Listen: FED, Donald Trump, Twenty Twenty discussed on Ballots and Dollars
"<hes> and maybe <hes> demand will l. decline in the future but i think if you're in a <hes> in a sector of the economy or a company that provides stuff for consumers you see strong demand and <hes> you know that's your gauge consumer has definitely been powering whatever growth we've been seeing here in the u._s. Okay so you and i are trying to put a timeline on something you can't put a timeline on which we can certainly yeah so we can have fun guessing so <hes> so lights so that so that people can come and throw spitballs at us in a year so you are saying we we will be in a recession about a year from now mild recession by miles recession q. three of anarchy saying we want now agree about much so we have. We have ego a gentle dental persons disagreement on economists. There was a recent survey that showed most economists believe we're in for recession by two thousand twenty one yes so this is the national association of business economists economists and this is a communist who work for companies <hes> and they there. I think is a quarterly survey so <hes> these numbers are kind of interesting because they were actually actually a little more pessimistic earlier this year when they took this survey so just read a couple of statistics boring. We're going to death but so when they economists in february did you do you think we're gonna have recession and twenty nine thousand nine hundred this year ten percent said yes but when they asked july only two percent said yes wow that's really really no. They were they were out there. That group was more bearish about this year than they are now so they were kind of wrong. That's only ten percent so at any rate <hes> but at the same time interject the trade whereas intensive hasn't yet that's right figure so why are they more optimistic. They should be more pessimistic shouldn't they. You'd think anyway <hes> so forty percent. <hes> thirty percent think we'll have a recession by twenty twenty so you put those two together. That's forty percent who think we'll have a recession either by this year or by twenty twenty. That's the trump reelection scenario so career than half think. We're gonna have a recession by the time trump <hes> is up for reelection and other thirty four percent think we will have a recession by twenty twenty anyone if trump wins that would be the first term of his second term <hes> but i honestly if if we if we have a recession in twenty twenty one while the economy we'll be cooling in twenty twenty. It'll be weaker than it is now and that might be as bad for trump as an actual recession now in the survey. I also found it interesting that these these economists felt like things were pretty good on the fiscal policy front thirty seven percent thought you know what things are right just where they are and they were even more bullish on the monetary policy. I'm looking through my shirt and so i think you're right. I think thirty seven percent said sorry for the shuffling of papers people. This is just the sound of journalism being conducted built so fiscal policy which is government spending and government taxation levels thirty seven seven percent say it's about right but fifty one percent say it's <hes> to stimulative which means <hes> the government has cut taxes too much or spent too much money and that would only be the problem if you're running up deficits in order to do that but guess what we are. We're running up deficits so trump is going to have a one trillion dollar deficit for this fiscal year that ends in september timber <hes> that's appalling. We've only had trillion dollar deficits during <hes> during deep recessions before <hes> when the government that's when the government is supposed to borrow the money in order to spend it to get the economy back on its feet. You should not be doing that during <hes> if the economy strong but we are doing it <hes> and then on monetary policy which is the fed had <hes> about about. Where's the number here more than half a yeah sixty. Two percent say the fed has got it about right <hes> <hes> that seems that seems about right. I mean the fed we know. The fed is in now in a in a modest loosening cycle. They're cutting rates a little bit. Maybe a little bit more. We don't know so <hes> but something's not right when the intr short-term interest rates get no higher than two point five percent which where they peaked in the fed starts to get so worried it starts cutting rates again <hes> normally when the fed has started to cut interest rate out of concerns about a possible recession or overheating economy when they do cut rates as a stimulus measure to help get the get out of a recession they normally cut by about five percentage points and we're only at two and a quarter percent right now two and a quarter is the most the fed could cut if we got in a lot of the rest of the world but yeah i mean you kenneth negative. I mean yeah but he don't look they don't have a lot of weapons in the arsenal and they know that and they're not gonna miss. There's another one of many instances where trump is saying consequences be damned. I want lower rates right now. He wants lower rates right now because he thinks that will help him with reelection action and he doesn't care if it's premature if it's gonna it's gonna leave too little in the toolbox for the fed when it actually needs to combat a real recession all he cares about his reelection getting getting those rates down now. We'll