Joe LaVorgna, SMBC Nikko Securities chief economist, and Dana Peterson, chief economist at The Conference Board, join ‘Squawk Box’ to discuss the Fed’s inflation fight, interest rate hikes, and more. For access to live and exclusive video from CNBC subscribe to CNBC PRO:
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BREAKING: Recession News
LEARN MORE ABOUT: Bank Failures
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
Here’s why a recession is likely to happen this year
The year 2020 has proven to be a challenging one for global economies, and there is growing concern among economists and financial experts that a recession is on the horizon. The outbreak and spread of the COVID-19 pandemic has disrupted numerous industries, paralyzed supply chains, and caused widespread unemployment. These factors, along with various other indicators, suggest that a recession is likely to happen this year.
One of the primary reasons why a recession is highly likely is the disruption caused by the COVID-19 pandemic, which has had an unprecedented impact on the global economy. As governments worldwide implemented lockdown measures and travel restrictions, businesses were forced to shut down or drastically reduce their operations. This has resulted in a sharp decline in consumer spending, as people are confined to their homes or fearful of spending due to the uncertainty surrounding the pandemic.
In addition to reduced consumer spending, the pandemic has severely affected businesses across sectors, especially those that rely on physical interactions such as travel, hospitality, and retail. Many companies have faced severe financial losses and have been forced to lay off employees or shut down completely. This has led to significant job losses and a rise in unemployment rates, further exacerbating the economic downturn.
Another critical factor is the disruption of global supply chains. As countries imposed travel restrictions and closed their borders, the flow of goods and services from one country to another has been severely hampered. Many businesses rely on international trade and depend on the availability of raw materials or components from other countries. With supply chains disrupted, it has become increasingly challenging for companies to continue production, leading to a decline in output and efficiency.
Furthermore, the current economic situation is marked by volatility in financial markets. Stock markets around the world have experienced significant losses, triggering fear among investors. Uncertainty about the duration and impact of the pandemic has led to increased selling pressure and reduced investor confidence. A sharp decline in stock prices can have a cascading effect on consumer spending and business investments, further aggravating the economic crisis.
Government responses to the pandemic have also strained public finances. To mitigate the impact of the pandemic, governments have implemented massive stimulus packages, including financial aid to individuals and businesses. These measures have resulted in higher government debt and budget deficits. As a consequence, governments may face difficulties in sustaining these relief efforts, potentially leading to reduced public spending and further dampening economic growth.
While the current economic situation raises concerns, it is important to note that recessions are cyclical and a natural part of economic cycles. Historically, the global economy has experienced periods of expansion followed by contractions. Economic recessions offer an opportunity for economies to recalibrate, restructure, and eventually recover.
However, it is crucial for governments, policymakers, and institutions to proactively address the challenges posed by the pandemic-induced recession. Targeted fiscal and monetary policies should be implemented to support businesses, protect jobs, and stimulate demand. Investments in healthcare and infrastructure can play a vital role in creating new opportunities and boosting economic growth.
In conclusion, multiple factors indicate that a recession is likely to happen this year, primarily due to the COVID-19 pandemic’s severe impact on businesses, consumer spending, and global supply chains. However, with appropriate measures and interventions, economies can recover and lay the foundation for a more resilient and sustainable future.
If anyone trusts the Federal Reserve they are mental.
Our mixed-economy is characterized by economic cycles of boom to bust. The booms are credit-fueled and speculation driven. And, speculation is encouraged and rewarded by how governments have chosen to raise revenue. Specifically, the problem is the failure to capture what in economics are called "rents" (i.e., unearned income flows). As a consequence, "rent-seeking" behaviors that enable nonproducers to claim what others produce act as a huge drag on economic output. While there are many sources of rents an enormous amount of rent is capitalized into land prices. Every parcel or tract of land has some potential annual rental value. To the extent this potential rent is untaxed, the net rent income flow is capitalized by market forces into a price of whatever land is held. Since land is not a depreciating asset, land is a very good asset to hold off the market in anticipation of ever-rising prices. This tendency reduces the supply of land brought to the market, driving up prices ever higher until asking prices impose such a stress on producers that profit margins for businesses are erased and potential purchasers of a residential property are unable to accumulate savings for a down payment or have sufficient income to service the necessary mortgage loan debt. The situation for a recessionary downturn or worse arrives. The depth and duration of the crash then depends on whether government makes the right decisions at the right time.
For more insight into the role of land markets in the economy, I recommend a search for the writings of the long-time professor of economics at the University of California, Mason Gaffney.
Tired of recession to happen, isnt it already happening?
Still the Lowest unemployment on record. I just don't see this happening.
