PART ONE: Experts offer their views on recession prospects
This is the first installment in a three-part series. Among the various experts that we reviewed, the vast majority are investors, not political analysts. While we agree that investors have a perspective of the Global Economy, which serves to shape their individual opinions, there is not one expert who looks at the economy in a macro manner and analyzes all of the various components of the economic and political forces that will go into the recession equation.
Issues such as the collapse of the economy in Venezuela and the fact that it is the sixth largest producer of oil in the world, does not really go into the discussion about whether or not a recession is in our country’s future.
Further, the fact that China and Saudi Arabia are buying large quantities of silver and gold and that those two nations seek to change the world’s Reserve Currency — away from the U.S. dollar — is a factor that we did not find in our review of the experts’ opinion on the subject of recession.
With the foregoing issues in mind, we began our analysis with two noted authorities.
In March of this year, Jim Rogers was quoted as saying that there was a 100 percent probability of a recession in the United States within one year. In an interview on Bloomberg TV, he analyzed this situation, relating his prediction to historical averages that a recession occurs every eight years and it has now been seven years since the last time that a recession occurred.
He stated that our national debt is staggering and that while many Wall Street economists see a much smaller chance of a U.S. recession, but a slowing and sluggish economy in China, Japan, and in the Euro Zone mean that there are many possible channels of contagion. He indicated that his former partner, George Soros, has suggested that if investors focus on the right data, there are signs that the U.S. economy is already faltering. If you look at the payroll tax figures, you will see they are already flat.
In light of the economic turmoil, Rogers says that he is long on the U.S. dollar. He went on to say that “it might even turn into a bubble! I mean, if the markets around the world are crashing, let’s just say that scenario happens, everybody is going to be putting their money in the U.S. dollar.” He added that a strengthening U.S.
dollar “has historically been negative for commodities.” This is interesting especially in light of fact that commodities are the asset class that this particular investor is best known for.
While the Japanese yen is often designated as a risk-off currency, it won’t benefit in the event of a flight to safety due to the massive, continued expansion of the Bank of Japan’s balance sheet, according to Rogers who said he exited his position in the yen.
Regarding prospects for a recession, Rogers was blunt about monetary gurus, who are supposed to monitor such things: “Central Bankers don’t have a clue,” he said. In February of this year, Rogers was warning that a financial Armageddon is just around the corner, and is being fueled by moronic central bankers.
“We are going to pay a horrible price for the incompetence of these central bankers,” he said in an interview with CNN Money’s Nina dos Santos. “We got a bunch of academics and bureaucrats who don’t have a clue what they are doing.”
Rogers relocated his family from the United States to Singapore because as he said, “Central Bankers are doing everything they can to prop up financial markets, but it is all for naught.” He predicts their unconventional monetary strategies will lead to a stock market rally in the near future, but deep trouble later this year and into 2017.
“This is going to be a disaster in the end,” he said. Central Bankers around the world have been increasingly using negative interest rates (suggested by Federal Reserve Chair Janet Yellen, reporters note) to prop up inflation and support their economies, but Rogers said the moves aren’t working. He said they are simply trying to rescue stock markets and help brokers keep their Lamborghinis. “The mistake they’re making is they’ve got to let the markets sort themselves out,” he said.
Mr. Dent is generally seen as one who tends to view the economy in a negative light. He has appeared on many financial news shows on television and inevitably his remarks tend to focus on the uncertainty in the U.S. economy. With that in mind, we were interested in determining the basis for his continued negativity.
In March of this year, he stated that evidence of a declining economy is piling up in this year’s Presidential race. What we have now (surprising to most political analysts) is a genuine voter revolt against the rich and the establishment. Trump is taking over the Republican Party, and Democrat Bernie Sanders is threatening Clinton beyond what almost anyone would have forecast a year ago, even if he can’t quite seem to win.
In this regard, Dent believes “the U.S. is in for much greater civil unrest ahead.”
Dent equates the political considerations in the U.S. with the prospects of a recession on the basis that political decisions drive the growth of the debt in this country, which has a negative effect on the economy. Typically, growth in debt means that the growth of business produces higher employment for the masses and a rising standard of living. However, with the current circumstance that we are dealing with in this country, economic activity is greatly inhibited.
Last week, when we introduced our lineup of experts, we pointed out that in the 1980s Harry Dent forecasted that the Japanese economy — then the darling of the world — would soon enter a slowdown, which would last for more than a decade.
Way back in the early 1990s, he predicted that the Dow Jones industrial average would reach 10,000. Both of these predictions were met with much skepticism, yet both eventually came to pass. According to Gene Epstein of Barron’s magazine, “Harry Dent knows how to sell books. But whether his stock market strategies make sense– or money for investors– is another question.”
Jeffrey Laderman suggested in a Bloomberg Business week article that, “Harry’s explanation of the stock market is a simple one that resonates with investors.” Market Watch columnist Chuck Jaffe opines that tell “people what they want to hear, and they will flock to your door.”
Editor’s note: Next week, reporter John Woodard offers Part Two in the series.