Lakshman Achuthan of ECRI sticks with his call
from September 30 that the US is headed for a recession. While many people focus on the GDP numbers, the Gross Domestic Income (GDI) numbers are more accurate and as he talks about in the video, GDI is barely growing. Add this to concerns about the job market, retail sales and industrial production and there is enough negative news to indicate the making of a recession. Moreover, some of the
yield spreads are now indicating recession. In particular, the spread between BB (Junk Bonds) and AAA Bonds or Government treasuries is now at recessionary levels.
There are problems in other countries as well. Of the 8 countries regularly tracked by the St. Louis Federal Reserve, Australia and Germany are the only two where real incomes coming out of the most recent recession are above their averages. Paradoxically, Germany has been benefiting from the debt mess in Europe as a low euro is good for Germany's exports.
The comment about Germany benefiting from the Eurozone debt crisis is instructive; Germany is in deep embrace with the the euro currency --moreso than the idea of a unified Europe. From our perspective, the Euro is overvalued; from the German perspective, it is trading at a discount to where the DMark would trade. As Greek economist Yanis Varoufakis has eloquently stated (and I am paraphrasing): a euro in a bank account in Frankfurt is worth significantly more than a euro in a bank acocunt in Athens or Lisbon. Germany does not really wish to foot the bill for fiscal transfers but relinquishing the euro in favour of the DMark would plunge Germany into a deep recession as Germany's advantageous terms of trade would disappear.
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