Bracing for Impact: The Unavoidable Hard Landing For America's Economy

News Image By Michael Snyder/Economic Collapse Blog March 05, 2024
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Ellen Zentner is Morgan Stanley's chief U.S. economist, and during an interview with CNBC this week she warned that "the tightening impacts from monetary policy" will have enormous consequences for the U.S. economy in the months ahead...

"We will have a hard landing at some point. I guarantee you that. We're all wondering: When does that come?" she said. "The point that Dimon makes is that there are these cumulative impacts that build over time, and we are in the camp that we haven't yet seen all of the tightening impacts from monetary policy," she added, referring to the impact of Fed rate hikes.

She makes a really great point.

The consequences of interest rate hikes are felt over time.

Higher interest rates have certainly started to cause a lot of problems, but if rates are not brought down soon the level of pain that we are experiencing will begin to go up dramatically.

Unfortunately, the Fed is not likely to reduce interest rates any time soon because inflation continues to run hotter than expected...

Inflation increased by the largest amount in almost a year, according to the Fed's preferred measure - confirming expectations interest rates will not be cut until around June.

The so-called core personal consumption expenditures (PCE) index - which excludes volatile food and energy prices - increased 0.4 percent between December and January.

Marko Kolanovic, the chief market strategist for JPMorgan Chase, believes that the U.S. economy could be headed into "something like 1970s stagflation"...

In an analyst note to clients, the bank's chief market strategist Marko Kolanovic warned that the economy may turn away from a "Goldilocks" scenario - in which it is not expanding or contracting by too much - and enter a period of stagflation similar to that experienced in the 1970s.

"Going back to the question of market macro regime, we believe that there is a risk of the narrative turning back from Goldilocks towards something like 1970s stagflation, with significant implications for asset allocation," Kolanovic wrote.

I would argue that we have already been in a period of stagflation.

The economy has certainly been stagnating, and inflation has been unacceptably high.

But now conditions have taken a dramatic turn for the worse in early 2024, and we are seeing some very troubling signs.

For example, I was stunned to learn that a Canadian pension fund has just sold a stake in a Manhattan office tower for just one dollar...

Canadian pension funds have been among the world's most prolific buyers of real estate, starting a revolution that inspired retirement plans around the globe to emulate them. Now the largest of them is taking steps to limit its exposure to the most-beleaguered property type -- office buildings.

Canada Pension Plan Investment Board has done three deals at discounted prices, selling its interests in a pair of Vancouver towers, a business park in Southern California and a redevelopment project in Manhattan, with the New York stake offloaded for the eyebrow-raising price of just $1. The worry is those deals may set an example for other major investors seeking a way out of the turmoil too.

The Canada Pension Plan Investment Board had a 29 percent stake in Manhattan's 360 Park Avenue South.

The plan was to redevelop that property, but at this point the outlook for office buildings is so bad that the pension fund just wanted out.

And so the entire 29 percent stake was sold off for just one dollar.

Do you remember when I warned that we were heading into the worst commercial real estate crash in history?

Well, this is what a crash looks like.

Meanwhile, large employers all over America continue to conduct mass layoffs.

Today, I was saddened to learn that Electronic Arts is laying off approximately 700 workers...

Another day, another round of mass layoffs in the games industry. Electronic Arts (EA) has announced it will cut around five percent of its employees, putting almost 700 people out of a job. It's also cancelling games and shutting down at least one development studio.

EA CEO Andrew Wilson announced the layoffs in an email to employees, which was subsequently posted to the company's blog on Wednesday.

And we just learned more details about the layoffs that Citigroup is conducting...

Citigroup is cutting nearly 300 workers in New York as it continues its massive layoff spree in an effort to rein in expenses, according to filings with the State Labor Department. About 239 workers in the primary banking subsidiary, 44 from its broker-dealer unit and three from its technology arm are getting cut, according to Worker Adjustment and Retraining Notification (WARN) notices filed this week.

In early January, the company announced that it was cutting 20,000 roles "over the medium-term," as part of a reorganization effort. The cuts are slated to save the company between $2 billion and 2.5 billion.

We have not seen anything like this since the Great Recession of 2008 and 2009.

On Thursday, Zero Hedge published a list of 50 different mass layoffs that we have seen recently...

1. Everybuddy: 100% of workforce
2. Wisense: 100% of workforce
3. CodeSee: 100% of workforce
4. Twig: 100% of workforce
5. Twitch: 35% of workforce
6. Roomba: 31% of workforce
7. Bumble: 30% of workforce
8. Farfetch: 25% of workforce
9. Away: 25% of workforce
10. Hasbro: 20% of workforce
11. LA Times: 20% of workforce
12. Wint Wealth: 20% of workforce
13. Finder: 17% of workforce
14. Spotify: 17% of workforce
15. Buzzfeed: 16% of workforce
16. Levi's: 15% of workforce
17. Xerox: 15% of workforce
18. Qualtrics: 14% of workforce
19. Wayfair: 13% of workforce
20. Duolingo: 10% of workforce
21. Rivian: 10% of workforce
22. Washington Post: 10% of workforce
23. Snap: 10% of workforce
24. eBay: 9% of workforce
25. Sony Interactive: 8% of workforce
26. Expedia: 8% of workforce
27. Business Insider: 8% of workforce
28. Instacart: 7% of workforce
29. Paypal: 7% of workforce
30. Okta: 7% of workforce
31. Charles Schwab: 6% of workforce
32. Docusign: 6% of workforce
33. Riskified: 6% of workforce
34. EA: 5% of workforce
35. Motional: 5% of workforce
36. Mozilla: 5% of workforce
37. Vacasa: 5% of workforce
38. CISCO: 5% of workforce
39. UPS: 2% of workforce
40. Nike: 2% of workforce
41. Blackrock: 3% of workforce
42. Paramount: 3% of workforce
43. Citigroup: 20,000 employees
44. ThyssenKrupp: 5,000 employees
45. Best Buy: 3,500 employees
46. Barry Callebaut: 2,500 employees
47. Outback Steakhouse: 1,000
48. Northrop Grumman: 1,000 employees
49. Pixar: 1,300 employees
50. Perrigo: 500 employees

Just look at that list.

That is nuts!

Anyone that thinks that the U.S. economy is heading in the right direction is simply being delusional.

Greg Hunter just interviewed economic analyst David Morgan, and he is warning that we are actually "entering into a global depression the likes of which the world has never seen"...

Economic analyst and financial writer David Morgan has gone against the majority in the past with predictions that seemed unbelievable at the time. One prediction last year is the Fed not cutting interest rates in 2023. The Fed didn't, and Morgan is still predicting there will be no Fed interest rate cut anytime soon. Now, with a record high stock market, Morgan is predicting "We are entering into a global depression the likes of which the world has never seen."

Global central banks were able to delay the inevitable by flooding the system with colossal mountains of money.

But that just created a tremendous amount of inflation and now a horrifying economic crisis is coming anyway.

So I would encourage everyone to brace themselves for the "hard landing" that is rapidly approaching, because it is going to be exceedingly painful for the unprepared.

Originally published at The Economic Collapse Blog

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