Christopher Thornberg, PhD


Downgrading The Economic Outlook: Credit Shortages Will Become A Problem By End of 2023

Despite a year of recession calls by many, the U.S. economy came into 2023 with strong momentum. While the headline GDP number for the first quarter was only 1.1%, that was entirely due to the anticipated rundown in inventories. Final demand—the sum total spending by consumers, business, and government—grew at a 3.2% annualized real pace, the highest level in almost

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Today’s Fed Decision: The Funds Rate Is Irrelevant—QT Is What Matters

Today’s big news was that the Federal Reserve only raised the Federal Funds Rate by a quarter point and has seemingly backed off on its plans for future interest rate hikes. Is this good news or bad? Oddly, the news first caused equity markets to rise, then fall. Why such a mixed reaction? Because the Fed didn’t actually address the

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No Recession In 2023

“If the economy shrinks next year, no one should be surprised. We’re facing the most widely forecast recession in history.” Wall Street Journal, Dec 4, 2022 The year 2022 was like the proverbial month of March—it came in like a lion and went out like a lamb. The start of the year was full of optimism following 2021’s high-growth recovery

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Quixotic Fed Policy and the Real Estate Cycle

Over the past year U.S. mortgage rates have risen from sub-3% to over 7%. Unsurprisingly the nation’s real estate market is swooning; home sales are plummeting, inventories of new homes for sale are rising sharply and we are already starting to see signs that home prices are falling. Little doubt that most people over the age of 30 are suffering

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It’s The Demand Curve, Stupid…

The biggest obstacle to slowing inflation is that the real causes of it—excessive consumer demand and rapidly rising wages—are too politically toxic to acknowledge. The August CPI report showed prices in the United States continuing to increase, contrary to the predictions of most Blue-Chip forecasts and the Federal Reserve. This has spooked the markets and caused a sharp decline in

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Why We Are Not In A Recession (at least not yet)

In conversations about the economy, there are a lot of conventional wisdoms that are neither conventional nor wise. One very relevant example today is the idea that a recession is defined as two consecutive quarters of negative GDP growth, exactly what the United States experienced in the first half of 2022. This definition enjoys wide acceptance and shows up in

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What The Fed’s Rate Hike And The 1st Quarter Contraction Means… And Doesn’t Mean

Given the frenzied and contradictory economic news lately, I wouldn’t blame anyone for having a bad case of whiplash. It’s difficult to get a read on what’s happening when the headlines flip between bull and bear faster than the stock market. One moment the discussion is about labor shortages restraining growth even as the administration pitches new relief efforts, how

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Why GDP Growth Should Slow… And Why It Won’t

In the 3rd quarter, U.S. GDP grew by 2%, down from an almost 6% pace over the three preceding quarters. Weak growth in consumer spending, with a sharp drop in spending on durables, is the primary culprit. Business investment slowed as well. Not surprisingly, the relatively weak number has led to an abundance of hang-wringing by pundits and many in

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Miserabilism and Money: Why More Stimulus Is A Bad Idea (part 2)


Miserabilism and Money: Why More Stimulus Is A Bad Idea (part 1)