Inflation and a recession are now here :(

[HuffyCane]

I don’t believe things are near as rosy as you’re painting them. Real wages have decreased for 13 straight months. That is anything but a favorable scenario for consumers. Both business and personal bankruptcies will begin to rise. Small businesses won’t be able to pass on the inflationary costs to their customers. Individuals will feel the effect of deceasing real wages and default on their obligations. Still hoping for the best.

I have two close friends who are managing shareholders at law firms in two different states. They don’t know each other and they have two very different practices. They negotiated long term services contracts at flat rates with government entities based on the assumption that inflation would stay at historical rates. They are businesses in two different fields, but they both basically operate on a fixed income. Their employee attrition rate right now is 33% and roughly 50% in the last year. One is offering lateral associates salaries 30% more than they offered this time last year and getting no takers. 5 year lawyers are saying they need partner money to keep up with housing and living increases. Two years ago the firm would place a want ad for an opening and receive hundreds of applications. This is going to get a lot worse before it gets better.

 

[Gmoney4WW]

I don’t believe things are near as rosy as you’re painting them. Real wages have decreased for 13 straight months. That is anything but a favorable scenario for consumers. Both business and personal bankruptcies will begin to rise. Small businesses won’t be able to pass on the inflationary costs to their customers. Individuals will feel the effect of deceasing real wages and default on their obligations. Still hoping for the best.

1 missing letter worth a small chuckle.

 

[TUMU]

I don’t believe things are near as rosy as you’re painting them. Real wages have decreased for 13 straight months. That is anything but a favorable scenario for consumers. Both business and personal bankruptcies will begin to rise. Small businesses won’t be able to pass on the inflationary costs to their customers. Individuals will feel the effect of deceasing real wages and default on their obligations. Still hoping for the best.

There will be a Recession some time in the future. Recessions are part of a cycle that repeats. I'm not ready to say it's inevitable in the short term.

Wage growth is down from its recent peak of 5.6%, having moderated for two straight months. However the Fed is going to continue with their path of rate hikes.
Perhaps inflation has begun to hit its peak and will gradually moderate as the year progresses.
If evidence of labor shortages begin to show strength, then perhaps the pace of wage growth will slow beyond the past two months, but not likely to slow to pre-pandemic pace, with the ongoing tightness in the job market.

As I said previously, unforeseen events could blow up my thoughts of a recession not occurring in the short term.

 

[lawpoke87]

There will be a Recession some time in the future. Recessions are part of a cycle that repeats. I'm not ready to say it's inevitable in the short term.

Wage growth is down from its recent peak of 5.6%, having moderated for two straight months. However the Fed is going to continue with their path of rate hikes.
Perhaps inflation has begun to hit its peak and will gradually moderate as the year progresses.
If evidence of labor shortages begin to show strength, then perhaps the pace of wage growth will slow beyond the past two months, but not likely to slow to pre-pandemic pace, with the ongoing tightness in the job market.

As I said previously, unforeseen events could blow up my thoughts of a recession not occurring in the short term.

I’m a bit confused. Real wages were growing pre pandemic. They have now fallen for 13 straight months. There is no real wage growth and hasn’t been for over a year. See graph near the top of this page.

 

[astonmartin708]

There’s no historic precedent for that. Try six to ten.

Not to mention we are going to have once in a generation shift in the House of up to 50 seats, the Senate firmly R, and a lame duck President running for President in a geriatric demented fantasy that not only more of this will work, but he’s the only one who can do it.

McConnell will have a laundry list of spending to make up for progressive resource shifts and the money will keep flowing.

We are in an economic spiral with China, UK, and Japan with death grips on each other’s throats. There’s no getting off without a 1970’s style UK economic correction.

There very much is historical precedent for that. Go look at the 1980's coming out of recessions.

As far as a 'generational shift' we've had a ton of those 'generational' shifts in my lifetime. They're hardly generational. They're typically associated with each administration. Clinton had one. Bush had one towards the end of his presidency. Obama had one early on. Trump had one early on, etc...

