And if the Most Clamored-for Recession Ever Fails to Appear? How a Higher Inflation Target Would Hit Markets, Banks’ Exposure to CRE, Blowups of Subprime Auto Dealers-Lenders…

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Wolf Richter on This Week in Money, at


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  61 comments for “And if the Most Clamored-for Recession Ever Fails to Appear? How a Higher Inflation Target Would Hit Markets, Banks’ Exposure to CRE, Blowups of Subprime Auto Dealers-Lenders…

  1. Depth Charge says:

    “….a higher inflation target….”

    This is a crime against humanity. An inflation target period is theft. They are changing the rules as they go to protect the net worths of the wealthy while destroying the working class and the poor. The wealthy have declared war on the people and have hijacked the government to do their bidding. The entire US government is shot through with corruption.

    • Depth Charge says:

      PS – Yes, I am listening to the podcast. I am about 10 minutes in. I always read the articles and listen.

    • Christof says:

      The original inflation target was a purely arbitrarily decision based off some chaps in New Zealand.
      Why do you think your understanding of how much purchasing power past-currency should have over future-goods and future-services is so sacred?
      In many ways, the incentive to buy now, and the evaporation of previous wealth, is a good thing.

      • Mr. House says:

        Sarcasm? Why do people get mad when the stock market drops to 666? Why are they entitled for it to rise every year at the expense of the general populace via money printing?

      • MM says:

        “In many ways, the incentive to buy now…is a good thing.”

        Saving for the future is definitely a bad thing and should be discouraged at all costs.


        • Mr. House says:

          Ha sadly it already is. Thats what unemployment and social security are for! Remember when people were making 50k a year or more on unemployment? Ah the good ole days /s

        • Prairie Rider says:

          John Maynard Keynes.

          This man was against saving money. He though that other than for retirement or education, it was “dangerous for the economy.” He stated that this saved money was “sitting stagnant and not stimulating the economy.”

          Forty-two years ago, my Econ 101 professor at the U of MN was Walter Heller. He was a Keynesian. Heller helped shape the post WW II world. I disagreed with him in class, and I disagree with Keynesian theory today.

          But Keynes’ policies have been twisted, just to add to their damage. Keynes advocated for reducing government debt and deficits when the economy was running strongly. That has not happened, and it sure as hell will not happen with the Two Party Duopoly in control of the USA.

          To add injury to insult, Keynes’ idea was for government to raise taxes from its working citizens to pay off the debt incurred by reckless spending.

          Also, regarding Wolf’s interview, the GM Volt has just been killed, no?

          Oh well, I’ll be changing the oil & filter on Thunder tomorrow. Four litres of Power 1 full synth will keep her alive; running fast and strong!

        • phleep says:

          Keynes indicated inflation was stealth taxation.

      • Depth Charge says:

        Since we’re asking dumb questions, why are you still breathing?

      • Augustus Frost says:

        Utterly absurd.

        The modern world financial system and economy are both a house of cards projecting the illusion of fake debt based prosperity.

        There is also a difference between someone losing purchasing power because of changes in relative prices: labor, goods, and services. That would happen without government created distortions anyway.

        It’s another thing entirely when it’s official government policy to steal a minimum fixed percentage of everyone’s savings and labor. That’s a criminal extortion racket and yes, government is the ultimate criminal enterprise. It’s just that those who run it claim and make it “legal”.

        Yes, I can infer you don’t agree.

      • Nacho Bigly Libre says:

        Haha, here comes the “you’ll own nothing and be happy forever” troll.

        All your money and fruits of labor are belong to us.

        Don’t worry about where your next meal comes from. Big brother will take care of that. What rainy day, what retirement? Just get on that hamster wheel and keep spinning.

      • rojogrande says:

        “In many ways, the incentive to buy now, and the evaporation of previous wealth, is a good thing.”

        I don’t know if you’re in the US. In the US, at least in the private sector, individuals are responsible for saving for most of their retirement. To avoid impoverishment, people must preserve and grow wealth, which is one reason inflation is so insidious. Under those circumstances, your comment is complete nonsense.

        • phillip jeffreys says:

          Savings are also critical to future investment. More specifically, how savings are used.

          Yes…the post does suggest there are gaps in understanding how the system works.

