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After a week of serious warnings about the threat of a recession and the appearance of indicators heralding an economic downturn, the White House is struggling to convince the public that the ## 147 ## # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # The economy is doing well. But experts are not so certain that President Trump's advisers are right in saying there is nothing to fear.
Larry Kudlow, Trump's chief economic advisor, and Peter Navarro, one of Trump's top business advisors, collectively participated in five television shows on Sunday as part of a concerted effort to ease growing fears of a recession.
Sure Meet the pressKudlow has touted low unemployment, rising wages and consumer confidence, saying to host Chuck Todd that Americans should actually expect a period of growth increased.
"I really do not see a recession," said Kudlow. "We are doing very well, do not be afraid of optimism."
Todd spoke of the fact that while working as an analyst, Kudlow wrote in December 2007 that there was no impending recession just before the biggest recession that the United States have known since the Great Depression. Kudlow acknowledged that he had been deceived.
"Well, I plead guilty to the end-2007 forecast," said Kudlow.
Liberal critics argue that Kudlow has a notoriously poor record of economic prognosis, and that he tends to focus on the issue of tax abolition to the detriment of most other elements of his analyzes. The counselor defended this point of view on Fox News Sunday, claiming that the White House "was considering" cutting taxes on the middle class, while he dismissed a question about the negative impacts of Trump's economic policy by praising the economic aspects of supply .
Navarro also advocated for a strong economy on the This week, CNN State of the Union, and CBS ' Facing the nation.
"Before I came to the White House, I had spent more than 20 years forecasting the economic cycle and stock market trends. What I can tell you is that we will have a strong economy in 2020 and beyond with a rising market, "said Navarro to Martha Raddatz on This week.
Although he is very confident, it should be noted that Navarro has extremely niche views on the functioning of the economy and that many economists and members of the business community do not consider his valuations reliable.
Sure State of the UnionFor example, Navarro has maintained – despite being presented with conclusive studies – that Trump's tariffs on Chinese products "do no harm to anyone here." They hurt China. "
But it is increasingly evident that US tariffs on Chinese products (border taxes on imports) have cost domestic firms billions of dollars by forcing them to raise prices for imports. consumers, which cost them sales.
And although the numbers literally say the opposite, Navarro m said sure This week that it considers that there has not yet been a reversal of the yield curve – a change in short- and long-term bond yields, widely regarded as a strong predictor of recessions – "for moment, from a technical point of view.
Investors have seen things very differently this week. On Wednesday, the yield on two-year Treasuries rose faster than 10-year bonds, reversing the yield curve. The Dow Jones Industrial Average lost 800 points, its biggest drop this year, following this reversal.
We do not know if a recession is coming. But there are signs that one could be near.
Economic experts and forecasters believe that there are few potential events that could cause or signal an impending recession.
The most important is the trade war that the United States is waging against China – a conflict for which Navarro has been arguing aggressively since his first day in office.
As Vox's Emily Stewart writes, the trade war between the United States and China causes serious volatility in the business environment:
Tensions between the United States and China have intensified and a resolution seems increasingly unlikely in the short term. Earlier this month, Trump announced that it would apply a 10% tariff on $ 300 billion worth of Chinese products. China retaliated by stopping to buy agricultural products in the United States and letting its currency weaken. In the midst of the market turmoil this week, the Trump administration announced it would delay its latest round of tariffs from September 1 to December 15, but China has shrugged it off.
Analysts at Goldman Sachs said in a note to customers over the weekend that they "no longer expect a trade deal before the 2020 elections" and have increased their estimates to determine how much they thought the trade war would affect the economy.
Increasing debt is also a concern. Prior to entering the Senate, Elizabeth Warren (D-MA) was a debt specialist and, unlike Ms. Kudlow, she detected the warning signs of the 2008 financial crisis, in part because of trends in the debt. In a Medium article published in July, Warren said that she was seeing troubling debt trends again.
"When I look at the economy today, I see a lot of things to be feared. I see a manufacturing sector in recession, "she wrote. "I see a precarious economy built on debt – both household and corporate debt – and vulnerable to shocks. And I see a number of serious shocks on the horizon that could shatter the fragile foundations of our economy. "
Some of the problems that Warren is worried about – for example the fact that the UK ends up leaving the EU – are beyond the control of the United States. But others, such as the escalation of a trade war with China, fall squarely within the purview of the White House.
Properly navigating these potential pitfalls would help dispel the concern over the recent reversal of the yield curve, which has also attracted much attention from economic analysts. The reversal of the usual relationship between short-term and long-term interest rates is a powerful predictor of recessions and has prompted policymakers to consider a recession a serious possibility.
As Matt Yglesias explains:
[F]or the curve to reverse implies that investors expect that something unusual will happen. Something that will lower future interest rates enough to justify the low yield of long-term returns despite the risks. Something like the future collapse of the private sector investment demand that makes government borrowing cheap. Or something like a series of measures taken by the Federal Reserve to try to reduce interest rates and stimulate economic activity.
In other words, a future recession.
None of these factors ensures that a recession is imminent and it is still possible for policymakers to take steps to minimize the likelihood of it. However, the fact that Trump's economic advisers claim nothing is wrong with the concerns of experts seems to indicate that the White House is not likely – or unwilling – to make the policy changes that could help avoid a recession.
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