Ask Chuck: Is the American economy doomed?

By Chuck Bentley, CP Guest Contributor Friday, June 24, 2022

Dear Chuck,

I’m concerned about our economy tanking. Larry Burkett wrote a lot about our national debt and out-of-control federal spending that would likely lead to hyperinflation. Where do you think our economy is headed?

Trying to Understand the Times

Dear Trying to Understand the Times,

Money is flying away by the inflation bubble and employees trying to prevent it. | Getty Images/Cemile Bingol

Only God knows the answer to your question, but He also gave us minds to think and reason. The U.S. economy has proven incredibly resilient over many decades, so I am reluctant to buy into any forecasts of impending doom. At the same time, Proverbs 22:3 instructs us to be “prudent” when it comes to situational awareness. This means we should neither be rash and respond emotionally or be paralyzed by fear. So, let’s look at where some of the experts think we are headed.

Where is the economy going?

We heard that inflation was transitory back in 2019, but by the end of 2021, we knew that description was false. Just 2 weeks ago, it was falsely reported that the U.S. had the fastest growing economy in the world, when in fact the U.S. economy shrank in the first quarter of 2022. The cost of inflation is being felt in numerous ways. Food, fuel, consumer goods, housing, and labor costs are challenging most Americans.

One month ago: Elon Musk said he thought the U.S. was already in a recession that could last 12–18 months.

June 11: Michael Burry, the ‘Big Short’ investor, warned that inflation will soar higher, putting greater pressure on the housing market, eroding buying power, and negatively impacting consumers’ savings.

June 13: Larry Summers, former Treasury Secretary, warned that the Federal Reserve’s forecasts on inflation have been “much too optimistic” and that we are on the edge of a recession. He thinks there’s a risk of it occurring in the next year. “We’ve had them for the whole history of the country. We need to be prepared and to respond quickly if and when it happens.”

June 13: A Financial Times poll reported that nearly 70% of leading economists expect that inflation will cause a recession. The majority predict it to hit the first or second quarter of 2023.

June 13: The Daily Torch reported, “The spread between 10-year and 2-year treasuries, a reliable indicator of incoming recessions that has predicted almost every recession in modern economic history, inverted once again overnight on Jun 13 amid financial markets turmoil with interest rates rising rapidly, the dollar strengthening and equities market crashing.” The same inversion occurred March 31 upon the onset of war in Ukraine. A recession typically occurs an average of 14 months after an inversion.

June 15: The Federal Reserve enacted the steepest rate hike in 28 years in an effort to battle inflation.

June 17: Deutsche Bank expects an “earlier and somewhat more severe recession,” a 3.1% contraction of GDP in the third quarter of 2023.

June 20: Economists at Japanese investment bank Nomura believe inflation will “remain elevated” throughout 2022 but a “mild recession” will hit around the end of 2022.

Mark Zandi, chief economist at Moody’s Analytics, recently noted that recession risks are “uncomfortably high and rising.” In addition, “For the economy to navigate through without suffering a downturn, we need some very deft policymaking from the Fed and a bit of luck.”

Understanding the times

I don’t believe in luck. None of us know what the future holds, but we do know that God holds the future! As you expressed in your question, we need a clear understanding of the times to know what to do (1 Chronicles 12:32).

We have been hearing about the possibility of a significant recession for more than a decade. It will come in time, so it is good to live ready for any economic change, whether inflationary or deflationary. Here is my advice:

Do not fear

“God is our refuge and strength, a very present help in trouble. Therefore, we will not fear” (Psalm 46:1-2a, ESV).

“… fear not, for I am with you; be not dismayed, for I am your God; I will strengthen you, I will help you, I will uphold you with my righteous right hand” (Isaiah 41:10, ESV).

Prepare

To step back from an economic cliff, you must decide to be deliberate and disciplined. Spend wisely. Look for ways to reduce necessary expenses and to eliminate the unnecessary ones. Download our Inflation Survival Guide, and adjust your lifestyle as needed. Pray for self-control, yet celebrate each new day with joy and anticipation.

Recognize the opportunity

Continue giving first and saving second. This timeless advice of God is the best way to manage money in any economy.
Analyze the stability of your job. Strengthen it or find another.
If you own your business, faithfully serve your employees and customers while seeking ways to improve the impact that inflation is having on them and their families.
Assess your investment portfolio with Godly wisdom. Seek counsel from those you trust. If you are prepared, you will be able to invest when market prices are low.

The Crown Stewardship Podcast is a valuable resource during these uncertain times. It is a wonderful tool to help guide you in the many facets of God’s financial principles. You can subscribe for alerts of new episodes. I hope you find it beneficial and encouraging.

Chuck Bentley is CEO of Crown Financial Ministries, a global Christian ministry, founded by the late Larry Burkett. He is the host of a daily radio broadcast, My MoneyLife, featured on more than 1,000 Christian Music and Talk stations in the U.S., and author of his most recent book, Economic Evidence for God?. Be sure to follow Crown on Facebook.