Why this recession is different from all the rest.

Fri Aug 19, 2022 9:08 am

No matter how you look at it, most Americans saving for retirement are feeling incredible pressure on their entire financial situation right now.

But before we dive into just how dire the economic situation is in the U.S., on the global level things aren’t “peachy” either. In fact, the International Monetary Fund (IMF) is predicting a massive global slowdown:

The IMF now expects the world economy to grow 3.2% in 2022 before slowing to a 2.9% GDP rate in 2023 — marking a downgrade of 0.4 and 0.7 percentage points, respectively, from April. The Washington-based institute said the revised outlook indicated that the downside risks outlined in its earlier report were now materializing. Those include soaring global inflation, China’s slowdown and the war in Ukraine.

But while the global GDP outlook isn’t so hot, the Biden economy could also be heading for serious trouble over the next few months.

To illustrate how fast things can change from one day to the next, on the 25th the chances of entering a recession were only “fair” according to CNBC and Janet Yellen:

The economy stands at least a fair chance of hitting the rule-of-thumb recession definition of two consecutive quarters with negative GDP readings. Should inflation stay at high levels, that then will trigger the biggest recession catalyst of all, namely Federal Reserve interest rate hikes. Treasury Secretary Janet Yellen said “we just don’t have” conditions consistent with a recession.

But only a few days later, and following her “faux pas” about inflation, Yellen was shown to be wrong once again. The U.S. economy did contract according to official GDP numbers released only a few days later, on the 28th.

This means that short of some miracle that isn’t likely to happen, a “widely accepted” economic recession is already upon us:

The U.S. economy contracted for the second straight quarter from April to June, hitting a widely accepted rule of thumb for a recession, the Bureau of Economic Analysis reported Thursday.