Abinader 2030 china
Trump 2024
The failure of SVB and everything happening has left the markets in shreds. I'm at a crossroads right now, deciding if to liquidate 200k portfolio down by 10%, and it's uneasy for me to not panic after my recent awful divorce. I just need investing ideas to afford my retiremen…………………………………………………………………………………………………..
recession is most likely the result of an external factor. For the first time in decades, the United States is losing its clout as a federal reserve currency. They don't have any more economies to use to control inflation, and less money is being spent on stock and oil trading than in the past. They all lend support to the idea that a new multilateral world order is in the works.
Recession needs to bring down house prices from 1 million to 500k and 500k to altleast 300k
And like that, any hope I had for my future completely vanished.
Sigh.
Honestly crypto is quite profitable and lucrative it’s been all beneficial with my weekly earns of 22 percent.
I hope a recession happens!!
People want to travel after staying home for over two years. Don’t punish them by raising rates.
Feds started too late and Now they are going to stress the economy by raising rates over and over.
I want a recession. Pray that I don’t lose my job but you get inflation down to 2%, great. That means you’re still grossly overpaying for housing, cars, and groceries. We need these price tags to go down to sustainable levels. 300k today buys a house that sold for 150k in 2017. That house should be worth about 180k in 2023. My salary didn’t double….
The next inevitable recession depends on when there are enough seats available before the music stops. What I can't see is how they can produce more seats to prevent a hard landing. They can slow the music but it eventually has to stop so maybe further QT will stop the music entirely.
Next GDP print will be >2%.
These people are clowns.
“Save my bonus! Cut rates!!” screams Wall Street analyst while regular people can’t afford groceries.
I have been buying some stocks since the beginning of the year, but nothing substantial. Why am I treating this poorly? However, people in the same profession are earning six figures on articles, which inspires me to aim toward becoming the first person in my polygamous family to hit the million dollar mark. I am perfectly aware that working harder to gain more money is expensive.
No recession this year.
–I can't believe how much our lives have changed since meeting Rodger Michael Karl. He's helped us become debt-free and save for retirement." I made over 220K during this dip, which made it clear there's more to the market than we average joes know. Having an investment adviser is currently the best course of action, especially for those who are close to retirement ..
Next time don’t shutdown the economy over a virus with a 99% survival rate!!!!!
The Fed didn't forget inflation is sticky and CPI has lags. They just want to keep their jobs cuz the people higher up are dumb and hard to convince
Inflation or stagflation, nothing beats involving an expert in any trade or investment, selfishness and greed have prevented many and they ended up suffering huge losses, and the crypto market is no exception.,
Sometimes, I feel these guys just enjoy seeing people suffer. We've literally been in a recession since last year and if anything, I was just expecting things to get better. Now they just issue doomsday warnings and projections without solutions. How do we prepare, what do the less fortunate ones like us do?
No one would have believed in the 70s we would have gotten to 20% interest rates, but it happened. The national debt of the time might seem puny now, but was huge at the time. If the FED is determined, who knows what will happen?
Omg, the world “might” not end, and S&P 500 is going to 10K this year. Crisis averted
hshxhxhxhxhxhxhxhhxhxhxhxhxhch
A recession as bad it can be, provides good buying opportunities in the markets if you’re careful and it can also create volatility giving great short time buy and sell opportunities too. This is not financial advise but get buying, cash isn’t king at all in this time.
Damn mainstream media doing a hard pivot in their bullish propaganda and now going all out crash propaganda
'The Fed hasn't gotten what it wanted', of course not because the inflation was from corporate greed and other issues completely unrelated to wage inflation.
The Fed is pushing the economy in to recession and the GOP will make a depression with their budget and debt ceiling drama.
Stop the lie about a 3.5 percent unemployement rate when I can see all those homeless people. Factg is the economy has the wheels coming off at only ~5 percent, so it's not like the Fed is pushing that hard.
The other way to reduce inflation is increase taxes on the rich and pay down the debt. Oh right, who want's to pay the debt down?
I understand why everyone thinks “recession is inevitable!”. But, the fact that MSM is so sure of it and pushing the narrative so frequently, really makes me question it. The Fed won’t be able to avoid accountability, if we have a prolonged recession or worse.
Dana said same exact thing Jim Lebenthal said later in day. Landing is here now.
Here's Why a Recession Will Continue Beyond the 12 Months That it Has Already Existed
Rent has to crash, that’s basically what the fed needs
Opinions are like butholes. Financial "news" media has one speaking every 2 minutes.
We’re already in a recession!
Ar this point I just wish Fed hikes many more times and get us into recession. Its been really tiring. Hope they just shake up and start from the scratch.
These clowns need to pause the rate hikes. This is beyond absurd at this point.
What definition of recession will they use next time? The definition got controversial last time
I think the Recession is ongoing since third quarter 2022
market rallies on the confirmation of a recession which is a lagging indicator