The US is careening towards a recession based on its economic symptoms.

Let's do some fact checks first to determine the US economic symptoms.

1. CPI slowed marginally to 8.5% from 9.1%

2. Inventories are building up

3. Low unemployment rate of 3.5%

4. Negative quarterly growth (Q1:-1.6%, Q2:-0.9%)

5. High US debts

The aforesaid economic symptoms befit an economic model created by economist Goodhart (see below).

In this model, it was stated that when the interest rate rose in a low debt economy (a), the price (inflation) would decline significantly from P to P* and the economic output (GDP) would shrink from Y to Y*.

However, when the interest rate rose in a high debt economy (b), the price (inflation) would decline marginally from P to P* but the economic output (GDP) would shrink from Y to Y* significantly.

Under the high debt scenario, the producers would increase their production to achieve economies of scale in order to contain their costs and the unemployment rate would stay low because more workers were hired to churn out more goods and services.  Thus, there would be inventory buildups and higher wages first before the onset of high bankruptcies and retrenchments later.

The outcome of this model is that there will only be a marginal decline in inflation but a significant reduction in economic growth (recession).  Coincidentally, we're seeing all the economic symptoms now in the US which are portrayed by this economic model.