Mar 17, 2020

Is a Recession Upon Us?
Farm Journal’s AgWeb

By: Betsy Jibben

The Federal Reserve made more emergency announcements to try and calm market fears and talk of a recession. It’s reviving a program first used in the 2008 financial crisis to help companies get access for cash for very short-term needs.

This comes after the Federal Reserve made an emergency announcement Sunday to cut interest rates to near zero percent.

Yet, the Federal Reserve is not the only place making big announcements this week. President Trump spoke to the public and press during a coronavirus task force press briefing Tuesday and called for everyone to stay home.

“We are asking everyone to work at home, if possible,” said President Trump. “Postpone unnecessary travel, and limit social gatherings to no more than 10 people.”

At the same briefing, Treasury Secretary Steven Mnuchin said the administration wants to get emergency funds in American’s pockets amid a coronavirus crisis.

“We are looking at sending checks to Americans quickly,” said Mnuchin.

The Dow Jones Industrial Average soared on the news of aid for the economy. That news followed the Federal Reserve’s recently announced interest rate cut Sunday. It also followed one of the stock market’s worst days in history on Monday, when it dropped nearly 3,000 points.

Industry leaders say it’s very unusual the Dow Jones performed so poorly Monday after the Federal Reserve announcement.

“That is very unusual, but we are in usual times,” says Shawn Smeins, deputy head for rural banking with Rabo AgriFinance. “It’s hard to predict anything right now.”

Economists and President Trump are worried about a recession. President Trump talked about a possible recession during a press briefing Monday.

I don’t, No. 1, determine recessions,” said President Trump. “I just say this, we have an invisible enemy. We have a problem that a month ago nobody ever thought about.”

Some wonder if the Federal Reserve’s announcement to cut rates to near zero Sunday, combined with social distancing, increases a threat for a recession.

Chris Narayanan, managing director and capital markets for INTL FCStone said, “The fact [the Federal Reserve] did this, does that mean that a recession or a slowdown is coming? Even if that doesn’t happen, are the banks going to actually be able to go out and lend without straining themselves?”

Some economists say the probability of a recession has increased dramatically in the last three to four weeks.

“As consumers spend dollars, that generates more economic activity,” said Jackson Takach, chief economist with Farmer Mac. “About 70% of our economy is driven by consumer spending. A decline in consumer spending is a good sign of an economic slowdown to come.”

Takach said the Federal Reserve’s timeline may even be a little delayed.

“[The Federal Reserve uses] traditional measures such as employment rate and some of the weekly indicators,” said Takach. “That data has not caught up. If you look at the Bloomberg Economist Group, they have a 50-50 shot of a recession in the next 12 months. I think that’s increasing.”

Others say a recession may be here already.

“In my personal opinion, we’re in it,” said Smeins. “We’re in a bear market. It hit the level of where a bear market is. A recession is upon us. I don’t think it’s [necessarily] bad on the ag side, because usually during a recession period, ag has done well.”

Smeins says he doesn’t think any economic theory can be thrown out. He says the U.S. is creating its own economic theory as the country through this odd time in history.

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