Recession Risks Rise: How Will Bitcoin Handle It?Examining Consumer Stress and Price Cuts From Target and Walmart Reports, Commodity Weakness, and Spiking Monetary Assets
The current economic climate is rife with indicators pointing to a looming recession. Contrary to the expectations of some analysts for reaccelerating price inflation, we are starting to see major signs that suggest an acceleration in the opposite direction, downward toward recession. Reports from Target and Walmart highlight the severe financial strain on consumers, while surprisingly low gasoline demand provides a unique perspective on the approaching recession. This blog post will delve into these indicators, examine the broader economic context, and explore Bitcoin's potential resilience and strategic significance in the face of an impending recession. Target and Walmart Very Concerned about the Health of ConsumersRecent reports from major retailers Target and Walmart underscore the financial strain that consumers are experiencing. Both companies have announced significant price reductions on essential items in response to declining consumer spending and increased financial hardship. Target has lowered prices on approximately 5,000 frequently shopped items, including groceries, household goods, and personal care products, aiming to alleviate the burden on cash-strapped consumers. Similarly, Walmart has rolled back prices on 7,000 grocery items to boost food sales and retain low-income customers, who are increasingly turning to discount retailers for their shopping needs. High-income consumers are also feeling the pinch, with many trading down to budget-friendly retailers like Walmart to manage their expenses. This shift in consumer behavior highlights the pervasive nature of financial stress across different income brackets. The underwhelming April retail sales data further illustrate the extent of spending fatigue, as many households have maxed out credit cards and depleted savings to cope with ongoing economic pressures. Sticky Prices Finally Coming DownI have been quite lonely in my position on inflation, but we are starting to see the culmination of its transitory nature. While most analysts claim that the price increases since COVID were due to massive waves of money printing, I’ve been steadfast in my position that the stats people cite for the money supply are wrong and that there really wasn’t that much money printing. The response I usually get is, ‘But we haven’t seen prices coming down. If that were the case, prices would rise and then fall.’ Price increases tend to be sticky for several reasons. Firstly, wages are much harder to cut in deflationary environments than to raise in inflationary ones. Secondly, fixed prices in the cost structure of goods make it more difficult to cut prices. Businesses find it very hard to reduce prices on items they have in inventory that they paid more for, and leases or contracts signed during inflationary times still must be paid at the higher level. Thirdly, debt deflation, where real debt burdens are increasing, can make it financially impossible for companies to lower prices. For these reasons, the price cuts from Target and Walmart suggest we are closer to a recession than most analysts predict...  Continue reading this post for free, courtesy of Bitcoin Magazine Pro.A subscription gets you:
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Thursday, May 23, 2024
Recession Risks Rise: How Will Bitcoin Handle It?
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