Is the recession upon us?

[boneyard bill]

Are we heading into another recession? GDP growth for the first quarter of 2014 came in at just .1% which is troubling enough but that figure has now been revised to -1.0%. A recession is officially defined and two successive quarters of negative GDP growth. We have one quarter now so if the 2nd quarter comes in negative as well, we will officially be in a recession. The outlook does not look rosy.

During the first quarter of 2014, earnings by major U.S. retailers missed estimates by the biggest margin in 13 years. The "retail apocalypse" continues to escalate, and the biggest reason for this is the fact that middle class consumers in the U.S. are tapped out. And this is not just happening to a few retailers - this is something that is happening across the board.

The key to the health of the middle class is having plenty of good jobs.

But the U.S. economy continues to lose more good paying jobs.

For example, Hewlett-Packard has just announced that it plans to eliminate 16,000 more jobs in addition to the 34,000 job cuts that have already been announced.

Today, there are 27 million more working age Americans that do not have a job than there were in 2000, and the quality of our jobs continues to decline.

This is absolutely destroying the middle class. Unless the employment situation in this country starts to turn around, there does not seem to be much hope that the middle class will recover any time soon.

Citigroup has joined the ranks of those with trading troubles, as a high-ranking official told the Deutsche Bank 2014 Global Financial Services Investor Conference Tuesday that adjusted trading revenue probably will decline 20 percent to 25 percent in the second quarter on an annualized basis.



"People are uncertain," Chief Financial Officer John Gerspach said of investor behavior, according to an account from the Wall Street Journal. "There just isn't a lot of movement."



In recent weeks, officials at JPMorgan Chase and Barclays also both reported likely drops in trading revenue. JPMorgan said it expected a decline of 20 percent of the quarter, while Barclays anticipates a 41 percent drop, prompting it to announce mass layoffs that will pare 19,000 jobs by the end of 2016.

http://www.zerohedge.com/news/2014-05-30/has-next-recession-already-begun-americas-middle-class

So we had negative growth in the 1st quarter and more lay-offs are taking place in the 2nd quarter while retail sales have tanked and the big banks, despite endless bail-outs, are still in deep trouble.

Real estate sales are still robust if you're rich. High end real estate is selling well but for normal people in the lower and middle brackets, there's not much going on.

In short, the indications are that 2nd quarter economic activity is declining even from the 1st quarter lows. It looks like the recession will soon be official. Not good news for all those Democrats seeking political office, but even worse news for the American people.

 

[Jason Harvestdancer]

Since the technical definition of "recession" is consecutive quarters of negative GDP growth, or current cooked numbers say that the last recession ended long before the effects of it ended. That's why I say we are in Great Depression II. Even during Great Depression II there were quarters of economic growth, and in 1937 a recession inside a depression.

And to answer your question, we might be experiencing a recession inside a depression again.

 

[boneyard bill]

Since the technical definition of "recession" is consecutive quarters of negative GDP growth, or current cooked numbers say that the last recession ended long before the effects of it ended. That's why I say we are in Great Depression II. Even during Great Depression II there were quarters of economic growth, and in 1937 a recession inside a depression.

And to answer your question, we might be experiencing a recession inside a depression again.

I think you can make a good case for the claim that we never pulled out of the recession that started in 2007. The current CPI calculation understates inflation significantly and that means it also overstates economic growth. But I won't quibble with the statisticians. Even accepting the official figures, it looks like we are heading into Great Recession II although I think it has an excellent chance to turn into the Greatest Depression. I'm certainly not looking forward to it even though I have been predicting it. I'd rather prosperous than right.

 

[Jason Harvestdancer]

I'm glad I was understood, since looking back I see how badly I mangled my wording of what I was trying to say. But I'm differentiating between a recession and a depression, and that is a very important distinction to understand if you want to understand what I'm saying. I think we never pulled out of the recession, though we might have. But even if we did, we never pulled out of the depression that was caused by the recession. Recession is the time in decline, while depression is the time in the trough. This can be illustrated with a sine wave.

