{"id":426,"date":"2023-03-19T08:02:11","date_gmt":"2023-03-19T13:02:11","guid":{"rendered":"https:\/\/enjoyingthisjourney.com\/banking-sector-turmoil-could-lead-to-economic-recession\/"},"modified":"2023-03-19T08:02:11","modified_gmt":"2023-03-19T13:02:11","slug":"banking-sector-turmoil-could-lead-to-economic-recession","status":"publish","type":"post","link":"https:\/\/enjoyingthisjourney.com\/banking-sector-turmoil-could-lead-to-economic-recession\/","title":{"rendered":"Banking Sector Turmoil Could Lead to Economic Recession"},"content":{"rendered":"

An economic downturn is looming as global banking crisis unfolds. Goldman Sachs on Thursday increased its odds of a recession by 10 percentage points, to 35%, and other economists are even less optimistic that the U.S. will be able to avoid an economic downturn, with those surveyed by Bloomberg putting the odds of a recession at 60%.[0]<\/a><\/sup> Market participants fear the U.S. may be nearing its Lehman moment yet again as panic spreads oversees to Credit Suisse, which saw its stock plunge 30% in a day after a top shareholder said it could not provide further financial support due to a regulatory limit.[1]<\/a><\/sup><\/p>\n

JPMorgan Chase & Co. estimated the US economy faces a potential hit to gross domestic product of a half to a full percentage point from diminished credit growth in the aftermath of the latest banking-sector troubles.[2]<\/a><\/sup> This could be a result of slower loan growth by mid-size banks, as Goldman Sachs analysts wrote that tighter financial conditions could shave half a percentage point off US growth this year.[3]<\/a><\/sup><\/p>\n

The average person\u2019s finances were better a year or two ago than they are now, as Ted Rossman, a senior industry analyst at Bankrate.com, noted that credit card balances were 17% lower than they were prior to the pandemic, but are now up 28%.[4]<\/a><\/sup> The amount of debt Americans are carrying has also soared, with credit card balances increasing by $61 billion to a record high of $986 billion in the last quarter of 2022, and auto loan balances rising by $94 billion.[4]<\/a><\/sup> The percentage of credit card holders carrying debt from month to month has increased to 46%, up from 39% a year ago, and auto loan delinquencies have been steadily rising from their pandemic lows.[4]<\/a><\/sup><\/p>\n

Meanwhile, the European Central Bank is seen scaling back rate hikes at its meeting Thursday.[5]<\/a><\/sup> Further complicating matters, First Republic Bank, which was downgraded by both S&P Global Ratings and Fitch Ratings on March 15, is exploring strategic options \u2014 including a sale, according to Bloomberg.[0]<\/a><\/sup> <\/p>\n

It is clear that the banking sector turmoil can tighten the credit squeeze already set in motion by interest-rate increases, potentially leading to a system-threatening bank collapse.[5]<\/a><\/sup> A giant bank failure, leading to a loss of credit, is the most catastrophic result that would almost certainly guarantee a recession.[2]<\/a><\/sup><\/p>\n

0. <\/span>“Odds of Recession Increase 10% After Bank Failures” Yahoo Entertainment, 16 Mar. 2023, https:\/\/www.yahoo.com\/entertainment\/odds-recession-increase-10-bank-155731909.html<\/a><\/p>\n

1. <\/span>“The market is on the verge of Lehman-style event amid banking turmoil” Markets Insider, 17 Mar. 2023, https:\/\/markets.businessinsider.com\/news\/stocks\/stock-market-outlook-ubs-svb-bank-crisis-lehman-art-cashin-2023-3<\/a><\/p>\n

2. <\/span>“Analysis | Behind the Banking Crisis, an Era of Easy Money's End: QuickTake” The Washington Post, 19 Mar. 2023, https:\/\/www.washingtonpost.com\/business\/2023\/03\/19\/the-era-of-easy-money-is-over-what-does-that-change-quicktake\/65a5f4b0-c60d-11ed-82a7-6a87555c1878_story.html<\/a><\/p>\n

3. <\/span>“A recession could come sooner on cooling bank lending” CNBC, 15 Mar. 2023, https:\/\/www.cnbc.com\/2023\/03\/15\/a-recession-could-come-sooner-on-cooling-bank-lending-.html<\/a><\/p>\n

4. <\/span>“Shrinking savings and rising debt leave consumers on shaky financial footing” AOL, 18 Mar. 2023, https:\/\/www.aol.com\/news\/shrinking-savings-rising-debt-leave-110511051.html<\/a><\/p>\n

5. <\/span>“Recession Fears Soar as Credit Suisse Woes Threaten Loan Crunch” Yahoo News, 16 Mar. 2023, https:\/\/news.yahoo.com\/recession-fears-soar-credit-suisse-062207564.html<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

An economic downturn is looming as global banking crisis unfolds. Goldman Sachs on Thursday increased its odds of a recession by 10 percentage points, to 35%, and other economists are even less optimistic that the U.S. will be able to avoid an economic downturn, with those surveyed by Bloomberg putting the odds of a recession […]<\/p>\n","protected":false},"author":2,"featured_media":425,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts\/426"}],"collection":[{"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/comments?post=426"}],"version-history":[{"count":1,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts\/426\/revisions"}],"predecessor-version":[{"id":427,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/posts\/426\/revisions\/427"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/media\/425"}],"wp:attachment":[{"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/media?parent=426"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/categories?post=426"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enjoyingthisjourney.com\/wp-json\/wp\/v2\/tags?post=426"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}