Michael Burry Issues A Serious Warning About "Permanent Decline"

The effects of inflation are wreaking havoc on the world economy. 

Michael Burry, a seasoned investor and the founder of Scion Capital, predicts that the macroeconomic situation will deteriorate.

Burry gained notoriety for foreseeing and underestimating the subprime mortgage catastrophe. Burry highlights the deteriorating state of white-collar employment. He claims that a lasting decrease in employment is imminent as the white-collar employment bubble bursts. Additionally, Burry thinks that in the long term, working from home would be blamed for the deteriorating employment situation.

On Thursday, the US Department of Labor will publish the country's initial unemployment claims.

Why Michael Burry's Advice Is Important

Inflation in the US is out of control. To reduce the rate of inflation in the economy, the Federal Reserve is acting aggressively. To keep prices stable, the Fed is raising interest rates. It is also tightening up quantitatively by offloading its bloated balance sheet from the pandemic. After August's consumer price data revealed higher inflation than forecast, the Fed raised interest rates by another 75 basis points.

A 100 bps massive rise is also anticipated to occur by the end of 2022, according to experts. The Fed views employment as a crucial component of the economy. The Fed's hawkish position could be strengthened by a robust labour market.

In the current economic climate, jobless claims are also important. The threat of a recession is there in the global economy as a result of aggressive monetary policy. According to FedEx, the reduction in demand will cause a recession.

To allay concerns of a recession, the Fed had emphasised the robustness of the labour market. On the other hand, a drop in white-collar employment may foreshadow the beginning of a recession.

A 2008-style economic collapse was recently predicted by Michael Burry as well.

Fed's Position on the Recession

The Federal Reserve has misjudged the recession and is maintaining its aggressive posture. But there is a noticeable change in tone. The market will be watching a number of upcoming talks by important Fed officials.