10 Reasons why we are headed into recession.

There are countless articles out there explaining why and how ‘our economic system is doomed,’ but it seems none has laid out the cause and effect of recession.

Recession means a temporary economic decline during which trade and industrial activity are to be reduced, generally identified by a fall in GDP in two successive quarters.

In an economical fashion, here is how NBER explains the concept of recession; NBER is an economic research institution:

“no fixed rule about what measures contribute information to the process or how they evaluate in our decisions.”

Even professionals and economists still need to figure out how to define an economic recession.

This ambiguity has left huge gray areas for the government and mainstream media. Since we can not tell if we are already in a financial recession, we can not blame the government or policymakers for their wrongdoing during their administration.

In this article, I am explaining ten reasons why we are going into an economic recession:

1. We are still suffering HIGH INFLATION; by now, inflation is still at 7.7%, and it is still very far from 2%, which means we still have a long way to go when controlling inflation.
2. FED IS GOING TO RAISE INTEREST RATES, AND it’s GOING TO GET HIGHER THAN 4.25%, PERHAPS EVEN 6~7% interest rates.
3. FED is willing to sacrifice economic activity in the short run to boost economic growth in the long run.
4. FED understands the only way to handle inflation properly is by allowing recession occurs in the economic system.
5. UKRAINE-RUSSIAN WAR will likely disrupt global supply chains, and this effect will last for a decade. We will probably see more side effects even after the war ends.
6. China raises the concern of the entire Wall-street; world GDP growth relied on China’s rapid economic growth. Now CHINA GDP growth has plummeted and no longer expands at the same pace. With GDP growth slowing down, global GDP growth is dead.
7. China has a high probability of launching a war against Taiwan. Such military invasion will result in instability of the global financial market. This military maneuver will damage the global supply chain of the semiconductor industry.
8. India’s 2023 GDP growth is disappointing, with 5.7% in 2022 and 4.7% in 2023. Will India becomes the next China? Not likely in recent years.
9. Michigan consumer sentiment is currently at 56.8; during the pre-covid period, this indicator was at 100.
10. The emerging currency and mortgage sector will be impacted by raising interest rates. Massive real estate developers and financial institutions will default and even go bankrupt.

Wall-street analysts are still claiming there will be a ‘pivot trade’ unfolding and hoping the FED will lower interest rates.

The QE era is no more. At least until the end of 2023, we are not seeing FED returning to easing.