Economists Issue Most Chilling Warning Yet About US

Mark Zandi, the chief economist at Moody’s Analytics, provided an interview to The Washington Post in which he warns of a looming recession for the U.S. economy.

Zandi isn’t the only economic expert who says there are signs pointing to a recession on the horizon.

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Lloyd Blankfein, former Goldman Sachs chief executive, said there is a “very, very high risk” of recession.

Wells Fargo CEO Charlie Scharf said there was “no question” the economy is facing troubles.

Ben Bernanke, former Federal Reserve chair, said stagflation could be near. Stagflation is a slow economy and high inflation that was very problematic during the 1970s.

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“Recession risks are high — uncomfortably high — and rising,” Zandi explained.

He continued, “For the economy to navigate through without suffering a downturn, we need some very deft policymaking from the Fed and a bit of luck.”

Zandi says the odds of a recession in the next two years are around 50 percent. A recession is reportedly defined as “two consecutive quarters of negative contraction in the economy.”

“We’re traveling very close to the edge,” Zandi said. “The housing market is the next thing that’s going to roll over; the question is just how hard.”

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More on this story via Western Journal:

The Federal Reserve has raised interest rates .75 percentage points this year, and may do more to cool inflation. But that carries its own risks for the economy, as shown by a drop in new home construction and demand for mortgages. Both are \very sensitive to interest rates, which have roughly doubled on 30-year mortgages over the past year.

“There is an extreme sense of nervousness out there,” Kevin Retcher, president of First Meridian Mortgage in Alexandria, Virginia, told the Post.

“It’s rare to have people win contracts and then back out, but that’s what’s been happening,” he said.

“Home builder sentiment fell to the lowest level in two years in May,” Yelena Maleyev, an economist for Grant Thornton, said in an analyst note, according to the Post. “Builders are seeing less foot traffic and expect sales to be softer as we enter the busy home-buying season.”

Although so far, consumers have been spending as if there was a need to make up for time lost during COVID-inspired lockdowns, inflation that is hitting 40-year highs may be taking its toll.

Big retailers have posted disappointing earnings, so much so that Walmart’s stock took an 11 percent hit on Tuesday, its worst free fall in 35 years, according to the Post. Target was next, with a 26 percent drop in its stock following a 52 percent drop in its quarterly profits, the Post reported. Target ascribed its woes to a slow consumer demand for big-ticket items.