        • rojogrande says:


          Yes, how the savings are used, hopefully to increase productive capacity, is very important too.

      • eg says:

        I happen to think Christof is right. The 19th century and the Great Depression taught governments (rightly) to dread deflation. A low inflation target is the lesser of two evils.

    • longstreet says:

      and those who promote theft are thieves themselves

    • Captainpeacock says:

      Wikipedia is already referring to first republic bank in the past sense of “was”. Not an encouraging sign for bank stability.

      • Keilbasa says:


        “From Wikipedia, the free encyclopedia
        This article is about the bank based in San Francisco. For the defunct bank based in Dallas, see First Republic Bank Corporation.
        Not to be confused with Republic First Bancorp.”

        “First Republic Bank is a commercial bank and provider of wealth management services headquartered in San Francisco. It caters to high-net-worth individuals.”

        Scraped from Wikipedia at 7:06 PM CDT, 26April2023.

      • SwissBrit says:

        Wikipedia is subject to the whims of its editors – if you (or anyone else) wish to change tenses on an article to make ‘is’ change to ‘was’, you can easily do so

    • Kevin says:

      You are absolutely correct once again. The problem is the majority of population is unaware of the critically important issues you mentioned. They live in an illusory world filled with entertainment and popular culture. Endless sports games, TV shows, movies, TikTok videos and time spent on the social media. If you look around, you see a lot of young people constantly on their phones. Corporate America can work in collusion with the government to wield their massive influence through media and entertainment to control people’s mind. Thus I see very little hope for change in the future.

      • VintageVNvet says:

        K, you said, “Thus I see very little hope for change in the future.”
        As an old, now clearly elderly and having watched the oligarchy continue to screw all or almost all of WE the PEEDONs who have worked our whole lives to help.
        I must say that there continues to be ”opportunities” for We working folks,,, BUT::
        Equally clearly IMO, serious ”challenges”
        VERY good challenges and opportunities in every case.

      • phleep says:

        The economy as a digital shell-game, cynically aimed not at enlightening or benefiting, but on shallowing-out and draining the broad public’s resources, including their mental lives and coherence, is the new pollution of our times. It is a fake photocopy of liberty.

        • 91B20 1stCav (AUS) says:

          …damned eloquent, phleep, damned eloquent…

          may we all find a better day.

  2. Depth Charge says:

    “With a strong labor market you can’t get a recession.”

    This is why Powell was derelict in his slowing of rate hikes. He once again erred on the side of speculators and the wealthy. Inflation is raging.

    “Used vehicle price declines have ended…we may see used vehicle prices rising again…”

    So depreciating assets are once again rising. And the FED should “pause” WHY, Wolf? Makes no sense whatsoever.

    • old school says:

      Strong labor market so far equals 2 years of real wages going down. I think its 80% plus we are getting a recession this year. Labor market will be the last domino to fall.

      • phleep says:

        If that is the last domino, it could be a late, hard fall. the grasshoppers fiddling in the sunshine could get a witheringly harsh blast of the wake-up horn.

  3. Misenome says:

    The more people that are betting on a recession and pivot then the less likely they are to need to have a recession and pivot. It’s kind of funny.

  4. longstreet says:

    Higher debt ceiling
    Banks in trouble due to high rates…rates that are STILL historically low vs inflation
    Digital currency
    It doesnt take much imagination to see where this is headed
    Nationalized banks
    Digital Currency

  5. R2D2 says:

    The US consumer has decoupled from the Fed and from Wall Street.

    We live in a new age.

    • phleep says:

      Patriotically spending bag-holders to-be. Paraphrasing Wolf, free money melts the brain.

  6. Labor data has been completely off the news feed. Most data, other than earnings, are on the back burner. The banks are falling apart and investors hiding in tech.

  7. Steve says:

    the current valuation of the economy is reflective in my opinion of all the money injected into it since 2008 mostly. The value from repressed interest rates and Fed injection was already far exceeding normal risk parameters in 2019. From 2019-2022 the distortion from risk expanded several fold more. We are currently multiples away from a valuation of equilibrium based on fundamentals now that the hyper punch bowl valuations are no longer valid. I say reversion to the mean is assets at 2015 valuations then add for geopolitical black swans as there are just so many flying around ready to land. I think what everybody’s wondering is what is the next shoe to drop on this Domino implosion.

