Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
When Will UK Coronavirus Crisis Imrpove - Infections and Deaths Trend Trajectory Analysis - 8th Apr 20
BBC Newsnight Focuses on Tory Leadership Whilst Boris Johnson Fights for his Life! - 8th Apr 20
The Big Short Guides us to What is Next for the Stock Market - 8th Apr 20
USD Index Sheds Light on the Upcoming Gold Move - 8th Apr 20
The Post CoronaVirus New Normal - 8th Apr 20
US Coronavirus Trend Trajectory Forecast Current State - 7th Apr 20
Boris Johnson Fighting for his Life In Intensive Care - UK Coronavirus Crisis - 7th Apr 20
Precious Metals Are About To Reset Like In 2008 – Gold Bugs, Buckle Up! - 7th Apr 20
Crude Oil's 2020 Crash: See What Helped (Some) Traders Pivot Just in Time - 7th Apr 20
Was the Fed Just Nationalized? - 7th Apr 20
Gold & Silver Mines Closed as Physical Silver Becomes “Most Undervalued Asset” - 7th Apr 20
US Coronavirus Blacktop Politics - 7th Apr 20
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

We Are Putting Off the Inevitable

Economics / Recession 2017 Dec 02, 2016 - 03:37 PM GMT

By: John_Mauldin

Economics

Only two presidents in history did not see a recession, and they were inaugurated after single-term presidents. In every single instance at the end of a two-term presidency, there’s been a recession. This means there is a 100% chance of recession for the new president.

My friend Raoul Pal, in his latest Global Macro Investor, talks about the potential for a recession in 2017:

The following chart shows every recession since 1910 (in yellow) with the new president after a two-term election marked in white and the new presidents after a single-term presidency in red. Wilson and Eisenhower appear as both. Only Coolidge saw more than a year (sixteen months) from his second-term election and the onset of the subsequent recession at the end of WWI…


Every single US recession bar one (with explainable circumstances) occurred around an election. Only two presidents in history did not see a recession, and they were inaugurated after single-term presidents.

You can see the whole piece here. There are a few caveats and some slight curve fitting, but his general observation of recessions after a two-term presidency pretty much holds as far as I can see.

One objection is that there are not enough data points to make it a really accurate predictor. There is nothing that I can think of economically about a two-term presidency that requires a recession to follow it.

If the economy were now growing at 3% to 4%, if unemployment were truly under 4%, and if we had the deficit under control, I wouldn’t be worried at all. But Raoul has pointed out those prior recessions.

For now, the country is growing rather slowly, at very close to stall speed. Corporate profits are coming under pressure. The post-election US dollar is rising seemingly relentlessly. This is damaging US corporation profits, not to mention emerging markets. And interest rates are climbing all over the world.

And then there’s Europe, which could potentially deliver a massive shock to the global economy in the not-too-distant future…

What happens if there is a recession soon?

Patrick Watson had our team at Mauldin Economics create the following chart. It shows what would happen to the federal budget if there were a recession in 2018. If the recession were to move up to 2017 or if it were to hold off till 2019, the result would be much the same.

Revenues go down. Expenses go up. Taxes would pay only for required spending like health care, welfare, and Social Security—plus interest costs. Money for defense spending and everything else would have to be borrowed. The on-budget deficit would rise close to $1.3 trillion.

Add in the off-budget debt that always seems to increase, and you could quickly grow total US debt to $30 trillion before the end of Trump’s first term.

Clearly, that doesn’t take into account any of the measures the new administration will put in place. This is just using Congressional Budget Office (CBO) data for our current trends.

By the way, the chart also shows that we can expect trillion-dollar budget deficits as far as the eye can see.

I should point out that federal income tax revenues are basically flat, though the jobs numbers are up. That means a lot of people are getting lower-paying jobs. The underlying economy is weaker than it appears.

Is it even possible to balance the budget?

We should of course cut out waste and fraud. But that won’t balance the budget. Take the following pie chart for example. Even if you cut out every single non-defense discretionary item, the budget still would not have been balanced last year.

For some detail, take a look at this bar graph. It shows the growth of spending in the various branches and departments of government. Which areas are you going to cut to make any meaningful difference?

For the purposes of my argument, I am going to assume that the Republican Congress and administration somehow wrestle with the Affordable Care Act and bring actual individual healthcare costs down.

But the reality of the “Baby Boomer Bulge” is that no matter what we do, overall costs are still going to rise again within a few years. Rationing health care is not a viable political option. As baby boomers retire in droves, not only will they need more health care, they will also need more Social Security.

There are things we can do to get the whole healthcare process under control and to improve the general health of the country. But that’s not going to have a significant effect in the next two or three years.

So, what choice do we have?

So bluntly, if you cut income and corporate taxes (which is something I think we should do) without any offsetting revenue increases, you’re going to make the deficit and debt problems worse.

The national debt could rise by 50%. Cutting taxes makes people happy. And simply adding to the debt merely puts off the hard choices. And it makes them a lot harder still when we hit the wall.

The simple reality is that this is where we find ourselves today. We are left with distasteful choices. When you’re left with nothing but difficult choices and bad choices, and you avoid the difficult ones, then you end up with only bad choices (cf. Greece).

FREE Report: How the Fed Is Leading Us to Monetary Hell

Contrary to common belief, it’s not greedy Wall Street brokers that are wrecking the US economy—but academic policymakers like the ones employed by the Federal Reserve. And they all have the best intentions… Read financial-bestseller author John Mauldin’s riveting special report, How the High Priests of Economics Are Leading Us to Monetary Hell. Click here to get your free copy now.
John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules