President Eisenhower once said, “Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him.”
January 1, 2022 will be here before we know it. Banks see “data requirements” and immediately think a software solution will solve everything. That doesn’t have to be the case in every instance. We’ve been able to find cost-effective solutions for clients, and we can do it for you too.
We can’t dwell in our love for how we’ve always done things or want to do things. Sometimes we have to change with the regulations. Don’t let CECL run you over. Please don’t hesitate to call us at (918) 791-0699 or email me directly at firstname.lastname@example.org.
Dustin Matthews, President
On to the news of the week:
The Fed won’t tap the brakes until it’s ready to cause a recession (source)
- Last week, the Fed declared the monetary policy more or less normalized.
- If the economy cooperates, we may finally get a chance to see what economic overheating looks like for the first time in a long time.
- Anything more than an additional interest rate increase would invert the US Treasury yield curve and would also signal that the Fed is seeking to slow the economy, perhaps even being willing to cause a recession in the name of fighting inflation.
Janet Yellen: Possible next Fed move is a cut if global growth continues to slow (source)
- The Federal Reserve’s next move may well be an interest rate cut if weakening growth around the world starts infecting the US economy.
- Weakening economies in China and Europe are posing a danger to an otherwise strong US economy.
- Yellen cited “slowing global growth” as the biggest threat to the economy she once watched over.
A New Great Recession, Once Every 5 Years (source)
- Whenever the next recession does arrive, what we know today is that it is unlikely to be a “normal” recession, by the standards of what most people have experienced in their lifetimes.
- For most of the modern era, we have experienced unusually short and infrequent recessions, specifically because of how the Federal Reserve interventions have changed the business cycle.
- Lacking those interventions, recessions become more frequent, average recessions become much longer, and the average investor – and retiree – is likely to spend twice as much of their lifetime in recessions.
- What 164 years of economic history shows us is that the so-called “Great Recession” of 2007–2009 was not an aberration but was merely average.
- If the US were to return to the long-term averages for what recessions have been when the Fed lacks the necessary “ammunition” to quickly exit a recession, then we could expect a new “Great Recession” about once every 5 years.