The similarities to 2008 keep piling up!

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The Leading Economic Index Declined in June for the 15th Month in a Row, Longest Down Since 2007–08

The U.S. economy, while currently still growing, shows alarming signs of a looming recession. The leading economic index, a measure of ten key indicators, declined by 0.7% in June. This represents the 15th consecutive month of shrinkage, a recession red flag reminiscent of the Great Recession in 2007-2008. Furthermore, seven of the ten indicators tracked by the Conference Board have shown a downward trend, suggesting a broad-based economic slowdown. This continued contraction is worrying many economists, leading to an increased prediction of a recession within the next year. The potential downturn is driven by factors such as escalating prices, tighter monetary policy, increasingly difficult-to-acquire credit, and reduced government spending. The Federal Reserve’s sharp uptick in borrowing costs, aimed at countering inflation, is an additional headwind for the economy. The Conference Board is forecasting a recession from Q3 2023 to Q1 2024. Although the current growth rate is higher than expected, the sustained decline in leading indicators and anticipated monetary tightening signal an upcoming slowdown. This forecasted recession, accompanied by lower government spending, tight monetary policy, and credit challenges, presents a gloomy outlook for the near future.

 











Former Fed Chair Ben Bernanke Says Next Fed Interest Rate Hike May Be Its Last

Ex-Fed Chairman Bernanke foresees that the Federal Reserve will likely raise interest rates again at its next meeting, potentially driving a slowdown in the U.S. economy. This rate hike, as per futures market predictions, could be the last for a while, but not before causing potential damage. Bernanke’s forecast resonates with his infamous “No Recession On Horizon” statement before the 2008 crisis, raising doubts about the accuracy of his predictions. Inflation is expected to drop “more durably” to the 3% to 3.5% range over the next six months, according to Bernanke, but only after triggering substantial financial stress. He believes the Fed will then take time to get down to its 2% target, implying prolonged economic unease. Bernanke also voiced concerns about the overheated job market. Despite a decline in job vacancies, there remains about 1.6 positions open for each unemployed person. This imbalance between demand and supply in the labor market needs to be addressed before the Fed can claim victory over inflation. Finally, Bernanke predicted a U.S. economic slowdown and a modest increase in unemployment, essential trade-offs to bring inflation under control. Although he anticipates any potential recession to be mild, his assurances carry the weight of his ill-fated 2008 prediction, casting a dark shadow over his current prognosis.


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