On Sunday, Steve Mnuchin told the nation that in his judgement, Gary Cohn was incorrect to suggest the US was likely already in a recession.
“I don’t think so”, Steve told ABC’s “This Week”, asked about the state of the US economy and whether the longest expansion in history has, in fact, already ended.
“I think the real issue is not the economic situation today, but what economic tools are we going to use to get through this”, Mnuchin added, before insisting that the administration will take the necessary steps.
While Mnuchin feigned confidence on national television over the weekend, he was emphatic Tuesday on the absolute necessity of passing a $1 trillion package aimed at cushioning the blow from the virus containment efforts.
And when I say “emphatic”, I mean that… well, I mean that emphatically. “We’re looking at sending checks to Americans immediately”, he told reporters. “In the next two weeks”.
Well, as it turns out, Mnuchin delivered a dire warning to Senators in a meeting on Tuesday. Specifically, he told lawmakers that without action, the jobless rate could spike to 20% in the US. That’s according to sources who spoke to Bloomberg.
That exceptionally dark prospect presumably rattled the GOP. After all, 20% unemployment is more “depression” than “recession”, and if the US were to fall into a depression ahead of the election, suffice to say Americans might be inclined to just write “BERNIE NOW!” on their ballots and tell both Trump and Biden to take a walk.
Don’t worry, though. 20% wasn’t a “prediction”, but rather one of “several mathematical examples for illustrative purposes”, a Treasury spokeswoman told Bloomberg.
Just for fun, here’s what that would look like:
For what it’s worth, stocks are already pricing in a deep recession.
“At current levels, the S&P 500 is pricing in an ISM of 35 and earnings growth of -25%, both commensurate with severe recessions”, Deutsche Bank wrote late last week, adding that “for the first time in almost a year, equities are pricing in worse growth than 10-year yields (ISM at 39)”.
“When you decimate the restaurant industry, the travel industry, the hotel industry, the airline industry, the cruise line industry, obviously you’re going to take a huge divot out of economic activity”, Jeff Gundlach said Tuesday, on the latest installment of his webcast series.
“Obviously we’re going to have a very substantial negative quarter”, Jeff added. “I just couldn’t believe Secretary Mnuchin actually said he wasn’t sure we’re going to a recession as a result of this, we might actually avoid a recession. That just seems so ludicrous”.
Apparently, it seems “ludicrous” to Mnuchin too – but only behind closed doors.