I do not know how to describe this with the Through The Looking Glass absurdity it deserves.

The ability of financial media and national economists to suspend accepting current reality, while making claims about the possibilities for next year, is ridiculous. Ask me why this era of great economic pretending is underway, and I have no answer. The intellectual dishonesty is beyond my comprehension.

The first and second quarters of the U.S. economy showed negative Gross Domestic Product valuations (GDP). We just finished the third quarter (July, Aug, Sept) and the likelihood of another negative GDP is high. Production is down, demand is down, consumer spending is down, inventories are climbing, and the economy is contracting. We are in a literal, technical and structural recession. Considering the Q1 and Q2 outcomes, we have been in a recession all year.

The Wall Street Journal publishes an article citing several notable economists who are putting the likelihood of a 2023 recession at 63%.

(WSJ) – […] On average, economists put the probability of a recession in the next 12 months at 63%, up from 49% in July’s survey. It is the first time the survey pegged the probability above 50% since July 2020, in the wake of the last short but sharp recession.

Their forecasts for 2023 are increasingly gloomy. Economists now expect gross domestic product to contract in the first two quarters of the year, a downgrade from the last quarterly survey, whereby they penciled in mild growth.

[…] Forecasters have ratcheted up their expectations for a recession because they increasingly doubt the Fed can keep raising rates to cool inflation without inducing higher unemployment and an economic downturn. Some 58.9% of economists said they think the Fed will raise interest rates too much and cause unnecessary economic weakness, up from 45.6% in July. (read more)

They are analyzing a pending recession in 2023 without even admitting we are in a recession right now. AT THIS VERY MOMENT.  We have two consecutive negative quarters of economic growth behind us (another Q3 result pending), and these economists are discussing a recession “next year“?

I feel like I’m behind a mirror in a parallel universe looking at financial pundits and economists pretending our reality is something completely different from what it is.   This is madness.

♦ “Managing the transition,” is a phrase we have heard often – but what does it mean?

This is the only explanation I can fathom for this era of great pretending.

As you are well aware the various western nation central banks including the U.S. Federal Reserve, have raised interest rates into a global economic contraction, a drop in demand.  Raising interest rates into a contracting economy is counterintuitive, it runs against the expressed interest of government to grow economic conditions.  However, there is a purposeful design to the contradiction.  [A TLDR Version Here]

The central bankers are trying to support western government policy.  Unfortunately, the government policy they are under obligation to support is the fundamental shift in energy development, or what the World Economic Forum (Davos Group) has called the “Build Back Better” climate change agenda.

Monetary policy can only impact one side of the inflation challenge.  The western bankers (EU central bank, U.S. federal reserve bank, and various banking groups) are raising interest rates in order to “tame inflation” by “taming demand.”  However, as you know the global economic demand has been declining for several quarters.  There is no excess demand, and there hasn’t been demand side pressure all year.

Raising interest rates into an already contracting economy does one thing, it speeds up the rate of economic contraction.

Economic contraction is the lowering of economic activity.  Raise interest rates -in a general sense- and businesses invest less, borrowers borrow less, consumers purchase less, employers expand less, and the economy overall slows down. When the economy turns negative, meaning less products and services are produced, we enter a recession. Some businesses and employers do not survive a recession and subsequently unemployment rises.

During recessionary periods people buy less stuff, people have less income stability, and economic activity drops.  When the banks raise interest rates into an economy that is already stalled or contracting, unemployment and general pain on Main Street increases.  Workers are laid-off, incomes shrink, consumer spending drops and that leads to less employment.  Recessions are bad for middle-class and working-class people.   This is what the Wall Street Journal is describing for 2023.

“Employers are expected to respond to lower growth and weaker profits by cutting jobs in the second and third quarters. Economists believe that nonfarm payrolls will decline by 34,000 a month on average in the second quarter and 38,000 in the third quarter. According to the last survey, they expected employers to add about 65,000 jobs a month in those two quarters.” (link)

From the perspective of the western politicians and central banks, there is one benefit from a recession…. Energy use drops.

