George Mentz: Economics 101—Welcome to the Recession of 2022

The economy officially fell into a recession this week, according to government and economic rules defining recession.

When we think of recession, it is a good exercise to analyze the top 10 contributing factors that created the financial slump and collapse of 2022.

Despite her emphasis on low unemployment of 3.6%, U.S. Secretary of Treasury Yellen admitted, in response to a reporter’s question, that the “common definition” for a recession is two consecutive quarters of negative GDP.

Here are 10 key issues that probably caused the recession of 2022. These key challenges below may continue to prevent the U.S. from regaining prosperity unless new strategies are engaged.

Border Crisis—Border issues are adversely affecting salary and jobs for women and minorities. With 2 million new immigrants looking for work, citizens may lose their jobs to cheaper workers coming in. Furthermore, benefits from those in need in the U.S. may be reduced.
Drug Death Pandemic—With 100,000 citizens being killed in the U.S. each year from toxic drugs coming from Asia and Mexico, the U.S. drug crisis is killing productivity and leaving millions of spouses and children on public assistance. Senator/Dr. Cassidy said, “Fentanyl accounted for 64% of the 100,000 overdose deaths last year— [of the] two out of every three people who died from opioids, it is from fentanyl or fentanyl-like drugs.”
Foreign Policy Debacles—Sending billions to Eurasia for countries to wage war will only keep energy and food prices high for working families.
Discretionary Spending—The buying power of your money is much lower. Typical costs of food and services are up 10%-20% in the last year. With spending and buying power lowered, people will be buying less goods, eating out less, traveling less, and unable to afford to participate in the economy, even as it is slumping.
Violent Crime—Homicides in major American cities were dramatically up in 2021, with a 44% increase over 2019. Rape of women and children may have hit new records in 2021 with over 400 thousand per year affected.
Energy Dependence & Strategy Failures—The shutdown of pipelines and cessation of the drilling in the Gulf of Mexico have doubled the price of gas for the middle-class worker. Losing energy independence is a national security problem. The rising costs of energy due to impulsive organic energy strategies increase the costs of fuel, heating oil, food, utilities—everything related to productivity.
Supply Chain—The supply chain problems are new to Americans. Most Americans have never seen a shortage of anything before. However, in 2021-2022, people and businesses have been unable to get what they need to thrive. Even basic needs like baby formula may continue to have shortages.
Housing costs—With the real estate market red hot, mortgage rates now soaring, and inflation continuing to increase, housing costs are going through the roof, regardless of whether you own or rent where you live. Inflation and interest rates are crushing home buyers.
Consumer Sentiment at New Lows —University of Michigan surveys and multiple reports, including from CNBC, are showing that consumers are increasingly disheartened.
Productivity & Tax Free Benefits from Public Assistance Lending Rates —It is becoming increasingly difficult to earn a living in an honest job and pay for basic necessities of housing, food and energy.

In contrast, a person on public assistance receiving tax free benefits may not feel the pain of increases in: housing costs, taxes, energy, fuel, utilities, education and health care. For these reasons, many are quitting their jobs and going on public assistance programs and disability.

Overall, this is one of the toughest times that U.S. citizens have ever experienced. Sadly, many of the problems that we have today could be fixed with strategic planning, innovative ideas, diplomacy, tax policy, and productivity policies.

In my other articles, I clearly write about the Federal Reserve’s ability to create added inflation. Remember if you raise lending rates, you raise the cost of: products, services, credit card loans, auto loans, student loans, mortgage rates, adjustable rates, and interest on loans and taxes.

There are other obvious problems that hurt families and discretionary spending in the economy.

In January, I actually called my local utilities company to ask about the heating prices. My heating bill was up about 100%. The local utilities company said that this was typical as costs were up—but the bigger problem was that the winter was mild and the heating prices could have been three times higher than 2019-2020.

Moreover, mortgage rates are up more than 100% in about one year, and rates are now over 6% on a 30-year fixed-rate mortgage. Thus, there seems to be countless variables of inflation that are hitting families from all directions.

With about 100 days until the 2022 elections, nobody is sure how the politicians will be able to appease the working folks with so much going badly all at once. Also, it looks almost impossible for Nany Pelosi to maintain her Congressional seat and position as Speaker of the House in 2022 when Republicans actually picked up seats in 2020.
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George Mentz JD MBA CILS is a CWM Chartered Wealth Manager ®, global speaker - educator, tax-economist, international lawyer and CEO of the GAFM Global Academy of Finance & Management ®. The GAFM is an ESQ EU accredited graduate body that offers certification training in 150+ nations under ISO 21001 and ISO 9001 standards. Mentz is also an award winning author and graduate law professor of wealth management in the USA.

I Cambridge O Level Economics Student's Book - SU.S.n Grant - Google Books

II Macroeconomics - N. Gregory Mankiw - Google Books

III Economics and the Business Environment - A. J. Marijs, W. Hulleman - Google Books

IV California Farmer - Google Books

V Economic Review - Federal Reserve Bank of Atlanta - Google Books

VI US GDP sinks 0.9% in second quarter, signaling a recession (nypost.com)

VII Overview of Immigrants' Eligibility for SNAP, TANF, Medicaid, and CHIP | ASPE (hhs.gov)

VIII US food inflation rates show brutal increase once again (newfoodmagazine.com)

IX Homicides in major American cities increased in 2021, new study finds - CBS News

X Sexual Assault Statistics in America - Facts And Stats 2022 (planstreetinc.com)

XI Prep yourself for another year of supply chain issues - Futurity

XII US formula shortage persists and will 'take a while to fix' - CNN