 

[astonmartin708]

I have two close friends who are managing shareholders at law firms in two different states. They don’t know each other and they have two very different practices. They negotiated long term services contracts at flat rates with government entities based on the assumption that inflation would stay at historical rates. They are businesses in two different fields, but they both basically operate on a fixed income. Their employee attrition rate right now is 33% and roughly 50% in the last year. One is offering lateral associates salaries 30% more than they offered this time last year and getting no takers. 5 year lawyers are saying they need partner money to keep up with housing and living increases. Two years ago the firm would place a want ad for an opening and receive hundreds of applications. This is going to get a lot worse before it gets better.

I agree that this has been a problem, but I do not agree that the problem will continue. As far as signing government contracts.... when has the government ever been known sign contracts with much foresight?

We are already seeing a titanic shift in the housing market. Market demand went from historic highs to historic lows, all because of the Fed's rate increases. You're going to see more inventory on anything that one requires to borrow for (cars, boats, etc...). Retailors are having to drop prices to get rid of back unsold inventories. Crypto has crashed and the marked up cost of chips that the industry was driving will help ease many technological supply chains.

Companies are going to begin wielding more power soon. You've seen it attempted by Musk at Tesla.

My anticipation is that the labor market is close to a shift towards closing open positions and a number of layoffs (I'm guessing 10-20%)

I really think we're on a trajectory similar to one in the early 80's.

The wildcard is how the advent and adoption of Renewables will effect a ramp up in domestic oil production and how ongoing global food issues will effect us domestically.

 

[lawpoke87]

The housing market is interesting. Typically when you see such a drop in demand a corresponding drop in home prices follows. We haven’t yet seen this due to continued limited supply. As long as prices hold I believe the housing market will be fine. Now if prices begin to fall all bets are off.

 

[astonmartin708]

The housing market is interesting. Typically when you see such a drop in demand a corresponding drop in home prices follows. We haven’t yet seen this due to continued limited supply. As long as prices hold I believe the housing market will be fine. Now if prices begin to fall all bets are off.

I think the housing market is interesting. No one is encouraged to sell their home in a market when no one is buying, because so many people have significant mortgages. They can't afford to eat the loss just so a buyer can afford the monthly payment with today's high rates.

Now, that might start to change if people start getting laid off. We will see more defaults, prices will begin to drop with increasing inventory, but it will only benefit those who can keep their job, even then though demand will be low due to the high interest rates. It is going to take a few years to balance back out, and it probably won't happen until interest rates start dropping instead of rising.

My hope is that I can weather the storm in a company that's slightly recession insulated. If not I'll be looking at returning to a booming Oil industry in the short term.

 

[lawpoke87]

I think the housing market is interesting. No one is encouraged to sell their home in a market when no one is buying, because so many people have significant mortgages. They can't afford to eat the loss just so a buyer can afford the monthly payment with today's high rates.

Now, that might start to change if people start getting laid off. We will see more defaults, prices will begin to drop with increasing inventory, but it will only benefit those who can keep their job, even then though demand will be low due to the high interest rates. It is going to take a few years to balance back out, and it probably won't happen until interest rates start dropping instead of rising.

My hope is that I can weather the storm in a company that's slightly recession insulated. If not I'll be looking at returning to a booming Oil industry in the short term.

As I’m in the housing business, we might be looking together

 

[aTUfan]

in just 18 months, biden has reduced us to a third world country.

 

[astonmartin708]

in just 18 months, biden has reduced us to a third world country.

Didn’t know that you were reduced to living in a steel roof shanty town.

 

[lawpoke87]

CPI numbers out. Worse than estimates. Not good. Highest inflation rate in more than 40 years

 

[astonmartin708]

CPI numbers out. Worse than estimates. Not good. Highest inflation rate in more than 40 years

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Since Reagan… yup. We’re following trend. It’s going to take some high interest rates to get us out of this. Good news is that whoever is in office next will look like a saint.

 

[lawpoke87]

Since Reagan… yup. We’re following trend. It’s going to take some high interest rates to get us out of this. Good news is that whoever is in office next will look like a saint.

Much like Reagan who was handed an inflation mess by Carter. Reagan was able to drop rates fairly quickly to spur growth. I don’t see that happening this time around Dow is down over 700 points this am. Market obviously wasn’t ready for the bad news.

