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2 mounting recession indicators to watch

2 mounting recession indicators to watch
Ana Zirojevic

Amid growing fears of a recession, indicators of a clearly approaching winter are mounting, and the most recent ones include banks in the United States increasingly tightening their lending standards and the arrival of a credit contraction among all commercial banks.

Specifically, the net percentage of US banks tightening standards for commercial and industrial loans to large and middle-market firms have reached the levels that have always preceded a recession, as noted by finance analyst Game of Trades shared in an X post on September 26.

Tightening lending standards

Indeed, according to the chart shared in the expert’s analysis, the current increases in tightening lending standards mimic those seen in previous slumps, including the Gulf War recession of 1990-1991, the Dot-com recession of 2001, the Great Recession from 2007 to 2009, and more recently, the Covid-19 recession in 2020.

US banks tightening lending standards. Source: Game of Trades

Credit crunch

On top of that, the analyst pointed out that “credit contraction is here,” referring to the decline in lending activity by banks brought on by an abrupt deficit in capital. Notably, similar happened in 2007 when the value of unregulated derivatives dropped, and banks began to panic, cutting back on lending and ushering in the Great Recession.

Credit contraction. Source: Game of Trades

It is also worth noting that Game of Trades has been warning of the bleak economic outlook for some time now, including back in August, when the expert reported an extremely high recession probability based on the 10-year/3-month term spread – the highest since the early 1980s, as Finbold reported on August 10.

At the same time, Robert Kiyosaki, the author of the best-selling personal finance book ‘Rich Dad Poor Dad,’ has made repeated warnings of the impending “end of the American Empire” through the demise of the United States dollar, urging his followers to invest in Bitcoin (BTC), gold, and silver, while they are still relatively cheap.

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