The coming recession will be mild; the U.S. economy could boom if Republicans win elections - Mark Skousen
(Kitco News) - "We could have a Roaring Twenties again," said Mark Skousen, Editor of Forecasts & Strategies. He spoke with David Lin, anchor and producer at Kitco News at the Vancouver Resource Investment Conference.
Skousen speculated that the upcoming recession will be "mild." He also said that if Republicans win mid-term elections, this could benefit the economy.
Skousen, who predicted the 1987 stock market crash, does not think the recent S&P 500 and NASDAQ declines are "crashes,' but rather corrections.
"The NASDAQ is down 25 percent in five months, so they've spread it out over a long period of time," he explained. "So bear markets are with us. We're in a bear market… But this is the price we paid for the excessive inflation of 2020 and 2021, where… the stock of money has increased 45 percent."
He went on to say that the Fed is not committed to fighting inflation. This is because of the U.S. government's "high debt problem."
"Thank goodness the Biden administration was stopped from expanding the deficit even more, thanks to Senator Joe Manchin," said Skousen. "[But] as interest rates get up to 3 or 4 or 5 percent, boy, that interest on the debt's going to balloon."
When asked how to fight inflation, Skousen said, "Anything you can do to reduce taxes, reduce regulations, that will help [recovery]. And we need to stop expanding money supply at a rapid pace, and we're moving in that direction. So I do think that a gradual increase in interest rates, what the Fed is doing currently, that's appropriate."
Skousen also opined that he foresees a "mild recession." He suggested that technological growth, the Trump tax cuts, and the labor shortage will prevent the recession from deepening.
When asked about the parallels between the high inflation of the 1970s and today, Skousen remarked, "You had spiking oil prices, you have food shortages, you have supply chain problems. All of that is very real. Now, of course, it's for different reasons… [Today] it was our response to the pandemic, that we overdid it… But free markets respond to these sorts of things, so I'm optimistic that the supply chain problems will be overcome, over a year period of time."
Skousen expressed hope that the Republicans will win the mid-term elections, causing "gridlock for two years" on Capitol Hill which would benefit markets.
He also said that Russia and China are moving in bad directions, given the recent Ukraine conflict.
"Russia is going to be persona non grata everywhere, and they're already moving in that direction," claimed Skousen. "China, frankly, is doing the same thing… I ask my students at Chapman [University] every year, "how many of you think you're going to see nuclear war in your lifetime?' And five years ago, nobody raised their hand, not a single student. Now a bunch of students are starting to raise their hands."
To find out Skousen's investment picks, watch the above video.
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