(Mike Maharrey, Money Metals News Service) Did Larry Kudlow just predict a financial crisis and recession in 2026?
Kudlow is a prominent conservative economic commentator who hosts a show on Fox Business. He served as Director of the National Economic Council (NEC) in the first Trump administration.
Kudlow famously called the 2008 financial crisis and Great Recession, and he recently used the exact same terminology on his show to describe the current economy.
Kudlow first referenced the stock market, noting that it continues to hit new record highs.
“Stocks up, taxes down. Stocks up, federal regulations down. Stocks up, energy prices down.”
He emphasized the importance of falling oil prices, noting that oil “permeates virtually the whole economy.”
Kudlow also talked up the impact of tax cuts, climbing GDP growth, and falling price inflation, and lauded the ongoing “business boom.”
He closed out his commentary proclaiming, “Falling energy prices are going to hand the midterms over to the GOP as long as they sell it. It’s the greatest story never told.” [Emphasis added]
Now, you’re probably thinking, “Mike, this doesn’t sound like a guy who thinks we’re running headlong into an economic crisis.”
And you’re right. He doesn’t.
And he didn’t expect a financial crisis or a Great Recession in 2008 either.
In fact, he used the same phrase to describe the 2008 economy – calling it “the greatest story never told.”
In an op-ed published by National Review on Dec. 7, 2007, Kudlow lauded the Bush economy.
“Despite all the doom and gloom from the economic pessimists, the resilient U.S. economy continues moving ahead,” he wrote, going on to predict those warning about economic problems would end up “with egg on their faces.”
“There’s no recession coming. The pessimistas were wrong. It’s not going to happen. The Bush boom is alive and well. It’s finishing up its sixth consecutive year with more to come. Yes, it’s still the greatest story never told.”
Maybe Kudlow should quit telling stories.
We all know what happened less than one year later.
I’m not writing this to pick on Kudlow. He was far from alone in 2008. In fact, most mainstream pundits and prognosticators insisted everything was fine in early ‘08.
This underscores a couple of problems when it comes to mainstream economic forecasting on the big networks.
The first problem is that people who support the current administration will always spin data to try to convince you that the economy is booming. Remember all the talking heads claiming Biden was bringing down inflation and solving the deficit problem?
The second problem is that most pundits fail to interpret current economic data within a broader macroeconomic framework.
I don’t think the U.S. economy is heading toward a cliff because the economic data is signaling a crash (although there are signs). I think the U.S. economy is heading toward a cliff because I’ve watched this movie before.
I understand how the loose monetary policy to stimulate the economy after the dot-com bubble burst blew up the housing bubble in the early 00s, setting the stage for 2008.
I understand that the Federal Reserve never unwound the extraordinary monetary policy of that era. I understand that the economy was cracking under the weight of rising interest rates in 2019, and the Fed pivoted to rate cuts and quantitative easing, trying to stave off a recession (just like it is today).
I understand that the pandemic was a gift for the government because it gave them an excuse to go all in on monetary and fiscal stimulus that kicked the inevitable recession down the road.
I understand how these decades of easy money have created a giant Debt Black Hole that dominates the economy today.
I understand how this monetary malfeasance fed asset bubbles, incentivized malinvestment, and created an artificial boom.
And I know that when you have a boom, there is always a bust.
I really can’t blame Kudlow and others who are convinced everything is fine. The problems aren’t obvious. They are bubbling under the surface, as they were in late 2007 and early 2008.
But, as I said, there are signs. Gold and silver, cruising to record highs day after day, are telling us something. It’s not that gold and silver are getting more valuable this quickly. We’re watching the decline of the dollar in real time.
But right now, the data looks OK. And Trump has done some positive things in terms of tax and regulatory policy. But Trump (or any president) can’t undo the inevitable effects of nearly 20 years of easy money. The best any administration can do is keep the easy money spigot running and cross their fingers that inflation doesn’t get too out of control.
The Fed has been trying to walk this tightrope for months. But at some point, economics will take control. It might not be in the next six months. It might not even be this year. But we will pay the piper for the monetary malfeasance of the last two decades. You would be wise to prepare, Kudlow’s confidence notwithstanding.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
