Recession is here, and it’s going to get worse because of the President’s pentateuch of problems; high inflation, short supplies, unfilled jobs, weaker demand, and vanishing wealth. Winter is coming and Joe Biden’s created a confidence crisis. His party killed a recovering economy, denies it, won’t change course, and has 80% of voters now saying “America is on the wrong track” (source: Monmouth).
It’s stagflation (inflation + slowdown) because Treasury Secretary Yellen just told EU reporters, “higher food and energy prices are having stagflationary effects, namely depressing output and spending and raising inflation all around the world.” And the surefire recipe for recession (inflation above 4% and unemployment below 4%) now exists today.
Wednesday’s Conference Board survey found 60% of CEOs expect a recession before Biden leaves office. Blue-chip retailers are lowering earnings guidance. Home Depot sees sustained price inflation, Target sees lower margins, and Walmart is just simply pessimistic. Probably because this looks like “worst ever” inflation.
When Biden entered office, there was rising demand, improving employment, and too much recovery money. He erred; sticking to Modern Monetary Theory and saying it was “transitory” inflation. The rate is now stuck above 8%, and the Fed is accelerating the pace of interest rate hikes. Bad, but the real problem is WHAT is going up; energy, food and starting wages.
The root problem is energy inflation, and J.P. Morgan says consumers will see gasoline prices above $6.00 this summer. Fox Business reports families will pay about $5,000 a year now for petrol; because, for the fist time ever, the average price of gas in every state is now over $4 a gallon. Fox News’ Steven Milloy faults Mr. Biden for a “de facto ban on new drilling” that “scared away investment.” In March, Biden stated gas prices will “continue to come down – fairly significantly.” Oops!
“Record-breaking food-flation” in 2022 is now predicted by Bank of America, and Biden is partly to blame. He accused Putin of expansionist goals, but still cut US oil and gas production (to appease green ideologues). He’s pressuring the EU to put sanctions on Russian oil, while the Department of Interior cancels oil and gas leases in Alaska and the Gulf of Mexico. Meanwhile, his war on fossil fuels made food prices go up; food transport (up 25%) and fertilizer (up 50%) now cost more.
The CPI for food rose 9.4% (most since 1981) in April, when the PPI for food rose 18% (most since 1974), and underlying pressures remain. Extreme weather in the US and war in Ukraine created grain shortages. Outbreaks of US bird-flu reduced egg-laying hens 10%. The result is wholesale costs increasing 40% for flour, 41% for fats and oils, 51% for butter, and 200% for eggs (source: National Restaurant Association).
Empty shelves are the hallmark of Biden’s recession. To wit, a shortage of baby formula hit one-third of the states, while Biden was trucking it to Texas to feed infant aliens. Pressed by CBS, Secretary Buttigieg argued: “Let’s be very clear. This is a capitalist country. The government does not make baby formula, nor should it. Companies make formula.” Really? Because the FDA initiated the close of Abbot’s baby-formula plant and is slow-walking European substitutes. It doesn’t end there.
Forbes states the “US healthcare system is facing supply shortages that dwarf the problems experienced in the early days of the Covid-19 pandemic.” The New York Times reports home builders are “having the most difficult time in decades meeting demand.” An Autoweek headline reads, “All the Motorcycles Are Sold Out, Too.” The list goes on.
An anti-work movement is afoot, with 1.9 million members in a Reddit community. You can’t make this up: the R/antiwork site has a mission statement: “for those who want to end work [and] get the most out of a work-free life. The workplace puts the needs of supervisors above workers.” It’s the Green New Deal’s universal minimum income for real; a generation of lazy citizens living off industrious citizens. It’s so unthinkable, no economic modeling exists.
The GOP warned Mr. Biden extra jobless benefits might invite an anti-work culture, but 18 million got them throughout 2021, resulting in 61.6% labor force participation rates that are the lowest since 1976. In March, a record 4.4 million workers quit their jobs, leaving 11.5 million unfilled jobs (source: BLS). A recent survey by invoice-specialist Skynova found the majority (78%) who quit were highly valuable. Odds are you see the results: poor customer service.
A hallmark of the Biden Recession is customers waiting longer to pay more to get less and come last. More quitters mean fewer workers, meaning Americans now depend on bots or know-nothing newbies. Suffice it to note the human cost of know-nothing admitting nurses, electricians, or tire mechanics.
Last week, I spoke to folks in the know, who report weakening demand. A builder said the market for single-family homes fell sharply in May. A banker told me demand for mortgages is falling. Just returned from India, a furniture CEO said Asian factories are choking on finished goods put on hold by US importers. A supply-chain manager told me factories in low-labor countries are now looking for business.
There is now a global reordering of wealth away from technology, which was supposed to propel advanced economies into the future. On January 3, Apple hit a market cap of $3 trillion, the S&P 500 Index hit an all-time high, and the Biden Bear Market began. On May 11, Saudi Aramco hit a market cap of $2.4 trillion, and replaced Apple as the world’s most valuable company. Imagine the US wealth created if Trump had been re-elected.
Back to reality, the S&P 500 has lost more than $7 trillion in wealth this year (source: CNN). This is why GOP polls see “Biden’s deep unpopularity and the ditch Democrats [are] in” and DNC polls find Republicans up 8 points on generic ballots. The President killed a recovering economy, his killing spree is far from over, and investors are rightly worried.
Winter is coming – and Americans deserve better than the man (Biden) Barack Obama belittled for the “ability to f*** things up.” This was a buzzkill to write, but forewarned is forearmed. Circle your financial wagons and hope to heaven Republicans sweep the far-left ideologues out of power. Recovery begins by checking the mad king and his court. Remember Reagan (and repeat).