Ready for the next recession?

Wall Street during the Panic of October 1907.  

Wall Street during the Panic of October 1907.

 

From Robert Whitcomb's "Digital Diary,'' in GoLoca24.com

Stock and other economic indices have been rising for years in the U.S. and in much of Europe and Asia, whether they have right- or left-wing governments. The economic expansion is getting very old. Eventually the markets will tank and we’ll have another recession. (My guess is that it will start next year, but it’s impossible to predict booms and busts with any precision. Too many variables.)

Maybe a world credit crunch will start the crash, or an unexpected string of lower corporate earnings, a Russian invasion of another European nation, a war with North Korea,  the popping of the Chinese property bubble, Chinese aggression aimed at controlling the trade routes through the South China Sea, a Chinese, Russian or North Korean assault on Western electrical grids. The list goes on. Then what?


Deutsche Bank analysts have warned:

"With Government debt levels spiking since the last recession, are politicians able to act as aggressively as they might need to {when the next recession comes}?"

"Could the next recession be the one where policy makers are the most impotent they’ve been for 45 years or will they simply go for even more extreme tactics and resort to full on monetization to pay for a fiscal splurge? It does feel that we’re at a crossroads and the next downturn could be marked by extreme events given the policy cul-de-sac we seem to be nearing the end of.’’

What makes prospects more exciting is that the U.S. may soon substantially expand its debt with big tax cuts.  That’s not to say there aren’t some very good things in the GOP tax plan announced last week, especially cutting back the mortgage-interest deduction. There are also some very bad things, such as getting rid of the estate tax. More to come, such as the fact that the tax bill would most benefit outfits like the Trump Organization.  Surprise!

In any event, Americans are undertaxed for the public services and infrastructure they say they want.  The United States of Wishful Thinking.