"Recession!!!"
by Brian Maher
"It is (un)official - the United States economy has descended into recession. Government data, this morning released, revealed that second-quarter GDP contracted at a 0.9% annualized pace. This, after first-quarter GDP contracted at a 1.6% annualized pace. A recession is generally defined as two consecutive quarters of economic contraction. And so there you are.
Experts being experts, most polled economists had projected second-quarter growth - if only minimal growth. Not for the first time we wonder: How can a humble, disreputable publication as ours continually cough out a truer forecast than a body of professional economists? Yet it makes no nevermind.
Of course, the American economy has not officially entered recession. The preliminary verdict will only be affirmed if the National Bureau of Economic Research stamps it valid. And these gentlemen and ladies of the jury often deliberate for months and months - at times longer - before pronouncing verdict. The administration has already voiced a loud objection. They retort that the economy is not in recession at all, that the prosecutor’s case is riddled through with holes.
For example, defense counsel Janet Yellen vaults from her seat to plead that: "Most economists and most Americans have a similar definition of recession - substantial job losses and mass layoffs, businesses shutting down, private-sector activity slowing considerably, family budgets under immense strain. In sum, a broad-based weakening of our economy. That is not what we’re seeing right now when you look at the economy. Job creation is continuing; household finances remain strong. Consumers are spending and businesses are growing.
Co-counsel Jerome Powell then rises to claim: "I do not think the U.S. is currently in a recession and the reason is there are just too many areas of the economy that are performing too well.
Lead counsel Joseph Biden… upon snapping to after a lengthy snooze… and wiping the drool from his necktie… mumbles that: "Coming off of last year’s historic economic growth - and regaining all the private-sector jobs lost during the pandemic crisis - it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation. But even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure… We're not coming into recession, in my view… I don't think we're going to - God willing - I don't think we're going to see a recession."
Just so. Perhaps there is even some justice here. An economy is a delirium of activity, some pulling this way, some pushing that way. Deciphering the signal from the noise and channeling rival information through the proper filters is complex business. The defense may possibly hang the jury. They may even earn an acquittal from the NBER. Yet we wonder if the defense team would cling to the conventional definition of recession if… perhaps… Donald Trump was president.
We merely raise the question in the spirit of open inquiry. It is an election year of course. And recession generally proves fatal for the incumbent party - justly or unjustly. The Democratic Party is the incumbent party. And so they are hot to have the recessionary charges dismissed. Yet what if the third quarter’s gross domestic product reveals further contraction? Will they heave up the identical defense?
Peter Boockvar, of the Bleakley Advisory Group: "I think it’s still just a game of semantics. The trajectory of the economy is clearly lower, whether we’re going to define it as [a recession] or not. If anything, the third quarter is going to show further weakness. So you could have three quarters in a row of contraction for GDP. Does that technically mean we’re in a recession?" It would likely require a crackerjack attorney, a real Philadelphia lawyer, to convince a jury in that case.
Yet bad news for Main Street is often fantastic news for Wall Street. Today furnished additional evidence. The stock market was in joyful spirits today, the three major indexes up and away. That is because recession means the Federal Reserve hawks will be doves sooner than later. That is, the worse things are… the better things are…
Below, Jeffrey Tucker presents the prosecution’s case that the economy is in fact in recession today. Moreover, that it is in a literal depression with little relief in prospect. Read on for the indictment."
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"A Literal Depression Is Already Here"
By Jeffrey Tucker
"It’s been amusing, or tragic, to see the White House this week doing its dance. They’ve been preparing the way to deny, deny, deny the recession that today’s second-quarter GDP numbers indicated. Doesn’t matter that our conditions will likely qualify by any definition of the term you read in a textbook. These people are shameless. They invent their own reality, in accord with post-structuralist thinking. Or I could put it in plainer terms: They are lying.
The White House says that even with two consecutive quarters of negative output, we are not in recession. That’s because the labor markets look strong. But that is pretty twisted because it only looks at the unemployment rate, which doesn’t count those who are out of the workforce. In labor participation, right now millions have gone missing, just having given up on life and personal ambition. That’s the truly chilling part of all of this.