So to analogize. From 0 to 90 degrees and from 270 to 360 degrees we have growth. From 90 degrees to 270 degrees we have recession. From 0 to 180 degrees we have prosperity and from 180 to 360 degrees we have depression. Recession is when the line is declining, depression is when the value is less than zero.

In Great Depression I, the initial recession lasted only a few years, but the effects of it continued for over a decade. The same can be said of our current Great Depression II which started in 2008 (I say 2007) with the Great Recession.

Our official numbers say that the recession period is over. Assuming they are right that means we've passed 270 degrees, but are still in a depression. I think that the cooked numbers hide that we haven't reached 270 degrees yet. But assuming the cooked numbers are right, our economy is far more complex than a sine wave and can easily both rise and fall during a depression. It did so in 1937 with the recession inside a depression. Keynesians blame that the budget deficit shrank imperceptibly in 1936. Austrians blame a new tax imposed in 1936. Either way there was a recession inside a depression in 1937.

So will 2014 have a recession inside a depression? Probably.

 

[boneyard bill]

I'm glad I was understood, since looking back I see how badly I mangled my wording of what I was trying to say. But I'm differentiating between a recession and a depression, and that is a very important distinction to understand if you want to understand what I'm saying. I think we never pulled out of the recession, though we might have. But even if we did, we never pulled out of the depression that was caused by the recession. Recession is the time in decline, while depression is the time in the trough. This can be illustrated with a sine wave.

So to analogize. From 0 to 90 degrees and from 270 to 360 degrees we have growth. From 90 degrees to 270 degrees we have recession. From 0 to 180 degrees we have prosperity and from 180 to 360 degrees we have depression. Recession is when the line is declining, depression is when the value is less than zero.

In Great Depression I, the initial recession lasted only a few years, but the effects of it continued for over a decade. The same can be said of our current Great Depression II which started in 2008 (I say 2007) with the Great Recession.

Our official numbers say that the recession period is over. Assuming they are right that means we've passed 270 degrees, but are still in a depression. I think that the cooked numbers hide that we haven't reached 270 degrees yet. But assuming the cooked numbers are right, our economy is far more complex than a sine wave and can easily both rise and fall during a depression. It did so in 1937 with the recession inside a depression. Keynesians blame that the budget deficit shrank imperceptibly in 1936. Austrians blame a new tax imposed in 1936. Either way there was a recession inside a depression in 1937.

So will 2014 have a recession inside a depression? Probably.

I'm expecting a whole new depression but that depends on how you are defining things. I could be wrong, of course, maybe we're just looking at a blip. But I don't think things can get a whole lot worse before the banks get into serious trouble again. Then the politicos and the Fed will have to decide on another bail-out or finally let the whole thing collapse. Let the liquidations proceed and then the re-building begin with new owners free of debt. That's what we should have done in '08. Now it will be a whole lot worse. But if they decide on a bail-out, they'll have to print the money. That amounts to kicking the can down the road and letting it get even worse. But now, that kind of money-printing also risks collapsing the dollar, and they have to be aware of that risk, so the decision gets a whole lot tougher than before.

At any rate, I don't pay much attention to what anyone says will happen because what will happen depends the decisions of the policy makers. But if a new meltdown is in the works, it's too late for anyone to prevent it now.

 

[GenesisNemesis]

There will always be recessions. I'm not sure how that's surprising.

 

[Nice Squirrel]

Funny how things are humming along here... We might have another housing bubble developing though.

Also: to those who advocate it: letting things collapse is not an option. Political instability is never a good thing.

 

[boneyard bill]

There will always be recessions. I'm not sure how that's surprising.

Usually, a recession follows a recovery, but we haven't had any recovery worthy of the name. We've had 1 or 2% growth which is also very suspect due to the new method of calculating CPI. You're looking for 5% growth or more for a recovery.

Secondly, if we do head into a recession, we just don't know how severe it might be. The fundamentals of the US economy are very bad so it would be worse than the last recession.

Thirdly, this also happens to be an election year so it has implications beyond the economy. Republicans could be looking at very big gains in the Senate and an even bigger majority in the House.

