How to Avoid a Recession & Other Awful Things!

Jul 13, 2023 | Bubble Monitor, No Bull Economics

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Everyone continues to be focused on the recently released inflation number which came-in at +3% to everyone’s delight, driving stocks higher but interest rates and, correspondingly, the US$ lower. While investors have convinced themselves that Powell will finally relent & put a hold on future rate hikes, everyone seems to ignore that the CPI is actually up +12% on a 2-year stack basis and +18% on a 3-year basis. We believe Powell has no plans of changing his tune in terms of future rate hikes, especially given his current need to defend the US$. That is not to say that slowing inflation is not delightful news, just that Powell would probably need to see some serious deflation to provide indebted consumers & the housing market a badly needed break.  

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Commentary

  • Business cycles are believed to be inevitable, driven by periods of boom & bust. Sorry, there is nothing we can do about it – we all must suffer through it.
  • In a recent post, we provide insight from Lowe’s management which recently reported that no matter how well-situated its customers are financially, worries generated by the financial press about something looming around the corner from a macro standpoint give them a bit of hesitation.
  • In other words, there is no reason other than fear that keeps consumers from doing their share to keep the economy going. If they were to fight through fear, their worst-case expectations could be avoided.
  • The same is true regarding corporate management teams – if they can fight the urge to plan for a fearful worst-case scenario, they can do their part to keep the economy humming along by moving forward with plans to hire & invest. It takes courage & leadership to do this.
  • In an interesting article from Imprimis (Hillsdale publication) titled “Thinking Smartly About Climate Change”, the author points out that those harboring the irrational fear that increasing temperatures could wipe out civilization are willing to pay anything to avoid doomsday. However, actual data shows that human innovation is helping mitigate the dangers as outlined in the chart below. The author further posits that what is needed is more technological innovation to solve the problem of climate change.
  • To this end, we recently wrote about how Toyota is leading the charge in hydrogen cell technology in these posts (part 1 & part 2). Why the world is not pouring substantial resources into this promising source of clean, grid-free energy is beyond comprehension.
  • The simple point is this: humans can be resourceful stewards of the earth & the economy if we will resist fear and embrace our constant need to experiment, learn, improve & repeat.

Source: Thinking Smartly About Climate Change – Imprimis (hillsdale.edu)

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