The warning bells have been sounding for some time now, but the biggest warning bell of them all went off last week on Wall Street when the bond market started weakening. Here’s what happened, from Jonnelle Martae at The Washington Post:
Stock markets tanked Wednesday after the bond market sounded a loud warning that the U.S. economy might be headed toward a recession.
There was an all-out effort from the Trump administration to dispel the notion the economy is weakening, after all, Trump continues to claim credit for the economic growth that resulted from Obama’s eight years in office. White House Economic Advisor Larry Kudlow went on Fox News Sunday to tell everyone to chill, everything is fine, just fine, nothing to worry about at all! Never mind his Trump administration colleague, White House Trade Advisor Peter Navarro, once wrote a book about economics and had this to say about the bond yield curve:
The yield curve is such a powerful forecasting tool precisely because it embodies the collective wisdom of millions of highly sophisticated investors quite literally putting trillions of dollars on the table in highly intelligent speculative bets on the direction of the business cycle. This is about as far away from Ouija board forecasting as you can get!
Economics aside, Kudlow’s interview ended up drawing attention for his slurred speech and demeanor (which you can see below).
Kellyanne Conway also made the media rounds on Sunday to try to tamp down discussion of a weakening economy.
Now The Washington Post is reporting Trump officials are considering a desperate move to stave off a recession, at least long enough to get re-elected before Americans begin to feel the real pain of a Trump economy down the road.
Several senior White House officials have begun discussing whether to push for a temporary payroll tax cut as a way to arrest an economic slowdown, three people familiar with the discussions said, revealing the growing concerns by President Trump’s top economic aides.
The talks are still in their early stages, and the officials have not decided whether to formally push Congress to approve the cut, these people said, speaking on condition of anonymity because they weren’t authorized to disclose internal discussions. But the White House in recent days has begun searching for proposals that could halt a slowing economy.
Donald Trump already has the lowest historical average approval rating of any president in modern history. Just how low would that go if the economy started slipping? If the bond market and Wall Street continue to decline, we may very well find out where that floor stops. Unfortunately for the rest of us, that means dragging us down too.