the inversion began and was driven down to almost zero!

But the 1-year rate is now 1.75% — and is itself inverted compared with the overnight rate! — so no such free-money bomb is possible — the economy is already running on adrenaline and sugar. With political paralysis, an unhinged President, a looming trade war, business confidence falling, and our partners laughing at us, future prospects don’t look bright. Even Democratic victory in future elections will come with problems.

The GOP Congress has taken from the working class and from future taxpayers to pump up corporate profits. Yet despite this the DJIA has lost its momentum and is slightly below its year-ago level. 3M is down 40% from its high in January 2018. Caterpillar is down 31% over the same period. Dow/DuPont is down 42% over the same period. And … And what? There just aren’t many manufacturing companies in the Dow-Jones Thirty like there used to be; it’s stuffed with financial companies. (Some of these “new economy” stocks are doing OK. Visa is up 41% since the January 2018 high.)

Ho-hum. But I’m starting this thread in hopes someone can explain a paradox.

With mounting debt — Trump is non-chalantly running trillion-dollar deficits now — and the prospect of trade wars, there will be increasing pressure to devalue the dollar. Trump might even swap out the FRB Governors and replace them with thugs who will follow his instructions to cause inflation. So why are long-term interest rates so low? Who wants to be tied in long-term to a dollar that may be a shadow of its former self in the future?

Trading dollars for euros or pounds is no solution — problems are worldwide. Silver and gold are both up sharply over the past few months, so I’m not the only one who fears that paper money might be a bubble to burst. (I’d never been a “gold bug” but did act on that sentiment a few months ago — Yay, me!)

So what will happen? What are the headlines we’re likely to see on the financial pages in late 2020, 2021, 2022, 2030?

2

It’s a great time to swap your long term annuity payment for a lump sum.

3

It’s a good time to hodl.

4

It’s a bad time to stop sniffing glue.

5

The President doesn’t run deficits, Congress does.

6

The President can veto it if he doesn’t like the tab. He’s certainly complicit.

7

Unless he’s a Democrat.
If the president proposes a budget or a set of tax cuts which a compliant Congress swallows, he can’t avoid the blame.

8

It seems to me that the administration is doing everything it can to push the looming recession until after Trump loses the election. Then they can blame Democrats for it.

9

Which is certain proof that Trump is not a fiscal conservative.

10

You’re assuming a level of competence which is not in evidence. Threats to business and wildly swerving policies are not ways of delaying a recession.

11

I was disappointed that this thread immediately jumped into politics. While Trump may be hastening or exacerbating the coming financial crisis, the systemic problems predate his election.

“The West is a basket case … [beware] the bubble of risk-free assets!” Just now I watch fund manager Donald Amstad’s comments titled “The developed world is on the brink of a financial, economic, social and political crisis”; he articulates some of my own fears. The title sounds hyperbolic — and will doubtless be laughed at, especially by Dopers who do not deign to watch it — but if even 10% of his pessimism is warranted he offers food-for-thought for those planning their financial future.

12

septimus, meet septimus:

13

:confused: If my frank comment encouraged a hijack, sorry.

In fact the point was opposite: DESPITE that the Trump regime wants to pump up the economy and asset prices, the party-goers are running out of gas.

Did you watch the video?

14

Of course not. You’ve been on the Internet long enough to know that anything presented in video form is probably worthless.