Ep. 317 Murphy Updates His Economic Outlook for the US
Bob explains his current thinking on the US economy, specifically in relation to CPI inflation, employment, and the yield curve / recession.
Mentioned in the Episode and Other Links of Interest:
- The article containing many of the graphs alluded to in this episode.
- NOTE: Bob in the audio says there is a video version, but he decided it would hold up release of the episode too long; interested readers should refer to the article while listening to his discussion.
- Bob’s article on the yield curve and recession.
- The link to Monetary Metals.
- Help support the Bob Murphy Show.
About the author, Robert
Christian and economist, Chief Economist at infineo, and Senior Fellow with the Mises Institute.
I agree that the US economy is not doing anywhere near as well as most of the talking heads are claiming.
Thing is, this time is different to anything from our recent experience … because we are moving into a stagflation system. Peter Schiff has been saying it for years … and looks like it’s finally happening. The Fed is slightly reducing its balance sheet but nowhere near enough to compensate for the massive expansion we saw a few years back. History has proven they can never really reverse balance sheet expansion and typically some.”crisis” comes along forcing them to relent.
The US debt to GDP ratio was around 100% during the last few years of Obama and the early Trump years … then with COVID it shot up briefly over 130% but it has at least partially recovered … back down to 120%. If you ignore the brief spike and look at that as a general trend, that debt to GDP ratio has slowly been rising since the 1960’s even though it does wobble around a bit.
At the same time, gold prices are making their move, and the inflation mindset is now fairly well entrenched … forget about stopping the genie before it gets out of the bottle … that inflation genie is loose and free and enjoying life with the wind in his genie hair.
Then you want to look at where government economic policy is going … the CHIPS Act hasn’t to my knowledge produced any computer chips yet, and the Inflation Production Act is simply throwing money into green boondoggles in a repeat of the Obama cronyism (e.g. Solyndra, etc). What Washington is attempting to do is outspend Fed tightening … hard to say what’s going to happen but I don’t expect a great outcome.
Tangentially related … but this chart is worth a peek.
https://fred.stlouisfed.org/series/LNU01074597
The number of disabilities has shot up in recent years … and not saying that disabled workers cannot be productive, but with such a large increase in only a short time, you would expect some disruption to overall productivity. I mean, added to all the other stuff going on … this isn’t exactly going to help, right?
New Year’s update … looking at the 1Y, 2Y and 10Y US Treasuries, there has been a significant inversion for approximately two years … but just recently it’s pulled together much tighter and we are right around the point where that rates are normalizing again.
I doubt the “Deep State” bureaucrats will allow the economy to fail before Trump is in office (that would defeat the point) … but they will happily let it fail soon after he gets into the big chair. If you were going looking for a macro problem, then I would say it’s coming before much longer. I have heard that Warren Buffett is sitting on a heap of cash … golly I wonder what that might mean?
The M2 curve was nearly a straight line on a log scale, from 1995 to 2020 but strongly deviated from that path during 2020 … although recently it has almost come back to meet the original line again.
https://fred.stlouisfed.org/graph/fredgraph.png?g=1CFnM
Yes Tel, I’m going to do an update soon on this stuff, thanks.