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Jun 1, 2025  |  
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Donald Devine


NextImg:Does Economic Recession Loom in Our Future?

The first 2024 Wall Street Journal front page headline set a euphoric economic outlook for the coming new year: “Optimism Flows on Wall Street, Fueled by Economy, Rise of AI.” With the “S&P 500 within 0.6% of a record high,” what could go wrong?

Moderating that outlook, one remembers Wall Street missed inflation in 2022 and was caught by surprise when the Federal Reserve increased interest rates. It was shocking how long it took the Fed and U.S. Treasury leaders to discover the fiscal crisis back then. They even told us not to worry about inflation — until they couldn’t ignore it any longer and finally acted. (READ MORE: The Tyranny of the Phillips Curve)

The optimists argue that the economy is still creating new jobs, even if at a slower pace. But another headline emphasized that businesses that were doing well did so more by cutting expenses than by producing new products or services. Many firms did institute real reforms, but it turns out that the expectation for a positive economic outlook was mostly a result of COVID government money and the move away from in-office work, which revealed that many unnecessary services could be cut. Kimberly-Clark eliminated 70 percent of its paper and tissue products and Yankee Candle reduced from 200 product lines to 150.

Another headline emphasized “bright spots, like manufacturing construction which rose by 40 percent in 2022 and 72 percent into 2023. But the article concluded that manufacturing growth was concentrated in only a few areas, primarily “high-tech,” with most manufacturing in a “slump.” Still, a survey of all manufacturers predicted 5.6 percent growth in 2024, up from 0.9 last year.

The Economy Is Growing In All the Wrong Places

Total national job employment did increase; but where? The Bureau of Labor Statistics “Current Employment Statistics Net Employment Change” for the last year shows substantial growth in government employment, health care, education, and social assistance — all highly government-dependent sectors. 

The problem with government money is that, after an impressive run-up at the beginning, things do not seem to work over the long run. President Joe Biden told unions this summer that he was building American manufacturing to become the world leader with one grant alone providing $39 billion to do the job. (READ MORE: The Latest Union Strike Might Turn Workers Red)

But this money went to a very small subset of semiconductor and other high-tech businesses representing merely 1.9 percent of industrial production. Even there, first came the government billions, then delays in constructing high-tech buildings and materials, and then the difficulties in making and selling the new manufactured products. 

EVs were another big government manufacturing winner, with $7,500 in government subsidies for individual car sales. But the Wall Street Journal noted that the total automobile business was in the “longest slump in two decades.” The bottom line for manufacturing activity overall was that it had still weakened for 13 straight months, the longest since 2002. Days later, the Journal reported manufacturing had declined in December.

The underlying problem is that even the Feds are running out of money. The official debt is impressive enough at $34 trillion compared to the annual total U.S. GNP of $27 trillion. The Bank for International Settlements (BIS) notes that these figures do not include foreign exchange swaps, which were only $37 trillion in 2007. Swaps dollar debt today is double the U.S. at $65 trillion, mostly by the U.S. Yes, the Fed can print more but how far can that go?

The U.S. is Losing Its Financial Dominance

The U.S. held 40 percent of world GDP wealth in 1960 but holds just 24 percent today. Going off the gold standard in 1971 allowed the U.S. to dominate the world economy with its fiat dollar system, but that dominance is weakening. Brazil and China have agreed to settle their trade balances in their currencies rather than U.S. dollars. India and Malaysia agreed to switch to the rupee in their joint trade. India announced that Russia, Sri Lanka, Bangladesh, and Mauritius have been considering joint trade in rupees. France is discussing settling some trade in Chinese yuan. This movement is still rather small but the desire to escape is large. (READ MORE: Poor, Unloved Dirty Joe)

There is even discussion around the globe about going back to gold or another independent measure of value. The financial experts doing the trading and the governments managing the fiat currency still insist that all is well. However, as independent trader George Gilder revealed, the Bureau of Industry and Security estimated that the foreign spot and trade market generated “a flow of some $7.6 trillion a day, more than a third of all US annual GDP every twenty-four hours,” representing “$5.1 trillion a day, a billion dollars every second.”

A prudent person would note with Gilder that ten “leviathan” banks in Western countries transacted 77 percent of this arbitrage business — and the Fed, Treasury, and president managing it all have an interest in promoting the narrative that all is well.

It only took a week for the WSJ business section headline to become “Stock Forecasters on Edge Over Weak Start,” which has been the dominant theme ever since. And serious independent economy analysts were still predicting a recession in 2024, as they have been doing for over a year.

Prepare. The real facts say a recession is still in your future. 

Donald Devine is a Senior Scholar at the Fund for American Studies in Washington, D.C. He served as President Ronald Reagan’s civil service director during the president’s first term in office. A former professor, he is the author of 11 books, including his most recent, The Enduring Tension: Capitalism and the Moral Order, and Ronald Reagan’s Enduring Principles — and is a frequent contributor to The American Spectator.