A Downturn by Any Other Name…

A Downturn by Any Other Name…

Oh recession, recession, wherefore art thou recession?

Would a recession (or depression) be less distasteful if called by any other name?

2022 continues to take the world down a strange journey, with surprises around every corner.

What we’ve seen is the increasing failure of those at the helm, aka the central planners, to steer the proverbial ship away from disaster.

Not only that, but there are clear signs that these individuals may well have been the reason why society keeps experiencing problems.

Economic downturns…

Increasing wealth inequality…

Social unrests…

International conflicts…

Divided societies…

Breakdown of moral and family values…

I could go on for hours on each topic.

But today, I want to focus on the state of the global economy. The powers that be have driven society into an insurmountable level of debt, and their biggest concern now is not how to get us out of the debt pile…

Instead, they want to bring us a new definition for ‘recession’.

I kid you not. They want to gaslight people, right in front of our eyes.

Downturn, recession, depression…it’s all a game

The US is officially in a recession. Two quarters of a decline in GDP. The first quarter saw GDP decline 1.2% and last quarter it fell 0.9%.

But watch the mainstream media channels tell you this isn’t a recession.

Recession is an economic term that commands more attention than it deserves. It belongs to the halls of parliament, inside a lecture theatre, or in a press conference.

You have to go through six months of this and then wait another month to find out that you’re in it!

It’s backward looking, much like a PCR or rapid antigen tests to confirm you have some flu-like virus when you have a fever, sore throat, aching joints, and a congested cough.

I’ve never understood the obsession over reporting who’s sick. Focus on the solutions, and ones that work!

People aren’t stupid. They feel it.

Households have been tightening their belts for several months as food, housing, petrol, and heating bills have risen rapidly. I doubt there’s anyone who hasn’t found it more difficult to make ends meet in the past year.

Those who’ve lost their jobs and see their mortgage repayments rise don’t need someone to tell them it’s a recession!

If it’s been painful up until now, things could get much tougher moving forward.

Even in Australia, we’re a bit behind with interest rate rises. But we’ll catch up real soon. There’s another meeting next Tuesday.

The cause of the illness came from the treatment

The very reason for our boom-bust cycle is because we have a small group of people making decisions to dictate how the economy should work.

And they get it wrong over again.

Yesterday morning we woke up to the announcement by the Federal Reserve Open Market Committee that it would raise the Federal funds rate by 0.75%. This was in line with market consensus.

The markets rallied strongly after this announcement was made public. Our ASX 200 Index [ASX:XJO] closed almost 1% higher. It was mild compared to other markets — the NASDAQ Index rose more than 4% and the S&P 500 Index rose 2.6%.

Gold managed to rally nicely as well — trading almost US$30 higher to sit at US$1,740 an ounce (AU$2,490) within an hour after the rate rise.

And not surprisingly, cryptocurrencies led the pack. Ethereum [ETH] managed to rally more than 15%.

Contrast this with early June when the Federal Reserve raised rates by the same amount, but the market was unprepared for it.

What we’re seeing is the markets hanging onto the words of the central planners. They end up taking a wilder roller coaster ride than needed.

But who can blame them? Years of literally zero interest rates have meant it’s harder to make an honest living relying on your salary or wages. The game is in investing and speculating in some asset.

You name your poison — stocks, properties, commodities, cryptos, or derivatives.

So the central banks shift society into allocating more into speculating on capital rather than real productivity. And when speculations fail, they paper over it with bailouts, handouts, and creating new debt to keep the game going.

Now that the central banks are reducing the currency supply and calling time earlier than many expect, you’re seeing the global economy implode on itself.

All this is happening as these central bankers take turns telling the people that this rate hike cycle is to stabilise the economy and ensure there is full employment and low inflation. All while people are losing jobs, and inflation (which they claimed to be ‘transitory’) is at 40-year highs.

On the precipice of a debt bloodbath

Many Australian borrowers are now in a dreadful predicament. They were lured by cheap loans and bullish forecasts on property prices to secure their dream of owning their home.

It seemed so right at the time. After all, as recently as last November, the RBA assured us that the first rate rise would come in 2024.

If only people remembered these economists’ track record about never seeing a recession or a market crash in their lifetime! They would’ve spared themselves a world of hurt.

So the media is now echoing the anger of the people who felt duped by the RBA Board of Governors, which has left them deeply indebted. Things could get worse as the rate rises continue.

With defaults likely to become more common, could the central banks power forward to normalise the economy and then leave it to the governments to placate the masses who literally lose everything?

Or will we see them walk back from their deadly waltz and cut rates?

Or could there be a financial system collapse that we’ve never seen before?

A plague on these central planners’ houses, though many will lose theirs because of them.

I hope you’re not among the victims. If that’s the case, follow me here for an opportunity to take advantage of the imminent destruction of the fiat currency system.

God bless,

Brian Chu Signature

Brian Chu,
Editor, The Daily Reckoning Australia