Wednesday, April 19, 2017

Could Dems Hang A Recession Around Trump's Neck by 2018?

Thanks to the work of Ben Carlson in 2015 at "A Wealth of Common Sense" (referenced below) we have this extremely interesting graphic:
As you can see, the median time between recessions since 1929 is 4 years and 2 months.  The longest time between recessions is 10 years from 1990 to 1991.

By June, this country will have gone 8 years without a recession. The primary reason for this is that the Federal Reserve has treated those 8 years as if we were in a recession by keeping Fed Funds Rates at historically low levels.  But, in December 2015 the Federal Reserve began raising rates and there is no indication that they won't continue to do so because they're now responding to the growing inflation they're seeing in the economy.

Raising the Fed Funds Rate will have a negative impact by making it more expensive to borrow money.  Credit card debt, car loans, and mortgages will all become more expensive.  The problem  is that the economy isn't that strong and might not be able to support higher interest rates.  The Atlanta Federal Reserve is with the GDPNow estimates that the economy will grow at a meager 0.6% in the first quarter.  Well below consensus estimates, as you can see from this graphic:

What this all means is that we could see another recession before or during the 2018 elections and the Democrats are sure to pounce on this and blame Trump and the Republicans; arguing that Obama never had a recession during both terms;  something that uniformed voters are sure to swallow hook, line, and sinker.


Source of 1st Graphic:

Fed Funds Rate History: Highs, Lows and Chart With Major Events:


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