 

[URedskin54]

.

 

[lawpoke87]

Crazy chart.

 

[HuffyCane]

Most people on here think Im talking out of my butt until they look at the numbers.

 

[lawpoke87]

CNN isn’t doing a very job trying convincing people an 8.6% inflation rate is good for them.

 

[lawpoke87]

Most people on here think Im talking out of my butt until they look at the numbers.

Numbers support your argument. Average family spending $460 more per month this year for the same goods and services. Consumer sentiment at all time low. Inflation 40 year high. All indicates the consumer will be buying less and less====recession. Yellen admits she missed the inflation train. If she now misses the recession train surely she will be replaced ?

 

[HuffyCane]

Numbers support your argument. Average family spending $460 more per month this year for the same goods and services. Consumer sentiment at all time low. Inflation 40 year high. All indicates the consumer will be buying less and less====recession. Yellen admits she missed the inflation train. If she now misses the recession train surely she will be replaced ?

Who they gonna get at this point? Their show is a howling dog with fleas. People are jumping out of windows in the West Wing.

 

[astonmartin708]

Much like Reagan who was handed an inflation mess by Carter. Reagan was able to drop rates fairly quickly to spur growth. I don’t see that happening this time around Dow is down over 700 points this am. Market obviously wasn’t ready for the bad news.

I agree, but you will notice how much higher the Fed raised rates under Reagan than they currently have. They peaked at ~15%. (which only lasted a very short period of time) We are currently at 3%. We have a ways to go to rebalance.

Also, just to make things more accurate, stagflation started before Carter. It was Nixon that put into place price controls after all.

 

[HuffyCane]

I agree, but you will notice how much higher the Fed raised rates under Reagan than they currently have. They peaked at ~15%. (which only lasted a very short period of time) We are currently at 3%. We have a ways to go to rebalance.

Also, just to make things more accurate, stagflation started before Carter. It was Nixon that put into place price controls after all.

Nothing like buying a 1979 VW Bug at 19.9% financing to live the American dream.

 

[astonmartin708]

Nothing like buying a 1979 VW Bug at 19.9% financing to live the American dream.

It sucks. We all get it. But it was necessary to break the stagflation cycle.

 

[watu05]

It was Carter who put Paul Volker in charge of the Fed despite knowing Volkers plan to kill inflation by raising rates would not be popular. Fortunately Reagan stuck with Volker. Not sure just raising rates are enough to offset the liquidity, effects of war in Ukraine and supply chain issues.

 

[aTUfan]

what is the difference in getting gas from russia, iran etal, or just producing our own

 

[URedskin54]

For a certain sub-set of Dems, the bloated gas prices are a feature rather than a bug(Yay less burning of fossil fuels). Unfortunately for them the downstream effects of that will get them demolished in November. The climate cultists just never can seem to catch a break

 

[HuffyCane]

For a certain sub-set of Dems, the bloated gas prices are a feature rather than a bug(Yay less burning of fossil fuels). Unfortunately for them the downstream effects of that will get them demolished in November. The climate cultists just never can seem to catch a break

The Uber riding Democrats are totally unaware of the number of people sharpening their knives over the gas price thing. The numbers are a blood bath. It’s statistically impossible to get any lower in the polls on that issue.

And amongst that pitchfork army are local and state Democratic leaders who suddenly have 10% lower budgets due to inflation to go with their defunded police who can only patrol half as much due to gas prices doubling. And they’ve got months to go before balloting begins while in races while knowing public safety was the key issue in last week’s races. You are seeing leaks that leaders are whispering that he shouldn’t run for re-election. That’s not about him being old. Or the poor polling. Or the meddling in schools issue they are all on the wrong side of. It’s about inflation and they can see the wheels coming off their own operation or they will have to raise taxes on people already stretched. They are worried about their own skin and they should be.

The 1980 landslide had as much to do with the Reagan charisma as it did universal disgust at how inflation killed the effectiveness of local government service providing. It wasn’t just Carter that was incompetent. But he got blamed when trash pick up got cut to once a week, milk delivery got cut off, postage rates doubled and paper delivery services cut. The so called Reagan Democrats were really just pissed off working class voters who could see their father’s leaders policies taking money out of their pockets, not delivering, and trying to raise taxes to give social programs to people not working.