We are not just in recession but depression and this is not just about economics. It’s about the human spirit itself. Hope has been drained away, and you can see it in the data or you can see it in the faces of those around you. The lockdowns were catastrophic enough but they were followed by brutal mandates, educational losses, cultural destruction plus an enormous devaluation of the currency that has already drained away 14% of the purchasing power of the dollar.
Let us have a look at consumer confidence surveys as measured by the Organization for Economic Co-operation and Development (OECD), which has been tracking it since the 1960s. It has fallen off a cliff. I can’t even see how the line could be more vertical.
Confidence has never been this low in anyone’s record. But let’s zoom in a bit closer to see how things went. It crashed after lockdowns and then made some effort toward restoration. Do you remember those days? You remember thinking: Maybe these people are not utterly and completely sadistically insane? Maybe the Biden administration will see the light and restore basic social and market functioning? That did not happen. It got worse. Much worse. Now our present times give new meaning to the word “worse."
So yes, there is every reason to reject the term “recession.” Let’s bring back the word “depression.” That was the common term for a fall in economic conditions before World War II. It was changed only after the war to make the word less ugly as if to say we will never go back to that. The word-game thing has been going on for a very long time.
A drill down into the labor market problem produces some terrifying realities. Hotels cannot find workers. Restaurants are cutting hours because they cannot find servers. Airline flights are being canceled because many pilots and flight attendants just left. We’ve never seen this odd combination of high consumer demand, resources available to spend yet physical bodies in grave shortage actually to do what is necessary.
What these times have unearthed is an already existing corruption in the American labor markets. There are far too many people out there with high educational credentials and absolutely no skills and no market for those skills. And yet these people have set their reservation wage so high that they are unwilling to do anything that someone is willing to pay for.
This worked out well for many people for a very long time as corporations fattened up their administrative apparatus and every company built out a massive back office, dedicated mainly to compliance and paper pushing. As technology improved and their jobs became ever easier, they worked less and less. After a while, it just seemed like money would flow forever even if millions only pretended to work.
My prediction is that these back-office jobs will be gradually gutted over the coming several years. And these people will have a very difficult time being repurposed in a labor market that wants actual workers rather than PJ-clad zoomers. They will not downgrade their expectations. It will come as a devastating shock to millions of people who had come to believe that they could get money for nothing forever.
Be clear on the following. The labor shortage is not in administration or management or people who have learned to be in the right place at the right time and watch the money flow in. The labor shortage is for people willing to cook the food, change the sheets, transport the goods, make the software, fix the code, stack the dishes and so on. In other words, people who actually do stuff will be in high demand but at low prices.
Looking back, the widespread appearance of books on bullshit jobs, boss hatred, work dissatisfaction and an overall explosion in labor-related litigation were all signs of a coming crisis. All they needed to explode was some one thing to introduce an element of chaos.
The same could be said of government debt, congressional spending, Federal Reserve money creation and so on. The U.S. as a country has lived off its capital accumulated in the 1980s for a very long time, while president after president has squandered it on wars, welfare and wild sprees of payoffs to special interests.
After decades of this nonsense, it truly seemed like nothing could break the system. Crazy theories began to circulate, such as “Modern Monetary Theory,” which speculated that the central bank could print all the money it wanted without any real consequences on the value of money or the stability of the economy. That has turned out not to be true, as the devaluation is taking place at a record pace right now.
What remarkable times! The experts are left sputtering. The ruling class lies with impunity. Everyone contradicts everyone else. And everyone seems to be out of ideas on how to fix things or even cover it up anymore. This is the whole reason for the wild political drama on Capitol Hill today: The only way to distract people from the national catastrophe is political persecution. They have a convenient voodoo doll in the person of Donald Trump, who often seems like he was sent by central casting to be their preferred enemy.
For years now, we kept thinking things would get better, that someone would save us from the emerging hell, that cooler heads would prevail and that someone in charge would rediscover wisdom and truth. That is not happening. We’ve got a population today that is drowning its troubles in substances while the way of life we once knew is being stolen from us piece by piece. A temporary recession may be the least of our worries."
