20. Is a Recession Inevitable? Why the Warning Signs Are Mounting

As the S&P 500 hits record highs and inflation cools, you might think the U.S. economy is cruising. But Professor Edwin T. Burton returns to Rubber Meets the Road Economics with a more sobering take: the real warning signs are hiding in plain sight. In this episode, Professor Burton explains why the yield on the two-month Treasury is a more reliable predictor of Fed action than market sentiment—and why he thinks the economy may be heading toward a recession. He breaks down the pressures on U.S. debt markets, explains how AI might shift the labor force, and makes a compelling case for watching the Federal Reserve’s balance sheet, not just their statements. If you want to understand what’s coming in the second half of 2025, this episode is essential listening.

Episode Breakdown:

• Why inflation may already be “last year’s story”
  
• What the 2-month Treasury yield reveals about the Fed’s next move
  
• How foreign investors are retreating from U.S. debt—and why that matters
  
• Why interest rates may stay high, even in a recession
  
• The limits of artificial intelligence as an economic fix
  
• Arbitrage explained: how institutional players respond to Fed policy
  
• Predictions for Q3 and Q4 2025: weak consumer spending, fragile housing, persistent debt pressure
  
• How to think critically about AI’s impact on jobs, investment, and productivity

Guest Bio:

Professor Edwin T. Burton is Professor of Economics at the University of Virginia, where he has taught for nearly four decades. A respected voice in both academic and financial circles, Burton’s career spans roles as a Wall Street economist, a financial strategist, and a sought-after commentator on monetary policy. He is known for his clear, no-nonsense analysis of complex economic systems and his ability to connect high-level financial trends to everyday realities. 

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Disclaimer:

The information provided on this podcast is for educational and informational purposes only. It is not intended as financial advice and should not be relied upon as such. All opinions expressed by the hosts, guests, or participants are solely their own and do not reflect the views of any companies or organizations they may be affiliated with. We recommend that you consult with a qualified financial professional before making any financial decisions. Remember, investing and financial decisions carry risks, and it is important to do your own research.