How To Turn A Mild Recession Into A Great Depression

Democrats Show How To Turn A Mild Recession Into A Great Depression

The U.S. is in a recession. Our readers knew this was coming because we've been forecasting it for months, but now it's confirmed. The U.S. Commerce Department reported that first-quarter 2022 GDP declined 1.6%, and second-quarter GDP declined 0.9%. That fits the standard definition of a recession as two consecutive quarters of declining GDP. Believe it or not, there is no official government agency that declares a recession. That task is undertaken by a private group called the National Bureau of Economic Research (NBER). Don't put any weight on the "national bureau" part of the name; it's a private body consisting of nine academic economists who meet in Cambridge, MA near the Harvard and MIT campuses. Don't hold your breath waiting for an NBER determination. Most recessions last only two or perhaps three quarters. In many cases, the NBER waits so long to declare a recession that it's over before the start date is even declared. With the NBER members being weighted to Democratic priorities and a mid-term election looming, I don't expect the NBER to declare the recession started last January until perhaps next January or in all events after the election. That's how they roll. These formalities and delays are what have enabled Biden administration officials like Treasury Secretary Janet Yellen to say "we're not in a recession." They're relying on the fact that no recession has been declared even unofficially by NBER. Meanwhile, evidence of a recession is all around us. It's like the old Groucho Marx line, "Who you gonna believe, me or your own eyes?" On this issue, don't listen to Yellen, believe your own eyes. Meanwhile, the Democrats have been trying to figure out policy responses to the (non)recession. They actually managed to come up with the worst possible policy, as reported in this article. The bill being pushed by Democrats is a warmed-over version of Build Back Better. Remember that loser? Starting in early 2021, the Build Back Better bill went from $4 trillion to $2 trillion to now something less than $1 trillion, but it still has the Green New Scam elements along with price controls and new handouts. The Democrats decided they needed to "pay for" their giveaways, so naturally, they're going to increase taxes. Not only that, but they're going to tax corporate stock buybacks. Raising taxes in a recession is a good way to turn a recession into a depression. Penalizing stock buybacks is a good way to sink the stock market. It looks like the Democrat-sponsored legislation may soon do both.

Jim Rickards