"Stagflation!"
Rising inflation and economic contraction...
you ain't seen nothing yet!
by Joel Bowman
Buenos Aires, Argentina - "Is it just that Elon Musk is an immigrant from a poor country, or is it because he’s African American that has got the woke mob’s unisex panties in such a bunch? We’ll “circle back” to all things Twitter/Musk related in tomorrow’s Sunday Sesh. For now, let’s concentrate on what’s in front of us... a stock market meltdown, a (synchronized?) fiat currency “race to the bottom” and a curious phenomenon that Austrian School economists call “stagflation.”
Where to begin? “The Generals,” as Dan Denning has been referring to them (that is, mega cap S&P 500 stocks like Amazon, Facebook, Netflix, Tesla, Alphabet etc.) were in full, disorderly retreat on Friday. Here’s ol’ mate Denning with the wrap..."Well, that was ugly... On the back of a disappointing earnings announcement from Amazon, the Nasdaq lost over four percent on the day. It was down over 13% in April (the worst month since October of 2008) and is now down over 20% for the year (bear market territory).
The Dow Jones Industrials rallied late to avoid a thousand-point loss on the day. A thousand points doesn’t mean anything technically. But it’s a big number and makes for big headlines. And more fear. Meanwhile the S&P 500 fell over three and a half percent. The minus 13.37% start to the year is the third-worst start ever, and the worst in 83 years. It started down 17.3% in 1939 and 28.2% in 1932."
Now, your weekend editor is no quant trader...but them there numbers sure do look bad! Meanwhile, economists were “surprised” to discover the economy shrank by 1.4% during the first quarter. They had been expecting 1% growth. Oopsie! It’s a good thing these wonks aren’t working as civil engineers... or pilots... or oncologists... Can you imagine?
“So, we made our calculations, using the decolonized 2+2=5 math equations, and the structure looked stable...” “It appears the pilot had been expecting the tarmac to be in the opposite direction...” “Right, well... the thing is, ‘remission’ can mean different things to different people...”
And here comes murmurings of that dusty old Econ. 101 term, scarcely heard in the US since 1974, when it was all the rage: “stagflation.” For those who had better things to do in college, stagflation is characterized by negative growth coupled with persistently high inflation (not “transitory,” mind you... persistently).
High unemployment is another hallmark of stagflation and, although at 3.6% unemployment is “officially” low, the fact that workers real wages (that is, adjusted for inflation) are falling like a rock does not help the situation. In the ‘74 recession, job losses lagged inflation and economic contraction by some months. All told, some 2.3 million Americans lost their jobs during the 16-month recession.
With the consumer price inflation gauge boiling over at a 40 year high and this week’s “shock” news that the economy is actually contracting, it might be time to whip out the old bell bottoms and platform shoes. One gets the feeling that, as Bachman-Turner Overdrive sang in the summer of ‘74, “B-b-b-baaaaby, you ain’t seen nu-nu-nu-nothing yet!”
Of course, President Joe “The Buck Stops With Me” Biden was on hand to claim full responsibility for the economic mess his administration hath wrought. From his official Whitehouse Statement... "While last quarter’s growth estimate was affected by technical factors, the United States confronts the challenges of COVID-19 around the world, Putin’s unprovoked invasion of Ukraine, and global inflation from a position of strength."
And here we invite any reader, thus far unconvinced of the president’s “position of strength,” to witness the man in full flight...
Just remember, it was only a couple of years before we went from “You Ain’t Seen Nothing Yet” to Kansas’s Point of No Return album... thereafter, it was all dust in the wind..."
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