Recession on It's Way?
Updated: Jul 15, 2022
I know I have been missing in action the past few weeks. I have been dealing with family medical issues and moving. I felt it was necessary to post today as I feel a real urgency to help you, and remind myself to get busy.
Emergency Preparedness is really a terrible term to use for what we are trying to accomplish together. It is not just emergencies that require our preparation but all the potholes as well as the sink holes we encounter along life’s journey. Now more than ever in the past few decades we are faced with new potholes every day and we know those sinkholes will also come. We are striving to become self-reliant, to care for our own needs. What peace it brings to know you can handle not just natural disasters but all the challenges ahead.
Inflation is now at 8.5% with inflation at: gasoline at 48%, used cars 35%, protein course including eggs at 14%, other foods at 10%. Added expenses for those making under $20,000 is triple the growth in income, those making $20,000 to $ 40,000 it is ten time growth in income, even those making six figure incomes expenses have risen 3 times growth in income. In other words we are all feeling the pinch but especially those who can least afford it. They are suffering the most.
Many economists are now forecasting a recession later this year or early next year. What does that mean?
We have focused on inflation for the past year and what we need to be doing to provide a hedge against rising prices. Now it’s time to look forward to preparations for a recession.
Recessions generally come after a decline in confidence, a sense among businesses and consumers that times won’t be as good as they have been. Some leading indicators a recession has arrived are reduced hours worked, fewer new orders of capital and consumer goods, lower level of building permits, increased interest rates and for the last 50 years all recessions have been preceded by greatly increased fuel prices.
Fewer new orders of capital and consumer goods, we have saw an increase of 9.7% January 2021 to January 2022 in costs to manufactured and delivered goods. Now today's report, the biggest increase in inflation since the beginning of the Reagan administration. Producers are now saying they can no longer absorb those increases and prices on goods will increase. As prices increase orders always decrease, first step on the way to a recession. We have already witnessed this as small businesses, fast food and other eateries, and even the dollar stores have raised prices.
For the past several weeks the average fuel price had been increasing nationally a penny a day, this increase seemed insignificant and then war happened in Ukraine. Instead of a penny increase each day we immediately witnessed a 15 cent increase overnight and the next day another 10 cents and now we just don’t know. With dependence on foreign oil and natural gas experts fear gasoline prices could reach $5.00 per gallon by summer nationwide. In California this has already happened, prices are nearing $6.00 per gallon. Hawaii is not far behind with prices over $5.00. In November of 2020 the national average for gas was $2.02 per gallon by March 2021 the price had increased to $2.81 per gallon and today it is $4.29.
Recession is a world-wide concern not just one in the United States. Everyone should be aware and preparing to be self-reliant no matter where they live.
What happens in a recession?
Unemployment typically rises as businesses cut back or shut down, but the degree of disruption can vary.
People who still have jobs tend to spend less during recessions, saving more, worrying that they may become unemployed. Those who are already unemployed naturally cut back. If too many people reduce their spending the recession can deepen. One person’s spending is another person’s income, and if too many people spend less even those employed suffer. What makes sense for an individual can harm the economy.
Manufacturing and services decline. With fewer people purchasing, needs for production declines and manufacturing is reduced as warehouses and retail outlets become overstocked.
A depression is a severe recession whose duration is usually measured in years rather than months. Depressions may also feature the breakdown of a key part of the economy, the financial system. Interest rates sore and there is less money circulating in the economy.
We have already seen many of these indicators. Interest rates are going up every day now. Home loans at 3% eight weeks ago are now at 5%. Not mentioned in the above list is the increase in government spending. Free money flooded the economy and now there are millions of jobs not filled.
What can you do to prepare? Today have a heart to heart with yourself and your family. How careful are you with your money? How is your food storage? What can you eliminate? If you have purchased the Totally Ready Binder pull it out and review the Have You Done This Yet pages. Our Monday post, Part One, will soon be ending. As we end those challenges we will focus on money saving tips for the next several months, Part Two. We encourage you to share your ideas with all of us. Thursday we will post ideas for preparing for a recession so do a little hard evaluating before then and return Thursday to begin preparing for a recession.