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An Economic Slowdown, Recession, Crash? Is Coming

By May 16, 2023Commentary

Like a crack high, the excessive goverment spending fueled economic splurge of the last three years is about to crash.  The epidemic became the excuse for completely crazy levels of spending and debt, which have consequences. In this case the consequences are inflation, uncertainty and slowing GDP growth.  Our economy depends on consumers to spend a lot of money on everything from cars and appliances to clothes to air fare and eating out.  The latest data shows the credit card debt has risen sharply and was not paid down after the holidays, as it typically is.  The proportion of that credit card debt that is delinquent has also increased.  People are resorting to using credit cards, with 15% to 20% interest rates, to pay basic living expenses.  This obviously can’t go on for long.

A lot of the spending is done by the higher income subset of Americans.  This group has actually experienced a decline in income, which means it won’t be spending as much.  So with consumers at all levels beset by inflation, falling income and rising credit card debt, retail sales are going to fall.  (ZH Post)  And this morning Home Depot, a harbinger of consumer spending, reported poor earnings and that it anticipates a 2% to 5% decline in sales for the year.  So no revenue growth at all.  (HD Report)

Predicting the economy is very difficult and getting accurate, not politically-driven, measures from the federal government makes the task harder.  But everything would suggest we are already in a slowdown, likely headed for recession, and it could be a very bad recession.   I see no reason to think that inflation and interest rates won’t continue to be an issue, largely because of the huge pile of debt which governments have to finance, and have to pay more interest on as default risk rises.  And I will have to say that part of me wishes for a long and deep recession to help people see the lunacy of progressive policies and vote the morons out of office.  I keep wondering what it will take for people to see the absolute stupidity of the Biden administration on the national level and the insane regime of Little Timmy Walz here in Minnesota.

Join the discussion 7 Comments

  • DuluthGuy says:

    I tend to agree with you that a slowdown is coming. But at the same time, I’ve thought that before and it simply hasn’t happened. The debt and deficits have just continued to grow with few, if any, repercussions.

    While Twitter was an extreme example (cutting over 80% of employees), one has to think that many larger employers are going to cut back on staffing. There are so many companies that have a ridiculous number of employees who do very little in the way of providing services for the company or their customers. While cuts like this tend to happen in an economic downturn, that should happen though regardless of whether or not a downturn happens.

    Another effect of the high interest rates is that people who had their home before 2021 are not going to be moving anytime soon. In my case, I refinanced in 2020 down to 2.625% on a 15 year mortgage. While I could get a lot more for my house than I paid for it 7 years ago, I’d just have to turn around and spend all of it on a different house and would have to take out a new mortgage at a much higher interest rate. Because of current owners being unwilling to sell, supply will stay low and prices will remain high.

  • Harley says:

    Agree with your comment about the value of a recession to create a desire to move away from the current regimes in Washington and St. Paul. An end to the “Season of Silliness”.

  • Rob says:

    It all feels like 1971. The political scandals and bicentennial circus didn’t change the politicized economic reality until things got worse.

  • Roberto says:

    I think it’s wishful thinking that the Dems will ever wake up to the idiocy of Little Timmy, in the same way the Dems thought Trump supporters would wake up when they saw what an obnoxious lunatic he was. Everyone seems to be doubling down on their favorite flavor of idiot.

  • Blackwing1 says:

    Mr. Roche:

    Please take everything that ZeroHedge (and their source, BofA) with several pounds of salt rather than grains.

    They have correctly predicted 4,237 of the last 2 recessions. (sarcasm)

    That being said, what I foresee coming is a repeat of the Carter years, with much more horrific results. I recall mortgage lending rates as high as 21%, the economy-destroying “stagflation” that the Keynesians said could never happen, “malaise”, etcetera ad nauseum. I remember tuition, fees, and book costs going through the roof (I was a student in those years), and struggling to make ends meet by working full-time in the summers, and part-time while going to school full-time. I remember thinking that the US military had gone into the toilet, and being proved correct by the Disaster in the Desert™ when Carter tried to micro-manage the hostage rescue.

    But I also remember how it ended, with Ronald Reagan coming into office and the terrified Iranians releasing the hostages almost immediately, worried that the “cowboy” would nuke them to oblivion. The economy settling down from the rampant inflation, and economic growth picking up after his first two years in office. I got my first professional engineering job after graduating in ’83, despite the slight downturn in the economy at that moment, and watched the small company with which I worked grow at an incredible pace. I remember the landslide re-election with only the Soviet Socialist State of MN voting for the inept and ineffective Mondale.

    There will be no Reagan-equivalent to save this country. Donald Trump was a Constitutionally-illiterate bloviating sales twit with exactly zero management skills, but I voted for him twice despite that. In 2016, because the alternative was Felonia von Pantsuit (thank you, Colonel Schlichter), and in 2020 for reasons that are now obvious to everyone. But DJT is no Reagan, and has no respect for free markets or minds. Outside of 2 or 3 of them, it’s hard to find anyone on the Rep-wing of the UniParty who actually has a sound basis in the values, standards, morals, and ethics necessary to defend the basis of liberty, which is why they consistently fold and fail when challenged by the collectivists of the left and right.

    I see our economy crunching continuously downward, ending in a collectivist/statist/authoritarian disaster like Venezuela or Zimbabwe. At best people will realize the cause was their devotion to socialism; but I fear the worst, which will be the destruction of the major cities of the United States as the food trucks stop supplying them. No major city has more than a 3-day supply of food, and the riots, looting, arson, rape, and murder will make the little Antifa/Buy Large Mansions practice sessions look like fun and games.

    Watching our country die, being killed from within, it’s really hard to not be depressed these days.

  • JT says:

    Just wanted to say thank you for the time and effort to keep up this website. It really helps to have like minded people spouting logic and common sense versus what exists almost all other sites.

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