It’s like none of these people in charge right now were alive then. I was in my early teens and was eyes wide open on these issues.

If you are under 50 you have no idea how much of a hardship inflation was on the working poor and retirees. Zero ability to empathize. None. A 30 year old behind a podium telling me about inflation is as tone deaf as it gets. This whole shake it off, it’s transitory, just a correction, core inflation is coming down. Nobody cares about that when it’s $200 to fill up your tank and you have to drive 90 miles round trip a day just to find a place you used to be able to afford to get your kid in a decent school. Reagan: “Are you better off than you were four years ago?” He brought down inflation and the answer was yes. Today the question will be: “Are you better off than you were four MONTHS AGO?!”

The Dems are worried about abortion and the Supreme Court. I’d be worrying about a watershed election that puts social moderate fiscal hawk Republicans in the drivers seat for the next twenty years.

 

[astonmartin708]

The Uber riding Democrats are totally unaware of the number of people sharpening their knives over the gas price thing. The numbers are a blood bath. It’s statistically impossible to get any lower in the polls on that issue.

And amongst that pitchfork army are local and state Democratic leaders who suddenly have 10% lower budgets due to inflation to go with their defunded police who can only patrol half as much due to gas prices doubling. And they’ve got months to go before balloting begins while in races while knowing public safety was the key issue in last week’s races. You are seeing leaks that leaders are whispering that he shouldn’t run for re-election. That’s not about him being old. Or the poor polling. Or the meddling in schools issue they are all on the wrong side of. It’s about inflation and they can see the wheels coming off their own operation or they will have to raise taxes on people already stretched. They are worried about their own skin and they should be.

The 1980 landslide had as much to do with the Reagan charisma as it did universal disgust at how inflation killed the effectiveness of local government service providing. It wasn’t just Carter that was incompetent. But he got blamed when trash pick up got cut to once a week, milk delivery got cut off, postage rates doubled and paper delivery services cut. The so called Reagan Democrats were really just pissed off working class voters who could see their father’s leaders policies taking money out of their pockets, not delivering, and trying to raise taxes to give social programs to people not working.

It’s like none of these people in charge right now were alive then. I was in my early teens and was eyes wide open on these issues.

If you are under 50 you have no idea how much of a hardship inflation was on the working poor and retirees. Zero ability to empathize. None. A 30 year old behind a podium telling me about inflation is as tone deaf as it gets. This whole shake it off, it’s transitory, just a correction, core inflation is coming down. Nobody cares about that when it’s $200 to fill up your tank and you have to drive 90 miles round trip a day just to find a place you used to be able to afford to get your kid in a decent school. Reagan: “Are you better off than you were four years ago?” He brought down inflation and the answer was yes. Today the question will be: “Are you better off than you were four MONTHS AGO?!”

The Dems are worried about abortion and the Supreme Court. I’d be worrying about a watershed election that puts social moderate fiscal hawk Republicans in the drivers seat for the next twenty years.

The irony is that the people who are blaming it on Dems really don’t understand oil or global politics.

For certain, the economy will hurt Democrats. There is a non-zero chance though, that Republicans won't be able to fix anything either.... because this isn't a problem of how the country is being run. It's a problem that we're having to deal with Macro Economic events.

 

[Gmoney4WW]

I am ever aware that their are many Republicans and Democrats who support the Ukranians, and support our efforts to assist them. Many of those same people are the one's who are not willing to pay higher gas prices and inflation brought on in a large way by that war. At least 30%, maybe closer to 50% of the inflation wouldn't be there if it weren't for that war. It's not all on the Democrats for their non foreign policy decisions.

 

[HuffyCane]

The irony is that the people who are blaming it on Dems really don’t understand oil or global politics.

The tragedy is that people don’t understand that oil supply/pricing and global politics aren’t in a vacuum.

The farce is the teenagers answering the phone in the White House don’t remember Wall Street lost 50% of its hard currency value during the Carter administration. Nobody would touch the stock market for almost a decade. They better hope inflation is transitory.

