9 of the 12 Federal Reserve districts reported a decline in financial exercise in August, up 5 districts from the July Beige E book report. Our system has warned that we’re getting into a interval of stagflation, the place inflation stays excessive however GDP declines. Now, the Fed is reporting that two-thirds of the US economic system is experiencing “flat or declining exercise.”
The US economic system superior 3% over the past quarter, main many to imagine that the economic system is recovering since Q2 posted a measly 1.4% development. Shopper spending, amounting to 70% of GDP, rose 2.9% final quarter as nicely, however persons are spending on necessities. They fail to calculate TAXES into the equation when producing these experiences after which dismiss necessities reminiscent of meals and shelter as “unstable” features that by some means should not factored within the core figures.
Some folks have a really arduous time understanding that we’re in a large deflationary spiral; they suppose that rising costs merely means it’s inflation and never deflation. Then, they mistake stagflation for deflation and surprise why persons are spending extra on much less. They solely see costs, not disposable earnings, and definitely not financial progress and unemployment.
The newest jobs report revealed that manufacturing is constant to say no – shedding 24,000 jobs in July alone. However, the general public sector grew by an extra 24,000, however these are 24,000 positions that won’t contribute to GDP. As a substitute, rising authorities is solely rising the nationwide debt however that determine not issues because it has lengthy been unsustainable.
If you happen to actually take a look at it, objectively, rates of interest all the time rise throughout increase durations, they usually decline throughout recessions and depressions. We’re elevated inflation into 2028 brought on by shortages and struggle. However you’re declining financial progress, in order that finally ends up being extra just like the Nineteen Seventies. The inflation fee will likely be increased than financial progress and we frequently see stagflation throughout occasions of struggle. We’re starting to see this come into play on the district stage, however quickly, it will likely be simple that the US has entered a interval of contraction.
