50% to 60% Chance of Recession, Economist Says

                          Ernie Goss

By Michael Hooper

There is a 50% to 60% chance of a recession in the United States in 2020, according to Ernie Goss, economics professor at Creighton University.

The United States needs a trade agreement with China. Without it, farmers are likely to continue to suffer, Goss said Wednesday at Washburn University.

Goss said he disagrees with President Trump how he is handling trade with China. He agrees there is intellectual theft but he isn't sure how to solve it, and Trump hasn't come up with the solution either.

Goss said exports are facing headwinds because of a lack of a trade agreement between the U.S. and China. He said 34% of exports in Kansas are food. That number is 51.6% in Nebraska. For years much of those exports were grain shipped to China. But China has halted some of its purchases of grain from the United States due to trade tariffs enacted by Trump.

So there is substantial risk to the agricultural market if no trade agreement is reached, Goss said.

"This trade war hurts us more than others," Goss said.

Farmers also have suffered losses due to bad weather. He said farm loan defaults are rising. Congress gave a lifeline of $12 billion in subsidies last year to farmers to help them out as a result of the trade wars with China. Congress gave $16 billion to farmers this year. Are they going to give another $18 billion next year? Goss asked.

Manufacturing, agriculture and energy have suffered declines this year, he said. Every other sector of the economy is doing okay.

Interest rates are low, and the Federal Reserve is expected to lower interest rates again. Interest rates in some places like Japan and Europe are negative.

"Fear is gripping the world," Goss said.

The greater fool theory is moving the bond market. People are paying high prices for bonds thinking that prices will go even higher, he said.

Outlooks for returns are modest.

He said stocks' rate of return is around 3%. The farm ETF MOO is about 3.75%. Agriculture land is -4%. Ag equipment -7.8 %. And home price return is just below 3%.

Under Trump, the federal deficit has increased 27%. Young people seem not to care about the deficit. Someday the deficits will result in higher interest rates, higher inflation, and higher taxes, Goss said.

He said the North American Trade Accord should be passed by Congress. The agreement would support trade between the US, Canada and Mexico.

Goss is also principal of the Goss Institute for Economic Research in Denver. He is an expert on the Midwest economy. He is editor of Economic Trends, a monthly economics newsletter.

His talk at Washburn University in Topeka was part of the 2019 Lecture Series in Economics and Free Enterprise.