For the time, we radically increased deficit spending and expanded the money supply to fund both the Great Society and The VietNam War. Nixon refused to jeopardize his re-election by restricting the money supply and refused to make foreign concessions that would have controlled energy price increases. He wasnt about to let the Democrats buy votes with tax dollars when he could do the same. People try to blame Nixon for the inflation in the 70’s. He was just holding the bag on the Dem guns and butter policy of the 60’s. And the world knew it and took advantage of it at our expense. They are doing the same now. I used to think Biden knew this and was playing the long game. After the Kimmel interview I wonder if he has any idea what’s going on.

 

[Gmoney4WW]

I am ever aware that their are many Republicans and Democrats who support the Ukranians, and support our efforts to assist them. Many of those same people are the one's who are not willing to pay higher gas prices and inflation brought on in a large way by that war. At least 30%, maybe closer to 50% of the inflation wouldn't be there if it weren't for that war. It's not all on the Democrats for their non foreign policy decisions.

But as always, when the economy is bad, the party in power loses on things that are partially beyond their control. It happens to the Republicans as well. (And vice versa when the economy is good.)

 

[HuffyCane]

But as always, when the economy is bad, the party in power loses on things that are partially beyond their control. It happens to the Republicans as well.

You mean like a pandemic where the party in power has developed a vaccine but can’t release it to the public because the doctors are worried it will influence an election?

 

[HuffyCane]

Not sure just raising rates are enough to offset the liquidity, effects of war in Ukraine and supply chain issues.

None of the sources I read has any confidence that the current monetary and war policies will have any effect in the near term.

 

[Gmoney4WW]

You mean like a pandemic where the party in power has developed a vaccine but can’t release it to the public because the doctors are worried it will influence an election?

No, I'm speaking strictly about the price of oil due to the war. Nothing else. The things you are addressing are things that would be in their control.

 

[URedskin54]

The so called Reagan Democrats were really just pissed off working class voters who could see their father’s leaders policies taking money out of their pockets, not delivering, and trying to raise taxes to give social programs to people not working.

If you are under 50 you have no idea how much of a hardship inflation was on the working poor and retirees. Zero ability to empathize. None. A 30 year old behind a podium telling me about inflation is as tone deaf as it gets. This whole shake it off, it’s transitory, just a correction, core inflation is coming down.

I think the “nothing to see here” response that’s running smack into reality is mostly a function of what the current dem coalition is and where it’s power is grounded. It’s mostly affluent college educated white people and progressive journos(I repeat myself) driving the platform. They lost pretty much all of the white working class voters that Obama kept and were a core dem voting block and traded them for affluent suburban Republicans. Got rid of some icky racists but lost a lot of what grounded them to reality…..and Black voters are taken for granted. That’s how you end up with student loan forgiveness and the salt deduction as key dem priorities. The best thing to happen to the Democratic Party (and Republican Party) in a long time is Hispanics trending toward becoming swing voters. Priorities will have to change.

 

[astonmartin708]

But as always, when the economy is bad, the party in power loses on things that are partially beyond their control. It happens to the Republicans as well. (And vice versa when the economy is good.)

This is realism. Appreciated.

Unless we stop the war in Ukraine, and China stops implementing lockdowns, things won't get better with inflation without a drastic drop in demand from the US.

 

[aTUfan]

The irony is that the people who are blaming it on Dems really don’t understand oil or global politics.

For certain, the economy will hurt Democrats. There is a non-zero chance though, that Republicans won't be able to fix anything either.... because this isn't a problem of how the country is being run. It's a problem that we're having to deal with Macro Economic events.

biden shut down much of our oil pruduction, and the ability to transport it.

if we produced our own, we would not be dependent on the global market and its prices

 

[astonmartin708]

biden shut down much of our oil pruduction, and the ability to transport it.

if we produced our own, we would not be dependent on the global market and its prices

This is not true.

 

[URedskin54]

If Biden wants to blame anyone for people having the impression he’s part of the problem with gas prices he should probably look inward

 

[astonmartin708]

If Biden wants to blame anyone for people having the impression he’s part of the problem with gas prices he should probably look inward

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Part of the reason I hate the one-ups-manship that happens in the primary debates. Everyone promises what they think the people want to hear.