 

[boneyard bill]

Funny how things are humming along here... We might have another housing bubble developing though.

Also: to those who advocate it: letting things collapse is not an option. Political instability is never a good thing.

Harding let things collapse in 1920, and we didn't have any political instability. Meanwhile, trying to prevent collapse domestically could lead to a collapse of the dollar internationally.

We probably do have a housing bubble developing, but I think we have an even bigger bubble in the stock market and the bond market. So we could have three bubbles blow up in our face.

 

[Metaphor]

I'm glad I was understood, since looking back I see how badly I mangled my wording of what I was trying to say. But I'm differentiating between a recession and a depression, and that is a very important distinction to understand if you want to understand what I'm saying. I think we never pulled out of the recession, though we might have. But even if we did, we never pulled out of the depression that was caused by the recession. Recession is the time in decline, while depression is the time in the trough. This can be illustrated with a sine wave.

So to analogize. From 0 to 90 degrees and from 270 to 360 degrees we have growth. From 90 degrees to 270 degrees we have recession. From 0 to 180 degrees we have prosperity and from 180 to 360 degrees we have depression. Recession is when the line is declining, depression is when the value is less than zero.

In Great Depression I, the initial recession lasted only a few years, but the effects of it continued for over a decade. The same can be said of our current Great Depression II which started in 2008 (I say 2007) with the Great Recession.

Our official numbers say that the recession period is over. Assuming they are right that means we've passed 270 degrees, but are still in a depression. I think that the cooked numbers hide that we haven't reached 270 degrees yet. But assuming the cooked numbers are right, our economy is far more complex than a sine wave and can easily both rise and fall during a depression. It did so in 1937 with the recession inside a depression. Keynesians blame that the budget deficit shrank imperceptibly in 1936. Austrians blame a new tax imposed in 1936. Either way there was a recession inside a depression in 1937.

So will 2014 have a recession inside a depression? Probably.

What is the 0 on the Y axis?

 

[Jason Harvestdancer]

What is the 0 on the Y axis?

An imperfect analogy, that's what.

I'm using the negative value of the wave to represent when the economy is depressed. I thought a sine wave would be the best way to differentiate between slope and value.

 

[Metaphor]

What is the 0 on the Y axis?

An imperfect analogy, that's what.

I'm using the negative value of the wave to represent when the economy is depressed. I thought a sine wave would be the best way to differentiate between slope and value.

I understand that. I understand falling activity, next to a baseline of the previous quarter (what you're calling recession). What I don't understand is the zero line. Is it arbitrary? If so, could you not have drawn it anywhere below the entire wave, and called everything a boom time? Or could you not have drawn it above the entire wave, and called everything a depression?

If it is not arbitrary, what does the 0 represent? Is it a median economy line? If so, I am not surprised that half the wave is beneath it, as it by definition must be.

 

[Jason Harvestdancer]

What is the 0 on the Y axis?

An imperfect analogy, that's what.

I'm using the negative value of the wave to represent when the economy is depressed. I thought a sine wave would be the best way to differentiate between slope and value.

I understand that. I understand falling activity, next to a baseline of the previous quarter (what you're calling recession). What I don't understand is the zero line. Is it arbitrary? If so, could you not have drawn it anywhere below the entire wave, and called everything a boom time? Or could you not have drawn it above the entire wave, and called everything a depression?

If it is not arbitrary, what does the 0 represent? Is it a median economy line? If so, I am not surprised that half the wave is beneath it, as it by definition must be.

Ah. Well, the zero line, although it doesn't correspond to anything in the real world, serves to differentiate between depression (not recession) and prosperity (not growth). Anything below the zero line would be considered a depressed economy, while anything above it would be considered a prosperous economy. It doesn't mean a median, as an economy is much more complex than a sine wave, and is not meant to imply that half the time the economy is in a depressed state. It's just used to differentiate between the two states.

I suppose if you wanted to, you could look up some of the technical definitions of a depression (there are sadly very few of them) and say that when those conditions are met then therefore you are in a depression. Some economists define it by persistent unemployment over a certain percentage.

