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What Will Cause the Next Recession?
Thursday, October 15, 2015 17:56
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wolfstreet.com / by Larry Kummer • October 15, 2015
Expect the unexpected.
Mainstream economists assure us that a recession remains unlikely in the foreseeable future. They have their reasons.
- They forecast steady slow growth. The Philly Fed’s Survey of Professional Forecasters sees 2.4 – 2.8% real GDP rising through 2018.
- Most indexes of leading indicators remain strong. The ECRI’s Weekly Leading Indicator hit bottom at 105.4 in March 2009; it’s remained above 130 since March 2013; it’s now 132. An exception is the OECD Composite Leading Indicator, which has been slowing since last Sept (“growth losing momentum”).
- Most of the standard warning metrics remain low. The recession probability indicator of Marcelle Chauvet and Jeremy Piper is at 0.3; it was 3.9 in November 2007 (the start of the great recession). The Econbrowser indicator of James Hamelton didn’t work in 2007 and has given odd readings since then.
These tools worked moderately well during the post-WWII era, when the Fed caused most recessions by raising rates to prevent inflation (they took “away the punch bowl just as the party gets going”). That era has ended. In this century unexpected economic shocks cause recessions, their severity depending on the size of the shock and the economy’s strength.
The post What Will Cause the Next Recession? appeared first on Silver For The People.
Source: http://silveristhenew.com/2015/10/15/what-will-cause-the-next-recession/