    • Augustus Frost says:

      Your comments don’t take into account that the fundamentals are also distorted.

      2015 asset values weren’t “fairly valued” or anywhere near it.

      The last time the US stock market was fairly valued” was somewhere around 1995.

      Housing? Maybe early 2000s, depending upon location.

      Credit standards and credit quality?

      Nope, not in the sub-basement and gutter like now, but still not “normal”.

      • Flea says:

        A F you need to look at transportation index ,it’s in terrible shape . We’re in a recession and stock market keeps going up ,there creating a blowoff top ,it could be a long fall off the cliff

    • Not Sure says:

      Going into 2015, our money supply (M2) was under $12T. It peaked near $22T in 2022, so the number of dollars sloshing around has nearly doubled since 2015. I doubt that most holders of wealth are in a rush to pull it out of assets in order to sit on quickly evaporating cash instead. Actual asset value hasn’t gone anywhere, but prices have gone up because the dollar has lost value. The Fed created too many dollars too quickly, so expect an inflationary decade ahead with 2015 prices never to be seen again.

      • Steve says:

        Disagree. Valuations I should have expounded on are not just Fed injection but MOSTLY the ability for the Fed to continue the same levels of injection backing the money supply investments. With QT and high interest rates now you not only have reversion but you have no backing as opposed to before. Mathematically we already have bank failures now, layoffs and severe business defaults baked into the cake to reach the mean, and this show is just getting started. If the Fed thinks they can save face and let inflation rip, they might lose control of their dollar, a total financial collapse. They let(made)2000 and 2008 happen. They’ll make it happen again. I see only inflation sticking maybe in food and some wages while everything else blows up. If they can keep liquefying the banks without hyper stagflation I would be shocked. Its pick your poison for the Fed with all being lethal now. The rich can keep their inflation going on only so much longer with a soon to be broke 80% which they need to keep their inflation going. I don’t see all this Fed injection as dollars in the system but rather as debt that will just disappear easier than the Fed made it. In a debt based ponzi economy, when reversion sets in motion, losses lose at multiples speed, unlike their rate of gain. A house of cards its called, and a house of cards its become, again. 3rd time is a charm.

        • phillip jeffreys says:

          Will this lead to a catastrophic deflationary cycle (in your mind)?

  8. Alex e says:

    One million people died during COVID…a lot of those people were working. Yea some of this missing labor force retired but the lion share of the missing labor force is dead and won’t be rejoining the labor market at any salary!

    Brookings did an article on this a few months ago…It seems correct at least anecdotally. The missing workers are not at home living off pandemic cash, they’re dead!

    • ru82 says:

      Maybe but . In 2020 there were 7.821 billion people on earth. Now there is 200 million more as we are at 8.024 billion.

      Plus the U.S. added between 4-5 million illegal immigrants the past 3 years. That should easily make up for the 1 million who died?

    • phillip jeffreys says:

      You trust Covid stats?

      What of labor force participation rates that were sinking long before Covid? I bet those are understated as well – speaking of trust!

      • Mr. House says:

        understated? I’d argue they were overstated. Weren’t hospitals being paid something like 30k to declare someone with covid? Seems kinda like a screwed up incentive. Shoulda been if they actually saved the person they got that 30k.

    • eg says:

      Add to your total unavailable to work those with long Covid and labor tightness becomes rather less mysterious.

  9. Alex says:

    Correction: And I meant to specify that the 1.4 million people that died, died from COVID.

    And it was Axios not Brookings…

  10. William Leake says:

    I was impressed that Wolf could talk at great length, in an intelligent way, about fairly complex issues. That’s not easy to do.

    I argue that our current interest rates are not unusual (the Fed Funds rate 1971 to 2022 averaged 4.86%). So it is no surprise to me that the labor market is still robust, as is consumer spending. It’s going to take much higher rates to knock them down.

    Anecdote: back in 1966 when I was a kid, I walked to the nearby bank and opened a passbook account for $10 and got 5.00% APY. Nobody thought it was unusual. $10 was a lot to a kid back then.

