Everyone hoped inflation would return to normal in 2023. Signs were encouraging at the end of 2022, with inflation falling from a high of 8.9% in June to 6.4% in December. However, the Federal Reserve’s preferred measure of inflation – the personal consumption expenditures price index – unexpectedly increased in January. This casts some doubt that a soft landing can be achieved in 2023. The Dow slid about 2,000 points in February, as this unexpectedly higher inflation increases the chances of further Federal Reserve rate hikes.

Bloomberg’s December 2022 survey of economists found that 70% expect a recession in 2023. Bank of America and Citibank forecast that such a recession could be “mild.” Consequently, it is worth considering what a mild recession might look like.

Many economists forecast a recession in 2023. The Federal Reserve does not forecast a recession but forecasts tepid economic growth, with the economy growing at only 0.5%, and slowing job growth. Inflation was at a 40-year high in 2022 but job growth was strong. What will 2023 bring?

The cryptocurrency exchange FTX filed for Chapter 11 bankruptcy on November 11, 2022. This marked a stunning fall for a company that ran star-studded Super Bowl advertisements and owned the naming rights to the arena where the Miami Heat plays. What happened?

The global economy is facing a severe energy crunch heading into winter. The price of crude oil isp ushing $100/barrel due to the continued conflict between Russia and Ukraine, Saudi-led OPEC production cuts of two million barrels/day and domestic oil production remaining one million barrels/day below what it was prior to the pandemic. The 15-million-barrel release from the Strategic Petroleum Reserve (SPR) recently announced by the Biden Administration thus offsets less than a week’s worth of these cuts. More concerning is that nearly half of the SPR’s inventory has been drained since the Russia-Ukraine conflict began and at approximately 400 million barrels, the SPR’s inventory is at its lowest level since the mid-1980s. This puts the U.S. in a vulnerable position if the world’s supply of oil gets further disrupted, since there is limited inventory in the SPR to meet any further disruption. At a minimum, oil prices would further spike.

As of writing this column, the 30-year fixed home mortgage interest rate is about 7.5%. If the Federal Reserve increases interest rates at its next meeting, this rate will likely go higher. Already nearly three times higher than what it was in early 2021, it is higher than at any time since the late 1990s.

Electric vehicles (EVs) are touted as a remedy to high gasoline prices – unfortunately, the math doesn’t support this. An EV costs, on average, $10,000 or more than a gasoline powered car. A 2022 Hyundai Ironiq 5 electric SUV costs approximately $15,000 more than 2022 Hyundai Tucson, a similar-sized vehicle. An at-home charger adds another $700.

Real gross domestic product (GDP), which is the inflation-adjusted final value of all goods and services produced in the United States, declined by 0.9% in the second quarter after declining by 1.6% in the first. Two consecutive quarters of GDP decline is the definition of a recession found in any “introductory economics” textbook, despite the attempts by some to redefine the term. Since the end of World War II, a recession has been called by the National Bureau of Economic Research’s Business Cycle Dating Committee every time the economy has contracted for two consecutive quarters. Consistent with the traditional definition of a recession and past practice, the economy is in a recession.

President Biden recently proposed a three-month gas tax “holiday” during which the federal government would not collect the 18.4 cents/gallon Federal Gas Tax. Unfortunately, it is unlikely this would cause the price of gas to fall.

As of this article’s writing, inflation is 8.2%, imposing an unavoidable tax on all Americans. A tragedy of this is that this inflation could have easily been avoided.

Suppose a President of the United States proposed raising taxes on everyone, rich and poor, by 8.5%. And suppose this would not be a one-time 8.5% tax increase; taxes would be increased by 8.5% every single year.

The Strategic Petroleum Reserve (SPR) was included in the 1975 Energy Policy and Conservation Act and intended to hold up to 700 million barrels of oil in the event of an emergency. The SPR was created following the 1973 Middle East Oil Embargo, when the price of crude oil tripled over six months, leading to a severe economic recession. The SPR is supposed to buffer against such disruptions that might otherwise lead to an economic or national security emergency.