The Nervous Nellies on The Wall Street Journal‘s editorial board think so. After all, the stock market had its roughest down day in some years on Wednesday.
The horrors that surely would be associated with this recession:
A Chinese recession would mean a European recession, which would send US growth down too.
Some wars must be fought, though; one such is the economic war the PRC has been waging against us, and the West generally, for years. The current trade dispute is just one aspect of that.
And
…drive China, the world’s second largest economy, into its first recession since Deng Xiaoping began the era of pro-market economic reform.
Certainly unfortunate for the mainland Chinese people, and there’ll be pain for us—but what war is bloodless, other than those in the imaginations of pressmen? A likely outcome, though, would be the weaning of the US and Europe off of its dependence on the PRC for trade, a separation of us from the bandits.
And the indicators predicting this recession:
The market had a terrible day. Market volatility is a harbinger of recession. Unfortunately for the narrative, the market is not the economy. The two are tied together as the one is driven by the other. But the tie has a lot of slack in it, and what the economy does does not inherently impact the markets immediately. The lag is months long, not hours or even days. The markets do not at all drive the economy. As well push a wet string across sandpaper.
Another indicator the WSJ has touted this week is the yield curve indicated by the 2- and 10-year Federal Treasury Notes. It inverted this week for a brief time. However, the lag between such an inversion (if repeated in a short time one or more times) and an actual recession is in the region of 22 months. If this indicator is followed by a recession in those 22 months the time frame would coincide with a record-long economic growth period, one whose age and hoariness already would seem to spring load us for recession. If we measure economic growth from when it really got started instead of from the beginning of the historically slow and anemic Obama “recovery,” this growth period after these subsequent 22-ish months would only be middle-aged.
There’s a confounding factor with the yield curve, though. For the last several years, the Federal Reserve Bank has been artificially manipulating interest rates. The yield curve, more and more over these years, reflects market forces/economic imperatives less and Fed moves more. Its value as an economic predictor is commensurately reduced.
Chicken Little lives.