People travel less; businesses operate shorter work schedules; manufacturing stops; overall fewer goods are produced because less consumer spending is taking place.  From the perspective of the groups who want to see overall energy consumption drop, a recession is a good thing.

A recession also brings along a natural drop in energy prices as less overall energy is used inside an economy that is slowing, stalled or contracting.

Oil prices drop as less oil is needed for the manufacturing of goods.  Energy use in transportation also drops and generally gasoline prices drop because less transportation fuel is needed, because fewer goods are being transported.  When the economy goes into a recession, energy use and prices always drop.

Put these factors together and you start to see how the transition to a new western energy policy, the Build Back Better agenda, benefits from a recession.

This is the essential understanding needed to reconcile why central banks would intentionally create an economic contraction.  This is the great pretending. The bankers are supporting the governmental objective of transitioning the western economy into a new energy system away from oil, coal and natural gas.

The banks are supporting the policy makers.  However, the central banks cannot openly admit what they are doing to support the politicians and policy makers.

In this weird new era, the banks are being instructed to support the policy makers without actually admitting they have changed their monetary mission.  The central bankers will continue to say their job is to manage and/or balance employment and inflation.  However, what they will not admit is their unspoken agenda to support the political decisions.

Instead, almost all the central banks are saying their interest rate hikes are intended to cool inflation by lowering demand.

However, it is not excess demand that is driving inflation; it is the policy making behind the energy transition that is driving higher costs on everything.  The origin of inflation is on the supply side.

The supply-side of the inflation dynamic is being overwhelmed by massive increases in energy costs which are the results of intentional western policy.  Extreme increases in consumer prices are the outcome of these energy price increases.  The overwhelming majority of consumer price inflation is being caused by energy policy, not demand.

The various central banks and monetary policymakers know this.  In fact, they are lying about their motives.  They have to lie, because if they were to tell the truth there would be an uprising, and the success of the energy agenda would be put at risk.

In order to support the energy objectives of the various governments’, the central banks are trying -and succeeding- to lower economic activity.

Less economic activity means lower energy needs.  This is what they call “managing the transition” to the new economy based on “sustainable energy.”

The banks and policy makers are ultimately managing the economic decline in order to Build Back Better in the future.  This is why the originating charter of the central banks is being ignored, and the banks are raising interest rates into an already contracting economy.

None of this is being done accidentally.  All of this is being done with forethought and implicit intention.

Unfortunately, for the average person this means the banks and policy makers have entered a phase where it is in their interests to shrink the global economy.  They are trying to control the collapse of the various economies by working together.  This is what they mean by “managing the transition.”

Managing the transition means less jobs, less work, a lower standard of living, and a period of extreme financial pressure for the average person.

Eventually, we will reach a point where the government(s) will need to step in and fill the gap from the declined economic activity.  Bailouts and subsidies will be needed as they were in the COVID lockdowns.  Unemployed workers and the people being impacted by a prolonged economic recession will need subsidies in order to survive.

The government policy makers are planning to do just that, spend more.  They practiced during the COVID economic lockdowns, now they seem to be positioning to execute a similar policy path as they manage the energy transition.

We have only just entered the beginning phase of this Build Back Better agenda.  No one, including the banks and policy makers, have any idea how long this is going to take.

We could be in this period of severe economic contraction for several years, perhaps decades, until their grand design of a new energy future is complete.  This has been the discussion at the World Economic Forum (WEF), as the instructions were passed out.

The entire time the western government architects are doing this, they must keep the demand for traditional energy products like coal, oil and gas at the lowest level possible.  That is why the central banks and politicians must keep economic activity at the lowest -yet survivable- rate possible.

Financial analysts and economists are pretending not to know this is our reality.  All the pretending in the world will not change the reality on Main Street; pretending will only create a divide between those who admit and those who deny.

The next President will be the political leader who admits the reality and affirms the proper cause.