The captains of industry have a warning from the cockpit: Fasten your seatbelts, there’s economic turbulence ahead.
They might be right, but we’re flying into rougher conditions than a possible recession.
If you missed it on Friday, Reuters reported that Elon Musk has a “super bad feeling,” his Spidey sense tingling that a recession is in the offing. The world’s wealthiest person is so spooked that he ordered a hiring freeze and layoffs at Tesla, his electric vehicle company.
Then there’s Wall Street supremo Jamie Dimon, who sees an economic hurricane barreling straight at us. “We just don’t know if it’s a minor one or superstorm Sandy,” the chief executive officer of JPMorgan Chase told a conference last week.
And since three examples make an undeniable trend: The Conference Board says that nearly 60 percent of CEOs in its latest quarterly survey expect a “very brief, modest recession” as the Federal Reserve boosts interest rates to combat inflation.
The C-suite chieftains aren’t Chicken Littles. But, as always, their focus is too short term and myopic.
There’s no doubt the Fed has some fancy flying to do as it tries to bring down the worst inflation in 40 years without crashing the economy.
On Wall Street, investors have put their tray tables up and seats in an upright position. Stocks have fallen in eight of the past 10 weeks.
On Main Street, the mood is dour. Even though employment is almost back to where it was before the pandemic, an overwhelming majority of Americans — 83 percent — see the economy as poor or not so good, according to a new Wall Street Journal/NORC poll.
That’s the damage $5-a-gallon gasoline and soaring food prices can do to sentiment. There’s a possibility that consumers, who power nearly 70 percent of the economy, will pull back so much that we slide into a recession.
As awful as that would be, downturns are an inevitable part of the economic cycle. We’ve had 13 recessions since 1945. On average, they’ve lasted a little longer than 10 months. The average post-war expansion has run 64 months, with average annual growth of 2.9 percent.
Here’s what gives me a super bad feeling: the nagging fear that this past economic resiliency is a thing of the past.
Our yawning partisan divide has morphed into something even more malignant — something that is a threat to the economy.
In the Journal/NORC poll, 86 percent of respondents said Americans are greatly divided when it comes to the most important values, and over half said they expect those divisions to worsen five years from now.
The last time Americans had anything close to national unity was after the Sept. 11 terrorist attacks. Two decades later it wouldn’t be just conspiracy nuts calling 9/11 a false flag operation. It would be closer to half the country.
Corporate America and Wall Street are, understandably, fixated on variables that can be inserted into mathematical models that spit out estimates of GDP, inflation, interest rates, or the next peak for the Dow.
What can’t be modeled: The endless fights over abortion, climate change, gender, guns, voting rights. The steady erosion of common cause. A loss of trust in the institutions — Congress, the Supreme Court, law enforcement, science, the media — that are supposed to protect and serve everyone.
Instead, the danger inherent in constant battling over almost everything is discounted or ignored. The United States has survived many periods of social upheaval over its 246 years. But past performance does not, unfortunately, predict future results.
Our audacious experiment in democracy has proven deeply flawed. The peaceful transition of political power can no longer be taken for granted. Our version of capitalism is dominated by increasingly powerful monopolies, while economic inequality and racial discrimination remain endemic.
America is exceptional, but for the wrong reasons.
Maybe democracy is expendable, as long as corporate profits grow and stock prices increase.
If so, fastening our seatbelts is an exercise in futility. And if so, it’s time to short America as we’ve known it.