Lacy Hunt: The Economy Is "Far Worse" Than Wall Street Thinks. Recession Odds Are Actually Over 50%

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Jun 1, 2025

In this conversation with Lacy Hunt, a renowned economist and former senior economist for the Federal Reserve Bank of Dallas, the current state of the economy is dissected. Lacy argues that Wall Street's optimism is misplaced, citing deteriorating hard data and rising unemployment claims as signs of an impending recession. He discusses the impact of debt overhangs and the critical role of money supply, emphasizing deflation risks over inflation. The chat offers a sobering view on systemic risks, unpaid debts, and the need for fiscal responsibility in turbulent times.

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INSIGHT

US Economy Weaker Than Expected

The US economy is far weaker than most understand, with recession odds over 50%.
Hard data like GDP, GDI, and corporate profits confirm growing economic weakness.

INSIGHT

Limited Impact of Big Bill

The so-called "big beautiful bill" is effectively a tax extension, offering minimal economic stimulus.
Tariffs and the bill's revenues roughly offset any mild positive GDP effects, leaving no substantial boost.

INSIGHT

Trade Deficit and Capital Flows Link

Large current account deficits imply capital inflows, but reducing the trade deficit may decrease foreign investments.
Policies tightening trade could shrink capital inflows, potentially harming US financial markets.

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GET THE 3 RESOURCES LACY MENTIONS by signing up for our free Substack at http://thoughtfulmoney.substack.com/It's an especially confusing time for investors.On one hand, the US economy is showing signs of slowing, with a negative growth for Q1 GDP, and mounting evidence that many corporations and consumer households are feeling the pinch of higher borrowing costs.On the other hand, FOMO Is returning to the stock market as corporate earnings look solid, tariffs tensions ease somewhat, and optimism over the longer term likely positive impact the Trump Adminstration's business-friendly policies will have on the economy.So, which is more warranted here: optimism or pessimism?For perspective, we have the great fortune today to sit down with one of the greatest living economists, Lacy Hunt, former senior economist for the Federal Reserve Bank of Dallas and current Executive Vice President of Hoisington Investment Management Company.Lacy sees Wall Street as dangerously deluded here. In his eyes, the economy is "far worse" than markets are currently expecting.Buckle up.#recession #marketcorrection #economy 0:00 - Deteriorating hard data5:22 - Inventory surge and corporate profits.10:24 - Rising unemployment claims14:10 - Big Beautiful Bill’s limited impact22:02 - Debt overhang and economic drag27:11 - Long-term policy optimism31:30 - Money supply’s critical role37:03 - Deflation over inflation concerns46:17 - Federal Reserve’s delayed action48:04 - Systemic risks and Minsky moment53:00 - Neil Ferguson’s empire insights54:03 - Market outlook and bond value1:02:17 - Policy reform for debt control1:06:59 - Defining a rich life1:13:10 - Closing and viewer guidance_____________________________________________ Thoughtful Money LLC is a Registered Investment Advisor Promoter.We produce educational content geared for the individual investor. It’s important to note that this content is NOT investment advice, individual or otherwise, nor should be construed as such.We recommend that most investors, especially if inexperienced, should consider benefiting from the direction and guidance of a qualified financial advisor registered with the U.S. Securities and Exchange Commission (SEC) or state securities regulators who can develop & implement a personalized financial plan based on a customer’s unique goals, needs & risk tolerance.IMPORTANT NOTE: There are risks associated with investing in securities.Investing in stocks, bonds, exchange traded funds, mutual funds, money market funds, and other types of securities involve risk of loss. Loss of principal is possible. Some high risk investments may use leverage, which will accentuate gains & losses. Foreign investing involves special risks, including a greater volatility and political, economic and currency risks and differences in accounting methods.A security’s or a firm’s past investment performance is not a guarantee or predictor of future investment performance.Thoughtful Money and the Thoughtful Money logo are trademarks of Thoughtful Money LLC.Copyright © 2025 Thoughtful Money LLC. All rights reserved.