“We have these real things going on. The Fed can’t create fuel. The Fed can’t create food. There are real supply chain issues… pushing prices up regardless of what the Fed does or doesn’t do.”

— Nomi Prins, The Distortion Report

There is a “very, very high risk” of a US recession.

So warned Goldman Sachs Senior Chairman Lloyd Blankfein over the weekend. “If I were running a big company, I would be very prepared for it.”

The Chinese are prepared to slow as their “zero covid” policy has its own impact. Cryptos are trading like the broader market, going down. Stock futures are negative for the week. We’re headed for a recession, pundits tell us…

“The fear of recession is not unfounded,” says our guest for this week’s Wiggin Session, Nomi Prins. Before we even begin, we asked Nomi to define the term. “A recession basically means we’ve got a couple periods of a declining growth economy,” Nomi says, “So we’re not growing, we’re going backwards… or staying close to the same.”

In a recession, “people can’t afford to buy things at the prices they’re at. Real people can’t borrow to the extent that they might need to to start small businesses or keep small businesses going or to buy real homes or to pay for real college tuition. All of that is really, truly coming to bear in terms of an economy slowing down.”

Nomi bears the epithet “former banker at Goldman Sachs” herself.

She is also the author of the best seller Collusion: How the Central Banks Rigged the World. Nomi joins us this week to describe how the Fed and big banks think about money, interest rates, and inflation when the economy begins to enter recession.

From the bankers’ point of view, the answer to the question is simple. Capital seeks refuge.

When a recession begins, “money ceases to go after things of value,” Nomi says. “Money starts going after things that it can multiply itself, sort of like a virus. Financial assets are to some extent ‘a host’ for money; a host for cheap money in particular. That’s what we’re seeing right now.“

“Why some win and some lose during an economic recession”
with Nomi Prins

Financial institutions always find ways to finance operations.

Even if the Fed is raising interest rates and beginning to “tighten” policy in an effort to tame inflation, bankers still get first crack at the cheaper rates. There’s a disconnect between what banks can do with the money and what large corporations can do. By extension what small operators can do. And then what individuals can do.

When money’s cheap, credit is extended far and wide. When money gets tight, the system works in reverse.

“That’s at the heart of what I call this great market distortion,” Ms. Prins says. Unfortunately, “the distortion has been baked in.”

To hear Nomi’s unique perspective, click on the image above, or right here.

Follow your bliss,

Addison Wiggin
Founder, The Wiggin Sessions

P.S. The 5’s Dave Gonigam reminded us this morning that forecasting is a fickle business, in true Gonigam-style:

“It’s beautiful… awe-inspiring… and apparently not a harbinger of market mayhem?

“A casual search of Google News turns up precisely nothing about the blood moon overnight as an ill omen — in the markets or anywhere else.

“We recall doom prophecies abounded with a couple of blood moons that occurred in 2015. “Blood Moon Market Meltdown This Weekend?” said a headline in April. (Didn’t happen.) CNN told us how “to some Christian ministers,” a follow-up blood moon in September “fulfills biblical prophecy of the Apocalypse.” (Also didn’t happen.)”

Thanks, Dave.