The stock markets sold off on Friday, and financial media headlines were dominated by an inverted yield curve, a key recession indicator for the past several decades. Was the selloff just a pullback as equity prices consolidate before heading for new highs? Or is this the top of a dead cat bounce after the December market meltdown?
Economic indicators are somewhat mixed. Unemployment remains low at 3.8 percent, although it is always important to consider what kinds of jobs people are doing, what they are producing, and why. Unemployment is always low just before a bubble pops, as monetary inflation leads to unsustainable expansion.
Meanwhile, February saw a nearly subterranean jobs report, and December’s much-ballyhooed number was revised downward from 312,000 jobs to just 227,000. Holiday retail sales, reported as “heating up” during December, ended up declining by 1.2 percent, the biggest drop since 2009.
That a recession is coming is a certainty. The question is when. And whether it hits in 2019 or 2020, you can bet it will take center stage in the political arena, with Democratic presidential hopefuls climbing over each other to blame President Trump and the Republicans. The GOP will find it hard to fight back after taking full ownership of the tail end of this ten-year, inflation-fueled bubble.
As ridiculous as we free-market types always find it, a recession during a Republican presidential administration is always characterized by our opponents as an indictment of capitalism, even though the business cycle is driven much more by monetary policy than anything presidents of either party do. And the Federal Reserve is not a capitalist institution. It’s an economic central planner Karl Marx considered a vital part of moving society towards communism.
Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.