Ask Archer: Are we heading for a recession?

A reader asks: Are we heading for a recession?

Archer replies: In his 2004 book, Genghis Khan and the Making of the Modern World, anthropology professor Jack Weatherford seeks to rehabilitate the reputation of the Mongol tribes of the thirteenth and fourteenth century, thought of heretofore in the West primarily as a barbaric horde that came thundering out of the steppes to despoil the civilizations of Europe, the Mideast, and China.

True as far as it goes, but not the whole story, says Weatherford who credits the Mongols with a host of advancements in addition to the usual pillaging. They did, he wrote, help to expand trade routes along the Silk Road, leading to a more robust exchange of ideas between East and West. They encouraged scientific advances and the development of new agricultural technologies. Their destruction of the sclerotic ruling classes of Europe helped open the door for the Renaissance. They even supported use of paper money. Seven hundred years ago they understood the value of moving goods across borders.

Let me just say that Archer is not usually a political animal, but no one likes chaos, least of all investors. And current circumstances have unnerved markets. As The Wall Street Journal noted in a recent story, “The Days of Set-it-and-Forget It Investing Just Ended for Many Americans.” No kidding.

There’s no real making sense of this. In this upside down world you can save a trillion dollars by hacking away at a portion of the federal budget that amounts to $293 billion (total spending on Federal employees in fiscal 2024). In this world, there is some underlying, if obscure, logic to the seemingly arbitrary disruption of peoples’ lives. In this world, levying $6 trillion of tariffs on imported goods over a ten-year period somehow makes everyone richer.

It’s hard to make sense of the math, much less the human carnage. Even the MMT people aren’t this crazy.

With apologies to the Mongols, sometimes chaos is just chaos, and that has rarely been good for stocks, or for civilized peoples. Markets have registered their opinion of all this, with the S&P 500 falling four out of the last five weeks and tumbling into correction territory. Early indications are it will continue on its downward path following the announcement of the so-called “reciprocal tariffs.” (The S&P shed more than $1 trillion in value in aftermarket trading”)

Here’s a question: is everything a “national emergency?” The importation of wine from France, of car parts from Canada, of avocados from Mexico or soybeans from Brazil, of sandals from Cambodia? Does one person get to decide this?

A recession? Maybe. How about a Constitutional crisis?

Woof.