The last economic crisis was ~10 years ago, and conventional wisdom says the boom and bust cycle is also ~10 years, so in that sense we're "due" for one. Conventional wisdom doesn't always hold. For example, unemployment is historically low (
cite), but there's no upward pressure on wage growth (
cite). AresProphet had an
effort post about it.
In the last year Mr. Trump decided since Trade Wars are the easiest thing in the world to win, he would go ahead and start them with basically the entire world. This has led to a tit for tat escalation with China, with no signs of either side backing down. For the last few quarters, companies have been stockpiling materials in anticipation of increased costs (leading to deceptively high economic growth), but this could have catastrophic long term consequences for the US. For example, Chinese buyers are shifting away from US soybeans, and even if a future president ends the tariffs, there's no guarantee they'll ever come back to US markets.
Also worrying is the impending no-deal Brexit. Although the finer points can be discussed in the relevant thread, if it goes forward as is it promises to be a disastrous exogenous shock to the global economy.
Posts
The growth news is significant though since sub 2% is a recession and it looks like we're slowly creeping our way into a structural recession rather than a bubble burst
There is some fundamental disconnect with American voters that I so dearly wish I could correct. It is an indictment of the US's education system that something so obvious (to an outsider like me) is missed or misunderstood by so many people.
Like, one doesn't need to be an economist to see the cause and effect here.
Can you explain how sub-2 is a recession? Not keeping up with some other index?
Sub 2% is generally considered a recession to allow buffer space for a depression, which is negative growth. I believe that was the determining point during periods of regular 2% inflation growth, but I may be mistaken.
The most accepted definition from what I can tell is two consecutive quarters of negative growth.
Literally no one other than some subsection of DC reporters, and moderate Democrats actually cares about the deficit
No, a Recession is 2 quarters (6 months) of contraction. I believe that is also Real GDP rather than nominal, so it takes our roughly ~2% average inflation into account.
It's an okay number. Not great, but also not terrible. Though only okay after this long of an expansion to build off of itself isn't a great sign for the future. Again, especially since the Federal Government is running such a massive deficit, which filters into helping economic growth and the Fed having had to cut rates recently while they are already extremely low. The next Recession is going to be more devastating because there isn't really any room to run with a policy response.
Yeah I'm not sure where I got the 2% number from. I recall a professor using that, but I think it might've been a 2% increase in unemployment
I mean, I do, but mostly because of the need for progressive policies to be self sustaining in order to help insure against sabotage.
I don't care about the deficit with regard to things like a massive infrastructure bill
The type of asset (human capital vs. physical capital) is important when looking at the funding source
Also overall macroeconomic conditions. Cut the deficit during an expansion (like now) so that you can more readily expand it during a contraction. Letting the deficit grow during the boom is just idiotic.
To try to head the inevitable tax conversation off at the pass, they also release some tax information.
I find it interesting, but not surprising, that they threw in the payroll and custom duties as those are not part of the financial sorts pay much attention to, not to mention that they dwarf the income tax side.
Basically never.
Walmart, which has been around longer, has 0.5 trillion in revenue. The US fed is at 3+
So they paid 1.4% in taxes?
And the 1 trillion is market cap which is meaningless from a tax perspective
The definition doesnt really matter. As “a recession” doesnt trigger any definite policy differences that would not be applicable at “just above a recession”. Recessions are usually defined after they happen as an example as gdp estimates get revised.
Either way i am not sure a “recession” is possible in the US right now. Growth is a function of both where you are and where you are going.
I think the US is below potential gdp and has been for years. If that is the case its harder for the normal financial mechanisms to produce a “recession” because overinvestment is more difficult
Found the secular stagnation perspective
In a lot of typically fast-growing (or at least, reliably-if-slowly-expanding) industries, growth is becoming more and more difficult to sustain.
Tech has seen its first major sacrificial unicorn (WeWork) and you can expect a lot more scrutiny in future tech IPOs, as well as a trend toward investors seeking out start-ups that are, you know, profitable at some point. Banks are being as careful as corporately possible; even the great vampire squid Goldman is beginning a shift away from proprietary trading and into servicing consumers. Retail is weathering the Amazonocalypse, but only just; meanwhile the private equity vultures circle.
I have doubts that, if the U.S. is in fact below potential GDP, it can ever return to whatever baseline you're assuming. I've seen the charts, I know that typically recessions see a return to previous GDP trends after a period of time. But we're going on 12 years since the last one and GDP remains suppressed. It's time to consider whether something is wrong with the predictive model and that assumption of a return to normal is flawed, or if a decade of suppressed wages and accelerating inequality has artificially distorted the world we live in.
