Thought Banana
“Oh No” From the Overlords
What do Orville Wright, George Orwell’s 1984, and the U.S. economy all have in common?
That’s right, they all have big brother(s). Sure, some might be better or worse than others, but in our case, the big brothers we care about are institutions like the Federal Reserve, IMF, and a handful of others.
But, it just so happens that the two overlords name-dropped above are both about as nervous about the state of the economy later this year as Chris Rock was when Will Smith stepped on stage during last year’s Oscars.
Earlier this week, we got the release of the Fed meeting minutes from the March rate decision debacle. At the time, officials stood behind a commonly held view that “projection[s] at the time of the March meeting included a mild recession starting later this year.” Duh, duh, duhhh…
Meanwhile, the International Monetary Fund (IMF) came out earlier this week in essentially complete agreement with the Fed. White JPow and the Fed only care about the U.S. economy, the IMF has to worry about the whole global kit and kaboodle. But as the saying goes, when the U.S. sneezes, the rest of the world tends to catch pneumonia.
So, it shouldn’t be much of a surprise that these two overlords joined hands this week to sing songs and warn about an upcoming slowdown in U.S. and global economic growth.
Bank failures were the topic of the week from these institutions. On the one hand, the Fed essentially said that fallout lurking from the SVB-ignited banking turmoil seen earlier this year is expected to bleed throughout the economy for the rest of the year, with particular drawbacks faced on credit availability.
The IMF, meanwhile, cites U.S. banking along with anticipated national debt defaults (like the one we’re just mere weeks ahead of in the U.S.) as primary culprits for a foreseen slowdown in lending on a national scale later this year.
The message is clear: credit conditions are expected to tighten, with or without an additional rate hike at the May 3rd FOMC meeting. And this tightening won’t be restricted to U.S. markets either, so congrats to everyone else for getting the honor to join in on the fun.
But, the big difference is that the Fed, in their minutes, suggested the possibility of a recession in the U.S. later this year. The IMF, on the other hand, simply tapered their growth projection…two VERY different things that we combined together as the underlying factors driving these forecasts are basically identical.
Well, I guess they’re about as identical as Zack and Cody…they sure look similar, and they’re basically the same thing, but you’d have to be a real idiot to get them confused with each other.
The big question: Are the economic overlords correct to project recession and slowdown for the U.S. and global economics later this year? If so, how bad will it get? Will Zack and Cody ever reunite for a Suite Life reunion?
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