It’s worthwhile recalling that mainstream economists, the Federal Reserve, government agencies and the mainstream financial media all deny the economy is in recession until it falls off a cliff.
Back in March I published unambiguously recessionary charts of new orders and per capita energy consumption: New Orders Look Recessionary (March 9, 2015)
Why Is Per Capita Energy Consumption at Recession Levels After Six Years of Recovery?(March 10, 2015)
Zero Hedge recently published an overview of charts that also spell recession: The US Is In Recession According To These 7 Charts.
Mish has provided evidence that a recession has already started: Household Spending Growth Expectations Plunge; Recession Already Started?
For those who want yet more quantitative evidence of recession, here is another chart, courtesy of longtime contributor B.C. This is a chart of the Chicago Fed’s National Financial Conditions Index (NFCI):
Because U.S. economic and financial conditions tend to be highly correlated, we also present an alternative index, the adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on financial conditions relative to current economic conditions.
The chart also displays the spread between Baa-rated corporate bond yields (Baa bonds are just above junk bonds, which are typically rated BB or lower) and 10-year Treasury bond yields.
Widening spreads between corporate bonds and Treasuries are associated with recessions, as are ANFCI readings above zero. The current reading is .20, a level that correlates to deteriorating financial conditions and the early stages of recessions.
The more dependent the economy is on financialization, the greater the impact of deteriorating financial conditions. To a large degree, the U.S. economy’s apparent strength is an illusion based on extremes of financialization: rampant Fed monetization of Treasury debt and mortgages, extremes of leverage and speculation that have inflated asset bubbles that have created a wealth effect that is limited to the top 10% of households, and is highly concentrated in the top .01% of households.