see if he gets it. He he will probably get lower rates somewhat not all the way to zero by the time of <hes> real of election day but i'm not sure that's going to matter. I'm not sure it. Let's say the fed ends up cutting total of point <hes> so it's already cut by one quarter. Let's see if we get three more one quarter points or something around now. What will that make a big difference. <hes> i mean in term it could it could make people feel better about going out and getting that mortgage getting the car loan. We'll lower the cost of your money but don't oh feel confident. Their jobs going to be there because of a looming recession then maybe they don't go out and take out that loan the other way this can help is it really has to work its way into long in term rates but we do have long term rates coming down for a variety of reasons and when rates get get get as low as they are right now. That's a that's an incentive for people to buy stocks because to just take a gamble on stocks because you're getting no return on bonds right but <hes> if this all happens for the wrong reason it implodes in the if the wrong reason would be the the fed is i do. These things because economy is weak so if they're doing it to keep a strong economy strong. It might work if they're doing it because the economy is weak. It probably won't work because of the economy's weak anyway a couple. You know a couple of interest rate cuts aren't going to prop it up. We're going to have to go through the cleansing of a recession russian and that is that's a good way to put it. We do need to cleanse every every few years and it's been quite a while since we've had a recession not that i'm wishing one but you know a lot of the economists i i talked to say we are probably due for some sort of a of a pullback <hes> you also have to think about another indicator when it comes to timelines for a recession and we've talked a lot about the inverted yield curve and recently it was the the ten year and two year notes their yield curves inverted. The tenure was below the two. Oh you're for awhile earlier in the year that tenure was below the three month for awhile and the indication is with the ten year and two year the relationship there is we usually see recession anywhere from nine and months after the inversion to up to twenty four months. That's quite a lot of time right right so i think it puts the recession right in between were you and i have been talking throughout this podcast somewhere in the mid twenty twenty two twenty twenty one. Thank you all you economists out there with all your fancy numbers but perhaps you're right. I mean you said in another podcast. Recently the the bond market doesn't lie and the market really. Maybe signaling something here well. It's a very tentative signal so as we sit here the the the <hes> curve that matters yield curve the matters most is the two year compared with the tenure and that inverted for what a couple of hours that's one day right right and the market did not open with an inverted yield curve and it did not close with an inverted yield curve but it happened <hes> for so it's like is on the radio. It's almost is this is like a medieval portent. Oh my god. I didn't verde run for the hills. Likely i mean yes. It was sort of run for the <hes>. Am i i. I'm reading entrails here. At this point i <hes> i i'm not buying that the inverted yield curve for two hours it it can be a meaningful stained and even the fed has said this bullard with with the federal reserve is that it needs to be a sustained in inversion usually mean anything. The communists don't know they. They honestly don't know on this. So <hes> this is this is a highly reliable recession indicator <hes> that has correlated with every single recession of the postwar era but we it has not happened in an environment where interest rates overall are as low as they are so so that means we have calm like compressed compressed scale of interest rates and economies. Don't fully understand that now. Maybe really understanding why the interest rates are so low why we haven't had inflation and a corollary of that is <hes> does a yield curve inversion mean the same thing when you've got interest rates compressed rushed so much as they are right now to start with <hes> or it. Does it become less meaningful <hes> i i. I'm kind of client if it was just that two hour period on one day i'm inclined to dismiss it. Honestly a number of congress. I talked to feel the same way yeah and they say because all the external factors. This time are different than then prior times during inversion famous words. This time is different. Almost almost never is yeah but <hes> you know i mean economics is not a hard science alliance. I mean these are not rule. In violent rules the way rules of physics are inviolable that is not the way economics works consumer behaviors. We're looking. We're always looking for guidelines lines. Yeah right right and this is at best. I'll tell you what the trump administration <hes> and it freaked out you know the stock market for a little while but god of the stock market has such a short term memory i mean does it came roaring back. Oh my god the recession indicator is on and then what three days later we see the rally and who cares and by the way if the recession indicators peter's right the recessions not going to happen for twenty one months on average. What are we supposed to do. I meanwhile twenty-one months preparing for a recession well you. It was just get the recession started.."