recovery recession

They Say Recovery, We Say Recession

How is the economy doing currently? Not well. The United States has had two recessions in the 21st century, in 2001 and 2008/9. Our prognosis is that the US economy is losing steam quickly and the third recession is getting near. Let’s look at the cost of money, raw material and labor. Due to a lack of demand, all current indications are that interest rates, commodity prices and real wages will continue to fall.

  1. Since December 2008, the federal funds rate has been in the 0 to 1/4 percent range targeted by the Federal Open Market Committee. The Fed wants to raise interest rates in September of 2015 but is afraid of the negative consequences.

  2. Over the past 6-12 months prices of commodities which include copper, oil, agriculture products, metals and minerals have fallen 20-50%. Demand of raw material is declining.

  3. Employment is primarily in restaurants, health care, high tech and financial services while layoffs continue in energy, retailing, transportation and industrial sectors. The unemployment rate will likely begin to rise from 5.3% back to 6% in 2016.

What is the cause of the problem? The zero interest rate policy (ZIRP) is a major factor in that it penalizes savers who cannot earn a risk-free return on their deposits - in essence a heavy tax burden on all citizens and institutions. The longer this policy persists, the longer the nation’s economic growth will be subpar and possibly worsen. Additionally, the US’s trade policy seems to distance the US from the BRIC countries, the growth engine of the world’s economy over the past decade. Since BRICs account for half of the world’s population, it is difficult to understand the rationale behind a trade policy that discourages doing business with a major part of the world. This is a negative for the BRICs as well as the US.

Orders for consumer products as illustrated below are declining. Since economists are usually late officially announcing the recession, we are sounding the alarm and anticipate negative surprises from the energy and commodity related industries. We believe the recent decline in stocks could be a harbinger of the coming recession and remain concerned that risks could be compounded if the Fed has run out of options to stimulate.


Do you believe that we are are headed for recovery or recession? Please share your thoughts in the comments.

"3D Recession Recovery" by is licensed under CC BY 2.0

avoiding financial hurricanes

Share This Story, Choose Your Platform!

About the Author: Samson Wang

Samson Wang


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.-"Runnymede"), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede.  Please remember that if you are a Runnymede client, it remains your responsibility to advise Runnymede, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Runnymede's current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Runnymede does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Runnymede's web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Search Website

Annuity Review Database

Follow Our Podcast

Google Podcasts
Apple Podcasts

Recent Posts