Executive Summary

• The limits to central bank money printing
• The key indicators signalling recession
• The growing fractures in the US economy & housing market, Europe, China & global trade
• Stepping out of the recession's path

If you have not yet read Part 1: Next Stop: Recession!, available free to all readers, please click here to read it first.

We think the next recession has arrived and that it’s going to be a real doozy in terms of creating financial market panic and losses. 

Sure, we’re early in calling that and there are no official recession pronouncements, but better early than late to this story for investors and people interested in stewarding their wealth during a downturn.  The officials and experts never call a recession until after the fact.

It’s true that we saw and called a recession back in 2016 which didn’t officially materialize in the US (but did globally). But it was there in the data, such as in US corporate profits which took a hard turn down in 1Q 2016:

We now know that the reason it didn’t and instead was converted into a blow-off top for equities, bonds and real estate was because of some extraordinarily heavy QE printing by the central banks, mainly the ECB and China’s (PBoC).

Here in early 2019 the central banks have already caved to the market’s December 2018 weakness by printing more money, softening their plans for reducing their balance sheets and delaying the already timid schedule for introducing new interest rate hikes.  They are panicking early and often and seem inordinately afraid of any sort of downturn in stock prices, which is a concerning matter in itself.

So our asterisk on this claim of ours that a recession has arrived is contained in the phrase “until and unless.”  Until and unless the central banks reignite their QE booster rockets, and do so in larger-than-ever quantities, and do so by giving money to the common people (not the banks), we think that the die is cast.  The recession has arrived. 

Perhaps we should introduce a second idea which is contained in the phrase “they can until they can’t.”  The central banks managed to get a bounce in the equity markets through a combination of easing financial conditions, as they say (i.e.