The New Government Lie About the Upcoming Recession

“Short and shallow.” 

That’s the 2023 version of “transitory”—the line the Federal Reserve started spouting in 2021 about inflation being a passing phenomenon.   

And just as with transitory, short and shallow is going to prove to be another in an alarmingly long line of Fed assurances that are wrong. 

See, short and shallow is what the Fed says we should all expect of a recession the Fed originally said was not likely to happen. 

Now, the recession that wasn’t going to happen is the recession that will be. 

But chin up, my compatriots. The Fed has assured us that this little economic nudge down will be, say it with me, “short and shallow.” 

Except, of course, that’s wrong. 

Being wrong, however, isn’t the problem. All of us are wrong about this and that on a regular basis. The problem is that the Fed is constantly wrong with its policy decisions and its assurances to the masses, and those decisions and assurances rob Americans of their wealth. 

This number just recently came out to bolster the point: $6.8 trillion. 

That’s how much money Americans combined have lost this year in the investment and housing markets. It’s a number from the Fed’s own analysis released last week. (For context: The U.S. economy is just shy of $26 trillion, so Americans have lost wealth equal to slightly more than a quarter of America’s economic output.) 

Had the Fed not gone street-rat crazy raising interest rates at a pace not seen since the late 1970s, those losses would not have piled up. 

Of course, the correct counter-argument is: “Well, Jeff, if the Fed hadn’t inflated asset bubbles, that wealth would not have existed!” 

Very true! 

And, “Exactly!” 

See, the Federal Reserve is like an industrial bubble-blowing machine. Its policies since at least the Greenspan era have focused almost exclusively on goosing the economy and benefiting investors, Corporate America, and Uncle Sam by keeping interest rates much too low. 

That has allowed misallocation of capital—bubbles—bolstered by a belief widely held since the 1980s that the moment the misallocation threatens to burn down the joint, the Fed will rush to the rescue by turning on a fire-hydrant of dollars…blowing an even bigger bubble. 

The devious element in all of this is that while the Fed is bubble-blower, it’s also the agency that has metaphorically hired a kid with slingshot and a bag full of pebbles to pop those bubbles, regardless of who loses an eye from all those pebbles raining down. 

That’s precisely what the Fed is up to right now. It’s trying to pop bubbles it blew in the wake of the Great Recession and most recently its response to the pandemic. 

Fed frontman, Jerome Powell, has already said there will be blood. 

People will get hurt. 

He wants jobs to vanish. This is from a speech Powell gave on Nov. 30 at the Brookings Institution: 

…demand for workers far exceeds the supply of available workers, and nominal wages have been growing at a pace well above what would be consistent with 2 percent inflation over time. Thus, another condition we are looking for is the restoration of balance between supply and demand in the labor market. 

Let’s run that through Google Translate, converting Fedspeak into English: 

Yo, my peeps, look—companies are trying to hire way too many workers for our comfort, and they’re paying jacked up salaries to do so. Ain’t nobody got time for that, because all that extra cash workers earn means we cannot hit our arbitrarily assigned inflation rate of 2%. So, you see—right?—why we gotta make sure Americans are not landing better paying jobs, and why we simply must kill the jobs market and push unemployment rates higher. Everyone has to suffer. 

Here’s another number, recently released, that jibes with the Fed’s bubble-blowing fetish: cumulative household debt is now $16.5 trillion. 

I’m not even going to comment on that. Just gonna let that number percolate in your noggin. 

Credit card debt, in particular, is growing at a torrid pace—now approaching $1 trillion for the first time ever—because families are having to rely on the good graces of Mastercard and American Express just to survive. 

And I mean survive literally. 

Can’t tell you the number of stories I’ve seen about parents eating one small meal a day so there’s enough food for their kids…all while working 16-20 hour days just to keep from drowning financially. 

Again, a lot of this rests on the Fed’s shoulders because it continues to make all the wrong policy moves. 

To anyone with a brain bigger than a mayfly’s, “transitory” was always going to be wrong.  

Similarly, Ben Bernanke was always going to be wrong when he said the subprime mortgage crisis was contained and would not spill over into the broader economy.  

And Alan Greenspan was always going to be wrong with his belief that deflation was imminent in the early 2000s, so he kept rates exceedingly low and insisted banks would not abuse that situation by making stupid loans because they would obviously be looking out for their own best interests and the best interest of their shareholders. 

Only Greenspan failed to account for personal greed and the fact that bankers did indeed abuse low rates to make stupid loans to goose corporate profits to secure bigger banker bonuses. 

So we’re back to the beginning: The Fed’s new mantra that a (highly likely) recession will be “short and shallow.” 

Gonna go ahead and call that “wrong” too. 

My bet: The recession will not be neither short nor shallow, and at some point in 2023 a struggling economy will prompt the Fed to pull out its tried-and-true playbook and cut interest rates. 

I hope I’m wrong.  

But if I’m not, well I have gold, silver, bitcoin, and Swiss francs as my parachute.