A recession is coming. Are you prepared?
If you follow my newsletters, you’ll know how I feel about the U.S. economy. We’re in trouble. But let me review some of the highlights.
First, the economy is still recovering from the recession of 2008 and 2009, with unemployment still at an astounding 7.6 percent. Although that’s down from its high of 10.0 percent in October of 2009, it’s still unusual: Unemployment spent the years prior to the last recession ranging from roughly 4 percent to 6 percent. And the gradually improving numbers are, in my opinion, deceiving because each month a fraction of the unemployed become frustrated and stop searching for a job, which causes the unemployment rate to decrease.
Now, the payroll tax hikes that kicked in at the beginning of 2013—as well as federal spending cuts, additional tax hikes expected to follow the battle over the debt ceiling, and the added costs associated with health-care reforms—are weighing on employers and consumers as well. All told, they’re enough to curtail incomes and that, it turn, will significantly dampen consumer spending.
But that’s not the only problem we have. In an attempt to get the economy back on track, the U.S. Federal Reserve Board has significantly increased the U.S. money supply as part of its quantitative easing program, and an increased money supply decreases the value of each dollar out there. So not only will consumers see their incomes decrease; they’ll be able to ...