Why Some Win And Some Lose During A Recession

“We have these real things going on. The Fed can’t create fuel. The Fed can’t create food. There are real supply chain issues… pushing prices up regardless of what the Fed does or doesn’t do.”

— Nomi Prins, The Distortion Report

 

There is a “very, very high risk” of a US recession.

So warned Goldman Sachs Senior Chairman Lloyd Blankfein over the weekend. “If I were running a big company, I would be very prepared for it.”

The Chinese are prepared to slow as their “zero covid” policy has its own impact. Cryptos are trading like the broader market, going down. Stock futures are negative for the week. We’re headed for a recession, pundits tell us…

“The fear of recession is not unfounded,” says our guest for this week’s Wiggin Session, Nomi Prins. Before we even begin, we asked Nomi to define the term. “A recession basically means we’ve got a couple periods of a declining growth economy,” Nomi says, “So we’re not growing, we’re going backwards… or staying close to the same.”

In a recession, “people can’t afford to buy things at the prices they’re at. Real people can’t borrow to the extent that they might need to to start small businesses or keep small businesses going or to buy real homes or to pay for real college tuition. All of that is really, truly coming to bear in terms of an economy slowing down.”

Nomi bears the epithet “former banker at Goldman Sachs” herself.

She is also the author of the best seller Collusion: How the Central Banks Rigged the World. Nomi joins us this week to describe how the Fed and big banks think about money, interest rates, and inflation when the economy begins to enter recession.

From the bankers’ point of view, the answer to the question is simple. Capital seeks refuge.

When a recession begins, “money ceases to go after things of value,” Nomi says. “Money starts going after things that it can multiply itself, sort of like a virus. Financial assets are to some extent ‘a host’ for money; a host for cheap money in particular. That’s what we’re seeing right now.“

Click here to learn more

“Why some win and some lose during an economic recession”
with Nomi Prins

Financial institutions always find ways to finance operations.

Even if the Fed is raising interest rates and beginning to “tighten” policy in an effort to tame inflation, bankers still get first crack at the cheaper rates. There’s a disconnect between what banks can do with the money and what large corporations can do. By extension what small operators can do. And then what individuals can do.

When money’s cheap, credit is extended far and wide. When money gets tight, the system works in reverse.

“That’s at the heart of what I call this great market distortion,” Ms. Prins says. Unfortunately, “the distortion has been baked in.”

To hear Nomi’s unique perspective, click on the image above, or right here.

Follow your bliss,

Addison Wiggin

Addison Wiggin
Founder, The Wiggin Sessions

P.S. The 5’s Dave Gonigam reminded us this morning that forecasting is a fickle business, in true Gonigam-style:

“It’s beautiful… awe-inspiring… and apparently not a harbinger of market mayhem?

Fox News Tweet

“A casual search of Google News turns up precisely nothing about the blood moon overnight as an ill omen — in the markets or anywhere else.

“We recall doom prophecies abounded with a couple of blood moons that occurred in 2015. “Blood Moon Market Meltdown This Weekend?” said a headline in April. (Didn’t happen.) CNN told us how “to some Christian ministers,” a follow-up blood moon in September “fulfills biblical prophecy of the Apocalypse.” (Also didn’t happen.)”

Thanks, Dave.

Addison Wiggin

Addison Wiggin

Addison Wiggin is founder and executive publisher of Agora Financial LLC, an independent economic forecasting and financial research firm. He and Bill Bonner began writing the firm’s flagship Daily Reckoning in the midst of the tech boom and bust. It was one of the first widely distributed email newsletters on the Internet. The publication’s critical eye on finance and economics continues today. He’s also creator and editorial director of Agora Financial’s daily missive The 5 Min. Forecast.

Recent Alerts

Beyond the Good Job Numbers (Bad for Social Security)

When you drill down into January job numbers — among certain age brackets — a more interesting picture emerges. Read More

Artificial Intelligence Gets Woke

I can’t help wondering if today is the day ChatGPT jumped the shark. Read More

Two Defensive Plays for a Debt Ceiling Crisis

“Here we go again,” says our income-and-retirement specialist Zach Scheidt. “The United States is facing another budget crisis.” Read More

I Don’t Give a Flying Flip About AI

On a basic level, I don’t give a flying flip about AI… But there’s gotta be an investing angle somewhere, right? Read More

The New Recession Is Now

“It’s clear that the U.S. economy entered a new recession in late December,” asserts Paradigm Press Group’s macroeconomics maven Jim Rickards. And for confirming evidence of this recession call, Jim points to stresses in the trucking industry. Read More

So Now EVs Are Evil Too…

Here at Paradigm Press it’s not good enough for us to shake our heads at the hubris of the control freaks and power trippers… We seek to follow the money. Read More

“A Radical Environmentalist Government”

A spate of wind turbine collapses is indicative of Canada’s “Just Transition” legislation… Read More

The Weaponized Dollar Misfires

The weaponized dollar keeps misfiring… So what do you do about it? Read More

S&P 500 on Steroids

Why is the S&P holding up so well when everything else looks terrible? Read More

Update: Four Years (Max) to China War

If China were to make a move on Taiwan… this week might be as good a time as any. Read More