Tags: recession | inflation | retirement | safe haven | gold
OPINION

That Uneasy, Sinking Feeling You Have Is the Best Recession Indicator

That Uneasy, Sinking Feeling You Have Is the Best Recession Indicator
(Dreamstime)

Phillip Patrick By Friday, 27 October 2023 10:43 AM EDT Current | Bio | Archive

…intuition is always right in at least two important ways; It is always in response to something. It always has your best interest at heart.

After all of the economic craziness we’ve been enduring over the last 3 years, you might have a weird feeling in the pit of your stomach.

I know I do. Ever since the pandemic panic, I feel like I’ve been waiting for the other shoe to drop.

Recently, I’ve been hearing the same thing from friends and colleagues. I assume it’s the same sort of uneasy intuition of inexplicable wrongness that sends animals into a restless panic before an earthquake strikes.

In this case, it’s an economic earthquake.

If you’re feeling the same way, I don’t think you should ignore that gut feeling. You’re not the only one having it.

And there’s a growing pile of evidence that we’re feeling something more than just mild indigestion.

Yes, a recession is on the way

Even the most optimistic advisors writing for Forbes can’t quite make the case that a major recession isn’t just around the corner:

The New York Fed recession probability indicator shows there’s still a 56% chance of a U.S. recession in the next 12 months, though that’s down from a 66% reading in August. Other reliable indicators are flashing warning signs that the economy could still slump: Jobs data has been uneven, the yield curve remains inverted and experts are divided on whether a recession may have been delayed rather than avoided entirely.

Keep in mind that’s supposed to be the optimistic perspective.

Now we’ll look at the more realistic takes…

Mark Zandi, who is the chief economist at Moody’s Analytics, still hopes the Fed “might” avoid a recession with correct interest rate management. Yet he still thinks a recession is coming:

Historically, when you have high inflation, and the Fed is jacking up interest rates to quell inflation, that results in a downturn or recession. That invariably happens — the classic overheating scenario that leads to a recession. We’ve seen this story before. When inflation picks up and the Fed responds by pushing up interest rates, the economy ultimately caves under the weight of higher interest rates.

That sounds like a pretty traditional take on the situation. Let’s examine a few more.

Jeffrey Klingelhofer, co-head of investments and managing director at Thornburg Investment Management thinks the recession “has been delayed,” but is still coming.

Bill Gross, widely known as the "bond king," also joined the chorus of investors who think a recession is just around the corner:

Regional bank carnage and recent rise in auto delinquencies to long-term historical highs indicate U.S. economy slowing significantly. Recession in the fourth quarter.

Billionaire Bill Ackman said the following in a Monday post on X, formerly Twitter:

The economy is slowing faster than recent data suggests

For a more mainstream consensus, WRAL News program "5 On Your Side" recently asked a handful of economists for their take, and here’s what they came up with:

Out of the seven economists 5 On Your Side talked to this year, all believe we will likely enter a recession at some point next year, to varying degrees. Two of them told 5 On Your Side that there’s at least a 70% chance.

Last year, 5 On Your Side asked the same question to the same group. At the time, half believed a recession in 2023 was likely, two were uncertain, and two felt it was less likely.

It took less than one year for this same group of economists to change their mind almost completely towards the negative. That doesn’t bode well for the optimists who think a “soft landing” is still possible.

Now let’s look at some official data…

Yes, there are historical precedents (but they aren’t hopeful)

First, let's take a quick look at how much money is “sloshing around” the economy.

M2 monetary supply is contracting at levels not seen since the Great Depression of the early 20th century, shedding billions – down $1 trillion from its peak (down $146 billion in September alone).

But like those midnight infomercials say, “But wait – there’s more!”

Inflation is still persistently hot in the most important consumer categories, according to the BLS:

The index for shelter was the largest contributor to the monthly all items increase, accounting for over half of the increase. An increase in the gasoline index was also a major contributor to the all items monthly rise. While the major energy component indexes were mixed in September, the energy index rose 1.5 percent over the month. The food index increased 0.2 percent in September, as it did in the previous two months. The index for food at home increased 0.1 percent over the month while the index for food away from home rose 0.4 percent.

That data is straight from the horse’s mouth, so no matter how many corporate media outlets try to frame it as “easing,” it isn’t. Laughably, even the Biden Administration tried to plead with the American public (through the New York Times) that “Bidenomics was working to ease inflation.”

This plea was made just before the August and September numbers came in that showed inflation was heating up again.

But it gets even worse…

Optimism, money supply and even bank credit are shrinking

A rare decline in commercial bank credit started earlier this year. That matters because, according to the federal Office of Comptroller of the Currency:

Banks issue commercial credit to companies, which then access funds as needed to help meet their financial obligations. Companies use commercial credit to fund daily operations and new business opportunities, purchase equipment, or cover unexpected expenses.

That’s only happened three times in the last 50 years:

  • During the dot-com bust in October 2001.
  • The financial crisis in March 2010.
  • The current 2.02% pullback from the mid-February 2023 high.

If we zoom out farther, there were only four previous instances before the 21st century. Each one of these instances resulted in deflationary depressions and high unemployment rates.

  • 1878: During the Long Depression, 18,000 businesses went bankrupt, including hundreds of banks, and ten states went bankrupt, while unemployment peaked in 1878, at somewhere between 8.25%-14%
  • 1893: The Panic of 1893 kicked off a four-year economic depression
  • 1921: The “Forgotten Depression” and its 11.7% unemployment rates and 90% corporate profit decline is only forgotten today because of the next entry on this list
  • 1931-1933: During the Great Depression, unemployment rose to 24.9% and global GDP declined by 26.7%

Just because you can't explain that sick feeling in the bottom of your stomach doesn't mean you should ignore it. You’re certainly not the only person who has it.

You may not think of yourself as much of an economist. That may be true – by the same logic, though, restless farm animals aren’t seismologists.

They still know when the earthquake is imminent.

I urge you not to ignore your gut feeling – instead, to do something about it.

Now is a good time to make a smart change

Scientists still don’t understand how both domesticated and wild animals perceive an imminent earthquake. They just know that they can.

What do they do? They run away – they seek safe haven.

There’s an obvious financial parallel to this behavior: Diversifying your savings with safe haven investments. Physical precious metals have served as the gold standard of safe haven assets for centuries.

I don’t have a crystal ball and I can’t tell you what’s going to happen. However, I can tell you that Birch Gold Group’s customers sleep better at night knowing that they’ve diversified their long-term savings. The benefits of owning physical precious metals go far beyond insomnia relief! If you want to learn more, you can get all the information you need to make an educated decision about the role precious metals can play in your savings in our free kit.

_______________
Phillip Patrick is Birch Gold Group’s primary spokesman and educator. He was born in London and earned a politics and international relations degree at the prestigious University of Redding in Berkshire, England. Growing up in London, he saw the risks of government overreach and socialist policies first-hand. He spent years as a private wealth manager at Citigroup on Lombard Street (the Wall Street of London). He joined Birch Gold Group as a Precious Metals Specialist in 2012.

© 2025 Newsmax Finance. All rights reserved.


PhillipPatrick
After all of the economic craziness we've been enduring over the last 3 years, you might have a weird feeling in the pit of your stomach. I don't think you should ignore that gut feeling. There's a growing evidence that it's something more than just mild indigestion.
recession, inflation, retirement, safe haven, gold
1418
2023-43-27
Friday, 27 October 2023 10:43 AM
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