The duo’s historic cross-country expedition began in 1804, when President Thomas Jefferson directed Meriwether Lewis to explore lands west of the Mississippi included in the Louisiana Purchase.
Lewis chose William Clark as his co-leader for the mission. Their treacherous adventure lasted over two years.
Along the way, they faced hostile weather, unforgiving terrain, perilous waters, bodily injury, persistent hunger, disease and both friendly and unwelcoming Native Americans.
Nevertheless, their roughly 8,000-mile trek was deemed a big success and provided new geographic, ecological and cultural information about previously unmapped areas of North America.
It was all about slow and steady.
Fast Forward 400 Years.......
By Dave Allen for Discount Gold & Silver
The duo’s historic cross-country expedition began in 1804, when President Thomas Jefferson directed Meriwether Lewis to explore lands west of the Mississippi included in the Louisiana Purchase.
Lewis chose William Clark as his co-leader for the mission. Their treacherous adventure lasted over two years.
Along the way, they faced hostile weather, unforgiving terrain, perilous waters, bodily injury, persistent hunger, disease and both friendly and unwelcoming Native Americans.
Nevertheless, their roughly 8,000-mile trek was deemed a big success and provided new geographic, ecological and cultural information about previously unmapped areas of North America.
It was all about slow and steady.
Fast Forward 400 Years
Over four centuries later, we see the Fed and many of their central banking peers doing some serious hiking of their own – aggressively tightening monetary policies to make up for a late start in trying to rein in high inflation and its effects.
As economists and investors debate whether their being behind the proverbial 8-ball and trying to furiously catch up will throw us into recession, some new research is asking, What about those that started earlier?
Central banks in Brazil, Poland, New Zealand and others started raising interest rates last fall, way before most of their counterparts in the U.S. and Western Europe began.
And now, a new report from too big to fail Goldman Sachs studied the results in nine countries that were "early hikers" for hints of how things might play out in the U.S. and the rest of the world.
Courtenay Brown and Neil Irwin (B&I) report that none of the nine showed clear evidence of being in recession so far, although two – Chile and Peru – are potentially in a mild one.
B&I say, “Strong private sector balance sheets, resulting from pandemic-era fiscal transfers, have enabled most of the early hikers to maintain growth momentum.”
The Goldman report concludes that the resilience of early hikers "supports our view that no major economy will enter a monetary policy-driven recession in the coming year."
They caution, however, that early hikers are mostly small, open, emerging market economies that may well have different dynamics than their larger counterparts elsewhere.
And, as B&I note, “Just because they're not in a recession now doesn't mean they won't be eventually.”
Major Slowdown Is Underway
With that in mind, we see another closely watched indicator sending a message across the globe – that there's a major slowdown underway in manufacturing and services sectors in the world's biggest economies.
To be sure, the level of pain is different from country to country, but the trend is the same, and it’s suggesting that economies the world over may be tipping into a recession.
Last week, S&P Global released its latest measure of private sector activity for a slew of countries. None of them were good.
In the U.S., an index of manufacturing and service sector activity unexpectedly dropped to 45 in August from 47.7. Any level below 50 indicates contracting activity.
The services sector logged the steepest rate of decline, as producers of goods saw output drop somewhat.
Activity in Japan's service sector fell into contraction territory as well, as its manufacturing sector registered the lowest reading since January.
Their economy is still dealing with pandemic fallout that's curbing consumer activity, while companies there are also facing rising material and energy costs.
In the EU, the survey results reinforce an already shaky outlook. Output declined yet again – with Germany and France posting particularly weak activity. And that’s pointing "to an economy in contraction during the third quarter," according to S&P.
The cost of living crisis is putting a break on both consumer and business spending, and lack of supply is still hurting manufacturers after two plus years.
Commerzbank observed, "Russia is supplying only a limited amount of gas, high inflation is tearing deep holes in the coffers of private households, companies are facing massive uncertainties. The economic outlook for the economy in the euro zone is bleak."
The survey of U.K. activity remains a little above 50, but factory activity there is experiencing a bigger-than-expected slowdown.
The Dollar Almighty
A major explanation for the global slowdown scenario is the strong U.S. dollar, which B&I note is “wreaking havoc around the globe.”
Of course, the other side of the dollar's rebound is slumping fiat currencies elsewhere. For one, the euro is at its lowest in 20 years.
The dollar's strength has its roots in the Fed's interest rate-hiking campaign that's been much faster than its major central banking peers.
But B&I point out that the result of the dollar’s rise is increasing inflation pressures for many other countries – as their imports priced in dollars become more expensive.
Plus, especially for poorer countries, dollar-denominated debt is more expensive to pay.
Forecasts Revised Down
The administration dramatically cut its forecasts for economic growth and upped inflation projections, according to new estimates published last week by the Office of Management and Budget.
The new numbers reflect the drastically different economic reality the Biden administration faces — including disruptions stemming from Putin’s invasion of Ukraine — since it last released projections.
The figures are part of the White House's "midsession review," which updates projections made in the administration's fiscal year budget for 2023, released in March.
Some of the assumptions about the economy that underpinned those budget estimates were finalized in November 2021. A lot has changed since then.
The latest round of forecasts were completed in early June. They do not reflect any impact from legislation passed since then, including the Inflation Reduction Act and the microchip act (CHIPS).
The White House now estimates that economy will grow 1.4% this year, and 1.8% in 2023. That’s a big difference from its previous estimates of 3.8% and 2.5%.
The White House now expects inflation — as measured by the Consumer Price Index — to slow to 6.6% in the final quarter of this year, more than double what the administration last anticipated.
On the other hand, the administration still sees inflation plummeting by the end of 2023 but only to 2.8%, a half-percentage point higher than the earlier estimate.
Their estimates for unemployment, however, were largely unchanged. In fact, the White House forecasts the headline jobless rate will average 3.7% by the end of the year — lower by 2/10ths of a percentage point.
The White House also revised down its projected budget deficit to $1 trillion for 2022, a $383 billion reduction from its forecast in March.
Factors lowering the deficit projection include better-than-expected tax receipts and "technical re-estimates" that resulted in a net decrease in Medicare and Medicaid outlays.
Higher interest rate payments on federal debt — as a result of the Federal Reserve’s rate hikes — will help push up deficits in 2023, the estimates show.
Officials project a $1.3 trillion deficit next year before rising to $1.6 trillion in 10 years.
While more pessimistic than previously forecast, the estimates on the whole reflect the administration's optimism for a soft landing for a fragile economy.
That's even as the Fed methodically sends out signals that it will do whatever it has to in order to crush inflation – which looks more like a veritable crash landing on steroids to me.
The ghosts of Lewis and Clark would be well-advised to seek cover.