 

[Metaphor]

What is the 0 on the Y axis?

An imperfect analogy, that's what.

I'm using the negative value of the wave to represent when the economy is depressed. I thought a sine wave would be the best way to differentiate between slope and value.

I understand that. I understand falling activity, next to a baseline of the previous quarter (what you're calling recession). What I don't understand is the zero line. Is it arbitrary? If so, could you not have drawn it anywhere below the entire wave, and called everything a boom time? Or could you not have drawn it above the entire wave, and called everything a depression?

If it is not arbitrary, what does the 0 represent? Is it a median economy line? If so, I am not surprised that half the wave is beneath it, as it by definition must be.

Ah. Well, the zero line, although it doesn't correspond to anything in the real world, serves to differentiate between depression (not recession) and prosperity (not growth). Anything below the zero line would be considered a depressed economy, while anything above it would be considered a prosperous economy. It doesn't mean a median, as an economy is much more complex than a sine wave, and is not meant to imply that half the time the economy is in a depressed state. It's just used to differentiate between the two states.

I suppose if you wanted to, you could look up some of the technical definitions of a depression (there are sadly very few of them) and say that when those conditions are met then therefore you are in a depression. Some economists define it by persistent unemployment over a certain percentage.

So, if you have no definition of one, why are you confident that America is, or has been, in a Depression, rather than 'prosperity'? Earlier you said 'a recession inside a depression' but you neglected to say what you thought a depression was.

 

[Jason Harvestdancer]

So, if you have no definition of one, why are you confident that America is, or has been, in a Depression, rather than 'prosperity'? Earlier you said 'a recession inside a depression' but you neglected to say what you thought a depression was.

No no no, I have no definition of the zero line. I didn't peg the zero line to any of the definitions of a depression.

 

[KeepTalking]

What is the 0 on the Y axis?

It is the starting point of the sine wave, 0 degrees, the beginning of the cycle. It bears no relation to economics, and is entirely irrelevant in discussions of whether we are currently in a depression or recession.

 

[Jimmy Higgins]

What is the 0 on the Y axis?

It is the starting point of the sine wave, 0 degrees, the beginning of the cycle. It bears no relation to economics, and is entirely irrelevant in discussions of whether we are currently in a depression or recession.

Can I post the Laffer curve now?

 

[KeepTalking]

What is the 0 on the Y axis?

It is the starting point of the sine wave, 0 degrees, the beginning of the cycle. It bears no relation to economics, and is entirely irrelevant in discussions of whether we are currently in a depression or recession.

Can I post the Laffer curve now?

That would be dangerously close to something actually relevant to the discussion (or, at least, economics in general). Best to not risk it.

 

[boneyard bill]

What is the 0 on the Y axis?

It is the starting point of the sine wave, 0 degrees, the beginning of the cycle. It bears no relation to economics, and is entirely irrelevant in discussions of whether we are currently in a depression or recession.

Can I post the Laffer curve now?

That would be dangerously close to something actually relevant to the discussion (or, at least, economics in general). Best to not risk it.

Ah, the problem with all those graphs, curves, and charts the economists who've taken too much mathematics love to engage in. They're mostly just snow jobs that can say pretty much anything you want them to say. All the statistics in the world cannot lead to sound policy. No matter how much data you amass, it still has to be subjected to interpretation. If your theory is wrong, all the data in the world won't correct, but all kinds of charts can help you to hide your error and try to fool everyone else by claiming that you are right.

We didn't need a bunch of statisticians telling us that the GDP grew by one percent to know that the economy was in a shit-hole, and we don't need to wait for some PhD to tell us that we are in a recession to know that things are getting worse. Our policies are fucked up, and they're fucked up because we are following unsound theories and unsound practices. We are debasing the currency which screws up the incentives for investors and leaves no one making any money except Wall Street, and despite all the hand-outs they've been given, they're still broke.

 

[laughing dog]

Despite the wishes of the Obama haters and the economically naive, neither a recession nor the onset of a hyperinflation is occuring.