Ever since Lakshman Achuthan made the call for Recession by mid 2012 back in September of 2011, people have been looking around and puzzling about the apparent lack of recession. But even back in 2011 Mr. Achuthan clarified the timing of the recession and said that we might not know until the end of 2012. Even in the face of declining unemployment rate and rising housing prices.
In the most recent U.S. current account deficit report, the making of a recession signal is being felt. Looking at the data, imports are now in a two month downturn having droped 8.4% in the third quarter and 2% in the quarter before that. This two quarter drop is a very infrequent occurrence and certainly waves the “red flag” of a recession, in the opinion of Robert Brusca, chief economist at FAO Economics. When the economy weakens, imports follow rather quickly, said Brusca.
Back in 2009, during the Great Recession imports declined for two quarters, culminating in a four-quarter drop in imports. When there are fewer imports it indicates that domestic demand is falling off, and a recession is “a real risk,” Brusca stated.
In view of this, the next year and its accompanying austerity make for a grim economic outlook, no matter how the fiscal-cliff is resolved and what comes out of it.
Brusca proposed that congressional Republicans and the White House make a small deal to dodge the fiscal cliff bullet and put off the messy major deficit reduction plans until the economic environment clears up.
“Now is not the time to take easy tax breaks, like the deduction of mortgage interest, that is driving the economy,” he said. “If you don’t think this is a risky situation, you are just not using your head.”
It might be time to buy some gold, whether or not there is a recession.