Historically, in most cases, your house is actually a good hedge against a recession, against inflation, and a stock market drop. But either way, here in Feb. ‘08, “Persistent fears over a possible U.S.-led global slowdown [have] fueled further profit taking in crude oil,” as one London analyst told Agence France-Presse at the start of this week.And here starts the chain of logic linking the housing slump to falling inflation and bypassing the impact of monetary inflation altogether.Who knows? So transaction balances are falling and precautionary balances are rising — what does that tell you about consumer spending and saving behavior?“This is all, from our lens, very deflationary.
The central bank’s newly created credit encourages both businesses to use more resources in their investment projects and consumers to simultaneously consume more resources. An absolute 1.00 only ever exists for the very same thing measured against itself — say, the cost of living mapped onto the cost of living, or gold prices correlated with gold prices, for example.Yet if we now race back to the present, and reappoint Mervyn King for his second term running U.K. monetary policy, “The disruption to global financial markets has continued,” explained the Bank of England — with King at the helm — when it cut U.K. rates on Thursday.“Credit conditions for households and businesses are tightening,” the BoE explained.
And not just in the United States, either.“The eurozone economy is now clearly slowing down,” says Michael Hennigan, founder and editor of Here in the United Kingdom — the world’s fourth or fifth largest economy, depending on how you count China’s boom — growth just slid to 0.5% in the three months ending January, says the National Institute of Economic and Social Research. WORRIED ABOUT INFLATION? If the sorry demise of the U.S. consumer really does dent the buying power of China, might the Chinese government not step in — and bid for crude oil, copper, soybeans and grain — to keep the fastest growing economy growing just as fast as it can?Conjecture and guesswork are no substitutes for an answer, of course. That was when the rate of U.S. consumer-price inflation overtook growth in the CRB index, surging on the previous commodity price hikes and feeding into service prices and wage demands. Government debt suddenly surged from 65% of GDP to 90% of GDP as the federal government began to run deficits in excess of $1 trillion a year. This was becauseIn the Great Depression, there was a large fall in output, and this caused deflation. The end result is that the central bank’s expansion of the supply of credit counteracts the market forces of supply and demand, andCentral bank monetary policy is an attempt to do an end run around supply and demand, but as with other government policies it comes with unintended consequences. However, it's possible to have a combination of recession and inflation, called "stagflation" (from stagnation-inflation). Here’s what’s hiding in plain sight and…Donald Trump’s positioning has put the U.S military one step closer to the next phase of the Korean War.
Depending on the phase of the business cycle, the rate may speed up or slow as consumers adjust … Businesses demand credit to finance new investments and ongoing operations. For example, we could have a period of A recession means two consecutive quarters of negative economic growth.
Which is odd, given the facts.“Few empirical regularities in economics are so well documented as the comovement of money [supply] and inflation,” as Mervyn King, now governor at the Bank of England in London, said in a late 2001 speech.And the world’s supply of money is surging right now, even as “deflation” hits U.S. housing and stocks:“Over the 30 year horizon 1968-98,” King went on back in 2001, “the correlation coefficient between the growth rates of both narrow and broad money, on the one hand, and inflation, on the other, was 0.99.”Narrow money means cash in circulation, but as King said, the relationship with cost-price inflation holds just the same for “broad money” (shown above) — meaning all notes and coins; cash on deposit; and short-term bills, notes and bonds.0.99 is as near perfect as you’ll find in any pair of data. Find out why the real story Wall Street is…Trump will win reelection this year.
The Recession's Effects on the CPI. (Don’t misread that “fall” from 10% to 5% year on year; the dollar’s buying power still shrank by almost one-tenth inside 16 months.) If a recession does not significantly impact long-term confidence in the economic future of society, then the rate of inflation will probably fall during the recession. What happens to interest rates during recessions is thus a product of the interplay between all of these forces, groups, and institutions.
Productivity tends to fall in the early stages of a recession, then rises again as weaker firms close. Indeed, if there has been an economic boom, particularly in one sector of the economy (technology in late 1990s), then many people may feel as though the recession that follows that boom is just “business as usual”.The point is that a recession does not, prima facie, lead to a collapse in confidence regarding the long-term prospects of society.For example, in the last recession (the “Great Recession” of 2008/2009), several structural issues were exposed.
The value of money is going to stop sliding, even as interest rates fall.“A U.S. recession is now an even bet as job losses and the housing contraction jeopardize the longest-ever expansion in consumer spending,” says “The world’s largest economy will grow at a 0.5% annual rate from January-March, capping the weakest six months since the last economic slump in 2001, according to the median estimate of 62 economists polled from Jan. 30-Feb. 7.”And your cost of living can NEVER go up during a recession, right?Oh, sure, inflation in U.S. consumer prices accelerated by one-half during the recession of 1973-75.