NYT Columnist Worried About the Economy

I really appreciate the way The New York Times columnist Jeff Sommer is being so honest regarding his concern about the economy: "It’s not easy to say this out loud. As Federal Reserve policymakers head to their annual summer conclave in Jackson Hole, Wyo., the state of the U.S. economy and markets looks awfully good. I’m far from confident this placid outlook will last."

"What’s startling about the uncanny tranquility in the economy is that the Fed has been restricting growth — by raising interest rates and shrinking its balance sheet (a policy known as quantitative tightening) — at an extremely sensitive time."

He then lists all the very real issues impacting the economy, that demonstrate how this is a global problem -

• The U.S. economy continues to be buffeted, if not battered, by supply and labor shocks induced by the pandemic and by commodity shortages set off by Russia’s war with Ukraine.
• The price of wheat has been fluctuating. Oil prices have been rising again
•  China’s slowdown is weighing on the global economy
• Political polarization in the United States is beginning to dim the country’s financial luster. That’s the core message of this month’s downgrade of U.S. Treasury debt by the Fitch Ratings agency.
• The United States came close to defaulting on its debt in May
•  The prospect of a presidential election campaign, with an indicted former president as a leading candidate, is, to say the least, unsettling. 

Economists United in Uncertainty

Even economists are starting to say outright that they don't know where all this is headed, but he assumes that a recession next year is a real possibility.

• Edward Yardeni , an independent Wall Street economist, is essentially optimistic about the market outlook but says that some worrying may be warranted. Titles of his recent notes to clients include “Don’t Worry, Be Happy.” and “Worry, But Be Happy Anyway.”
• Blue Chip Economic Indicators, a long-running monthly survey of economists published by Wolters Kluwer , “places a 50 percent probability on a recession occurring within the next 12 months

At this point in the article he says very honestly that he has no idea how all this will play out -

I can’t forecast recessions with any accuracy, nor can anybody else. But despite the robust labor market and the strong economic reports lately, I assume that a recession in the next year or so is a real possibility.

"But there are no guarantees, and because experience shows that setbacks occur regularly, it’s also important to prepare for any eventuality by keeping plenty of cash on hand to pay the bills. I’ll acknowledge that calling the glass half full may be more justified right now than calling it half empty. Unfortunately, I don’t know for sure, and neither do the economists and Fed officials meeting in Jackson Hole."

My Commentary

If we stop putting all our energy into the numbers, and start investing far more in understanding and strengthening our relationships, we'll be able to go through this inevitable adjustment.

But instead of using the challenges to come closer together, some business leaders are suggesting deglobalization as a solution. In a 2009 CBS interview, economist Mark Vitner said that would be like trying to unscramble scrambled eggs.

I agree that it's impossible to turn back globalization. It can't be done now or at any time in the future. So why would the world's top economists suggest it?

They see globalization aggravating the world's problems because it's based on such negative relationships. This is why economists are thinking of breaking the ties between the world's economies, to stop its progress until we can organize a more positive foundation for existing together.

What's the real problem?

At the moment we're relating to our economic relations the same way we do with all of our relationships - thinking how to exploit them for our own benefit. But since the economy provides for our most basic needs, it shouldn't be used as a means for trampling other people. If we continue to abuse the system this way the world economy will not serve us well. This could lead to shortages of staples and greater conflicts.

It's 2023 and time we understood that we can't afford to mistreat each other when it comes to economic matters.

The really annoying part is that the shortages are not real. It's just that certain nations are unwilling to supply other countries with necessary things. But if we all agree to change our attitude toward one another, we'll discover that we're really not short of anything.

So we need to start understanding how dependent we are on each other and that sooner or later we'll have to improve our relationships. Soon we'll understand that all the competition between our countries causes great harm to everyone.

There is always a lot of confusion and uncertainty during transition periods. The natural evolution of humanity has connected us, so all we can do is try to advance in a positive way together.

When we begin to invest in learning about our interdependence and the need for positive collaboration at all levels, we can reverse all these negative scenarios playing out inside each country, and also between countries. If we focus on enhancing our connections, we'll be able to advance in a way that benefits everyone and that truly provides for all our needs.

The only thing we should really be anxious about is our unwillingness to change, and how we're constantly trying to go back to our default behavior. Now is the time to be open to new thinking, since clearly all the old models are no longer relevant.