    • Colinsky says:

      You could buy three cartons of Luckies for $10 in 1966. The other day at the supermarket the guy in line in front of me paid $14 for a pack of smokes, or $420 for three cartons.

      • William Leake says:

        Sheesh, don’t remind me.

      • SoCalBeachDude says:

        Any brand of cigarettes you wanted were 35 cents a pack right up through 1974. I used to pay $3.25 per carton including tax in Durham, NC for any brand I wanted in the mid 1970s.

        • VintageVNvet says:

          ANY brand of cigs were $0.10,,, ten cents per pack,,
          Onboard ship who went out from homeport every month or so after we returned from VN in ’66.
          Clearly, all the rest was profit from the civilians,,, eh
          Were totally free in past wars when our boys ”went into harm’s way.”

    • rojogrande says:

      From 2001 through 2022 the FFR averaged 1.43%. That’s the only environment people in their early forties and younger have ever known as adults. Current interest rates are definitely unusual to Millennials and Gen Z. The interest rate environment of the last 20 years was radically different than the 30 years before that.

      Interest rate averages inflated by much higher rates from the seventies through the nineties are outside the personal experience of many Americans. I think that’s one reason so many people expect a Fed pivot and return to much lower rates, it’s all they’ve ever known. It may be difficult to change that mentality.

      • William Leake says:

        I agree. Young investors got hooked on low interest rates for so long, they cannot imagine minimum rates at 4%. They are going through withdrawal, which is painful. Hence we see the constant drone for pivot. “Please Mr. Pusher man, just one more hit.”

        To get to 2% per year, The Fed will need to raise rates much higher than they are now and will stay high for longer. Now rates are about average, when looking at the last 50 years. They will eventually lower rates (I guess that is what is called a pivot) but they will not go much below 4%, certainly not below 3%. The Fed has learned its lesson, I hope.

        Black swan events will likely alter the above scenario.

  11. JM says:

    With 15% YOY inflation and trillion-dollar annual deficits how could GDP possibly go down? There will never be a recession (reduced quarter over quarter GDP growth) in a hyper-inflation environment. Meanwhile, your real wages have declined for two consecutive years. Middle class dying a little more every day. Next phase is what is commonly known as a depression. The country is rotting away….

  12. SoCalBeachDude says:

    WP: Shares of First Republic Bank fell sharply Wednesday, continuing an astonishing decline that poses a fresh challenge for the Biden administration and industry regulators.

    After losing roughly half of their value Tuesday, First Republic’s shares fell by an additional 30 percent Wednesday.

    San Francisco-based First Republic, which has a wealthy clientele, peaked at $147 per share in early February before the failure in mid-March of two other midsize banks threatened to ignite a wider financial contagion. By late Wednesday morning, its share price had dipped below $5 before rebounding to close at $5.69.

    • Flea says:

      Plus there worth only 1 billion, but other banks lent them 30 billion ,something smells fishy

  13. Real says:

    In my city there is stickers on mail trucks and police cars – we are hiring, come work with us. It’s desperate. Soon the people in the mansions will realize they will be missing some services and protection. Hopefully.

    • Flea says:

      Watch a lot of internet ,rich keep meanting New Zealand as there bud out place .WHY

  14. American Dream says:

    Seems recession is guaranteed but if it’s not a full on recession maybe we just have a massive asset bear market for a decade. That might be better medicine then a recession!

    • phleep says:

      LOTS of asset prices, I see as fake-money froth, going back decades of appreciation. But the Fed would have to hold the line a LONG time to truly re-balance this.

  15. SnotFroth says:

    Speaking of the auto industry, Wolf, I don’t know if you’re familiar with ‘ol ADP’s Dealer Management System, one of the big two software application providers to dealerships (the other being Reynolds and Reynolds), but it was spun off into a public company called CDK years ago. They continued strong for a while, but recently were taken private by some Canadian private equity conglomerate. Seems the employees are getting outsourced or turned into contractors. This year looks like the beginning of the end for a big player’s multi-decade era.

    Tekion is the Tesla of this space, shaking things up and forcing change. In fact, their founder is a former Tesla CIO.

    • Wolf Richter says:

      Thanks for the update. We used to run Reynolds and Reynolds back in the day. Those things were awful. Friend of mine’s dealership runs some kind of cloud-based service now, maybe Tekion.

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