Reading back to my post from October of 2018 in the OP (that's a surprise) many of the same pressures on consumers and investors are still in play. So in 15 months none of that came to a head enough for GDP growth to take a hit, which makes it look like shoddy prediction. But people still struggle to make ends meet, investors are chasing yield that is harder and harder to attain, and somehow the world lurches from one crisis to the next without quite falling on its face. That can't sustain forever.
I still maintain that nobody in a position of power is going to acknowledge the fragility of global and regional markets until something catastrophic happens, and the political will to do anything about it simply won't exist. No bailouts, no stimulus, no nationalization, no nothin'. I can only hope that it happens slowly enough for people to adapt.
White sands is doing payload research TMD is doing ballistic missile research but that company has an interesting ideal
https://www.youtube.com/watch?v=ofbcumgqTj4
Just saying these two companies will help create jobs and move the state out of poverty doesn't bode well
I think its the latter. If its the former we can still have recessions, the fundamental thing that makes recessions (from an economists point of view) is being under potential GPD (or losing ground to potential gdp). Negative real gdp is just a handy way to determine it.
If we arent going to “return to normal” for non structural reasons then there is a new normal and the new normal is the new potential gdp spot for which to ocilate around. And if youre at that new potential gdp spot then all the old tricks and financial effects that produce recessions should still be in effect.
I like to think of recessions like the old farming spiderweb but with finance (and over a longer scale and with less rationality and more feedback effects). There is some equilibrium food production but because of error there is an incorrect “initial” production. This leads to an increase or decrease in price. The next term the farmers respond by targeting the production set by the price in the last term and since it was not equilibrium they overcorrect, producing an overproduction or underproduction based on whether or not the prior price was too high or too low. This produces an ocilation around the equilibrium. But it doesnt work if the error doesnt oscliate around the equilibrium. If the correction is on the same side as the equilibrium then you move towards it.
Anything people want to add? Statistics, places to look at economic status, other?
Actually having a list of important economic vocab would be a good idea.
Reply here, @ me or PM me for any ideas.
Edit: Also to clarify is this thread mostly about the US Economy or the worldwide economy?
Cause if it's the former I'd change the title to [US Economy] instead of just [The Economy]
I will sometimes pop by Investopedia if there's a term I'm not familiar with.
I like this thread hence I was willing to start up the new one but I don't really have a good pulse on what's going on in the broader picture of the economy.
If someone(s) would like to write a new brief synopsis for "US Economy: Where we are now and what may be coming" I'd love to post that and update that in the OP with each new thread and keep the previous ones in a posterity spoiler.
Seriously though, thanks for all your hard work, I'm just some guy who has time to format an OP.
It all went to tax cuts for the super rich.
And whenever the next Democrat is in charge, Republicans are going to use the fact that the deficit is over $1 trillion to justify cuts to everything under the sun, and blame Democrats for it.
It's just really goddamn annoying.
For high tech firms, their websites are of early GeoCities quality. I like that White Sands has a visit ticker on its home page that's under 10k views and a lovely picture in the about page prominently featuring grifter extrodinare Linda McMahon.
Signs point towards bullshit.
~ Buckaroo Banzai
It doesn't mean anything is imminent, but it's not exactly a good sign.
https://www.youtube.com/watch?v=Ndja2v3urV4
There's a recent episode of The Weeds podcast between Matt Yglesias and Claudia Sahm about recessions. They end up getting into her recent work on the Sahm Rule that's a much better predictor of recessions than most anything else.
What does it suggest?
Yeah I guess I should've followed up with that.
Sahm Rule uses the three-month moving average of the national unemployment rate. When that value increases by 0.5 percentage points or more relative to its low during the previous 12 months, we're in a recession.
It's basically been a skyrocket in terms of predictive power. FRED has already included it in their data.
https://fred.stlouisfed.org/series/SAHMREALTIME
Except it more accurately represents whether or not we're entering a recession before most other indicators. Stuff like the inverted yield curve can be explained by animal spirits more than any actual underlying economic shifts
Yeah, the inverted yield curve means a Recession is pretty likely within a year or so. Which... a year is a long time.
A year, huh. Just in time for a Dem to win the presidency and take the blame for it again.
You're being optimistic I see.
That seems like something that should concern people.
https://www.washingtonpost.com/business/2020/02/06/gop-senators-face-new-loyalty-test-whether-approve-trumps-controversial-fed-nominee-judy-shelton/
twitch.tv/Taramoor
@TaramoorPlays
Taramoor on Youtube