We Just Got A Big Red Recession Warning
Peter Reagan

There’s an old curse that supposedly comes from an Eastern country (it could have actually come from a comedy writer, for all I know). The curse is:

“May you live in interesting times.”

As Lenin put it, “There are decades where nothing happens, and there are weeks where decades happen.” Under that philosophy, this has been at least a six-decade week. Things sure are “interesting” right now, and are likely to become even more so… 

Now, there’s good news, and there’s bad news. Because I’m a guy who prefers to take the medicine all at once to get it over with, we’re going to start with…

The bad news on the U.S. economy

The U.S. economy is going through an upheaval. 

Even Trump, the eternal optimist about the strength of America, said something that set off alarm bells.

Here’s a summary:

President Donald Trump declined to explicitly rule out a full-blown recession for the U.S. economy this year… the country will see a "period of transition" as his policies take effect.

"I hate to predict things like that," he said of a recession. "There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing… it takes a little time, but I think it should be great for us."

Now, I firmly believe that, like Trump said, his economic policies will bring back the U.S. economy stronger. It will take time,though, and that “period of transition” will involve ups and downs – volatility and uncertainty – in the economy.

Take, for example, the mini panic after Canada announced reciprocal tariffs on energy because of Trump’s threatened tariffs against Canada. Fortunately, things are looking a bit different now according to Jennifer Cowan with The Epoch Times who writes,

President Donald Trump will not double tariffs on Canadian steel and aluminum after Ontario suspended its 25 percent tax on energy exports in response to U.S. tariffs, White House officials say.

“After President Trump threatened to use his executive powers to retaliate with a colossal 50 percent tariff against Canada, Ontario Premier Doug Ford spoke with Secretary [Howard] Lutnick to convey that he is backing down on implementing a 25 percent charge on electricity exports to the United States,” White House spokesman Kush Desai said on March 11.

Fortunately, a tariff war was averted – in this case. 

What does a period of economic transition look like?

People stressing about reciprocal tariffs, especially on energy, would be bad enough, but there’s more news. Cortenay Brown with Axios writes:

Sentiment indicators show that economic uncertainty, tariff threats and federal government cutbacks are weighing on consumer and business spending plans.

Some companies most exposed to discretionary spending say it isn't just talk: Weak sentiment is carrying over into weaker buying.

Some companies are seeing lower sales – which could indicate a slowing in the U.S. economy. The reason analysts and economists are so obsessed with so-called “consumer spending” is simple: consumer spending is TWO THIRDS of economic activity in the U.S.

When we talk about GDP and so on, we’re mostly talking about everyday American families going shopping. For gas and groceries (considered nondiscretionary, by the way), and for mansions and Maseratis – it’s all “consumer spending.” Discretionary spending, for households, is usually things we don’t need right away – a bigger TV, or a new dining room suite.

A slowdown in consumer spending is a major recessionary red flag. When households cut back, retailers make fewer sales. So they order less from manufacturers. A deep cutback in spending leads to layoffs among retailers and manufacturers alike – along with supporting services like warehousing, transportation, financial services… 

Because, you must understand, that one person’s spending is another person’s income. 

That’s why a slowdown in spending leads to a slowing economy – when it’s harder to pay the bills and to save for the future. Nobody wants to deal with that.

Here’s the thing: The White House has to look beyond the current economic climate, years into the future. Recessions are an inevitable part of the business cycle. They’re unpleasant, yes – but they also tend to put inefficient and wasteful corporations out of business. 

Recessions are an economic version of the controlled burns that the forestry service uses to clear out the accumulated deadfall and brush that chokes a healthy forest. The healthy trees that survive enjoy a greatly improved environment – where they can grow faster and stronger than before.

So when we step back, and look at not the trees but the entire forest, you can see that a recession can be a good thing. 

In the long term.

In the short term, recessions are simply painful. 

So, are we on the brink of recession?

Lutnick says we aren’t. As Alexandra Marquez at NBC News writes:

Commerce Secretary Howard Lutnick said Sunday that Americans should “absolutely not” brace for a recession… 

“There’s going to be no recession in America. ... Global tariffs are going to come down because President Trump has said, ‘You want to charge us 100%? We’re going to charge you 100%,’” Lutnick told NBC News’ “Meet the Press.”

So does Lutnick mean this, or is he whistling past the graveyard? I suspect it’s the second. You can’t blame him – the man’s the Commerce Secretary, of course he’s going to say commerce is doing better than ever!

Treasury Secretary Bessent had a more nuanced take: 

“Could we be seeing that this economy that we inherited starting to roll a bit? Sure. And look, there’s going to be a natural adjustment as we move away from public spending to private spending,” Bessent said… 

“The market and the economy have just become hooked. We’ve become addicted to this government spending, and there’s going to be a detox period,” he added.

He later clarified that this “detox period” did not inevitably mean a recession. So that's a bit of a relief.

Of course, all of this information may leave you a bit confused about what is really going on and asking…

So, is the U.S. economy good or bad?

And the answer is… yes.

What I mean is that the economy is showing both good and bad signs. 

The economic volatility we are experiencing is to be expected as the nation is fundamentally realigning under Trump’s guidance. From a more regulated and government-focused economy to a less-regulated and more free-market-based economy.

Historically, free markets are always better because they raise the standard of living for everyone at all economic levels.

It’s the transition from one to the other that’s challenging. 

And we don’t know exactly how long these economic growing pains will last. They could be over within a couple of years. Maybe longer – it takes about 4-5 years to build a new factory, for instance… 

If I had to bet, I’d guess that it will probably take at least five years to go through most of the transition, and it could take as long as ten years for some sectors to settle down. That’s just a wild guess, though – I claim no special insight beyond my decades of experience watching markets and studying economics. If I’ve learned nothing else over those decades, it’s that we all need to stay humble. Accept that we just don’t know what’s happening next. 

In other words, hope for the best and prepare for the worst. (This is smart because we almost always get something in between.)

Here’s what you can do about it: I recommend taking control of your personal financial situation so that no matter how long the transition lasts, you and your family will be as secure as you can make them. Some people think the whole point of saving and investing is to make their money grow. While that’s nice, I believe the main point is the certainty that you and your family will be fine no matter what happens. We can’t control the economy – all we can control is what we do about it.

Diversifying your savings with physical precious metals gives you the knowledge and confidence that, no matter what, you own tangible financial assets. They’re more than a security blanket, though! Take a few moments to learn more about the advantages of physical precious metals right now.

 

 

Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver.

 

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