U.S. Steel Plants Are Going Idle, But The Fed Continues To Perpetuate The Myth That Everything Is Just Fine
Even though there is a tremendous amount of evidence to the contrary, the Federal Reserve continues to insist that the U.S. economy is in good shape. On Wednesday, Federal Reserve Chair Jerome Powell told the nation that “the economy has performed relatively well” in 2019 and he insisted that “the baseline outlook is a good one.” Of course he didn’t say anything about our collapsing manufacturing numbers, the worst global trade numbers since the last recessionor the “bloodbath” in the U.S. trucking industry. Powell did concede that “the risk of less favorable outcomes has risen”, but other than vague statements like that he really didn’t acknowledge our growing economic problems at all. Considering the fact that Powell has more power over the U.S. economy than anyone else in the entire country, this should deeply concern all of us. To me, Powell’s performance on Wednesday was quite reminiscent of the moment in 2008 when Fed Chair Ben Bernanke told us that the Federal Reserve was not “currently forecasting a recession” after a recession had already begun.
As I have been documenting for weeks, evidence that another major economic downturn has already started can be clearly seen all around us.
For example, we got some very alarming news from the steel industry on Wednesday. When the Trump administration slapped a 25 percent tariff on steel imports last year, that was supposed to greatly help the U.S. steel industry. But instead, a dramatic drop in demand due to this new economic downturn is forcing steel companies to take dramatic measures. According to CNN, U.S. Steel just announced that it will be shutting down a blast furnace in Gary, Indiana and another one that is located just outside of Detroit…
But when will market conditions improve?
After this new economic downturn is over?
Of course U.S. Steel is not the only steel producer that is hurting right now. In fact, Nucor and Steel Dynamics have both cut profit forecasts…
Sadly, the truth is that major industry after major industry is deeply suffering at this moment…
-Our ongoing “retail apocalypse” is absolutely brutalizing the retail industry, and we are on pace to have the worst year for store closings in our entire history.
-Auto industry sales have been absolutely abysmal, and auto loan delinquencies have shot up to alarmingly high levels.
-The agriculture industry is going to have the worst year it has seen in at least several decades.
-Our 800 billion dollar trucking industry is already in the midst of a “bloodbath”.
-The real estate industry is poised for the worst downturn that we have seen since the subprime mortgage meltdown during the last financial crisis.
-The manufacturing industry has not seen numbers this bad since the last recession, and things are rapidly getting worse.
But yeah, let’s tell the American people that the economy is “booming” and see if they will buy it.
Let’s get real. The U.S. economy is mired in the worst slump in a decade, and economic conditions continue to deteriorate rapidly. The Federal Reserve could have given us a short-term boost by cutting interest rates on Wednesday, but they decided not to do that…
Perhaps they want to save their very limited ammunition for when the recession officially starts, and I can understand that.
But this latest move by the Fed is definitely not going to please President Trump, and it will likely prompt more speculation that Trump would like to demote Powell…
Trump needs the U.S. economy to be as strong as possible as he heads into an election year.
The stronger the U.S. economy is, the more likely it is that he will be re-elected.
And actually the Federal Reserve may be doing Trump a favor by trying to perpetuate the myth that everything is just fine. Because if the Fed had cut rates on Wednesday, it would have essentially been an admission that a new recession is on our doorstep. As John P. Hussman has aptly pointed out, almost every initial rate cut in history “has been associated with an oncoming or ongoing recession”…
Unfortunately, I don’t think it is going to work this time. And meanwhile millions upon millions of Americans have been lulled into a false sense of security, and they are not getting prepared for the exceedingly hard times that are coming.
One of my readers recently left a comment in which he stated that what we are facing “is not a drill”, and I believe that he is quite correct.
We haven’t seen economic conditions anything like this since the last recession, and the outlook is getting worse with each passing day.
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