The next recession cannot be avoided and it is not far away

[josephpalazzo]

https://thenextrecession.wordpress.com/2015/10/30/the-next-recession/


I'm going to be more pessimistic than that article. Main reason: in 2008-9, a recently-elected Obama had a Democratic-dominated Congress (for two years), and was able to pass a stimulus package (not big enough in my estimation) to slow down the spiraling downward of the US economy after the financial crisis on Wall Street. This is not the present situation. With a Republican-dominated Congress, any stimulus package is dead in the water before it would ever be proposed. If there is a recession, expect unemployment rate to shoot right through the roof over 20%, unless Americans vote in 2016 for a Democratic-dominated Congress, in which case I will eat my words...

[Jason Harvestdancer]

The effects of the last one are still being felt.  Then again there is precedent.

The effects of the Recession of 1929 were still being felt when the US was hit by the Recession of 1937.  One can have a recession inside a depression.

[Baruch]

The CPI figures, like the employment figures, money supply figures and GDP figures are all crooked, like Enron.  The actual unemployment rate is much higher than admitted ... we have never recovered from the current depression ... the recovery is smoke and mirrors only.  The economy has to legitimately grow 4% per year, just to deal with population increase.  Anything less is recession, and actual decrease is depression.  What jobs that have developed, are at much less pay per hour than the jobs that were lost ... so the quality, even of the part that has recovered ... is lower as well.  Based on spending savings and applying mis-created credit ... the recovery has been ... covered up, not blunted.

So if George W or Obama could just rule by decree, and ignore the legislature and the courts ... then we are all good?  If any large section of society decides that one part or all three, of the government, are illegitimate ... then we have revolt or revolution!  A government that pulls 14 trillion out of the air in 2008/2009 is not legitimate .. according to some ... because it is clearly bankrupt.

[SGOS]

The CPI figures, like the employment figures, money supply figures and GDP figures are all crooked, like Enron.  The actual unemployment rate is much higher than admitted ... we have never recovered from the current depression ... the recovery is smoke and mirrors only.

It does kind of seem that way.

[josephpalazzo]

It does kind of seem that way.

The economy has its ups and downs - unfortunately its very nature is fodder for Conspiracy Theorists.

[jonb]

The economy has its ups and downs - unfortunately its very nature is fodder for Conspiracy Theorists.

Yes when the authorities act like the church, and pretend they have all the answers, even ill informed people say that does not work.
The problem is that ill informed people for some reason hold in their heads the notion that their betters know what they are doing, so interpret any failure as deliberate.

[SGOS]

The economy has its ups and downs - unfortunately its very nature is fodder for Conspiracy Theorists.

I agree with that.  However, one should not be so quick to therefore conclude that our government does not lie to us.

[josephpalazzo]

I agree with that.  However, one should not be so quick to therefore conclude that our government does not lie to us.

All governments lie to some extent, even if it is for the simple reason of avoiding panic. In terms of economic realities, governments don't want to say there is a recession coming our way as this public announcement is counter-productive, that is, many consumers and producers will start to act in a manner that will make things even worse. But the economy is like an asteroid, half the size of the moon, traveling at 100,000 miles an hour. We can send rockets to nudge its trajectory, but trying to control it is a futile exercise. On the same level, no government on this planet can control the economy. All it can do is apply measures to soft land a falling or overheating economy. But those tools are limited and are no guarantee of success as recessions have their own specifics - the one in 2008 was different than the one in late 1970's, which itself was different from the 1930's, and so on. Each time, we have learned certain lessons, but none of that means we will know how to face the next one.

[Baruch]

The economy has its ups and downs - unfortunately its very nature is fodder for Conspiracy Theorists.

Yes, quantization of everything by the cult of Pythagoras ... being the original Freemasonic conspiracy ;-)  Accountants are the ultimate terrorists.  Let me show you your bank account balance ... Eek!

And people never learn lessons from history, including economic history.  So I think any "lessons" fall on deaf ears.  Who is this "we" of whom you speak?  Academics?  Bwahaha ... stick that up your Milton Freeman (who aided Kissinger and Pinochet).

[Baruch]

Yes when the authorities act like the church, and pretend they have all the answers, even ill informed people say that does not work.
The problem is that ill informed people for some reason hold in their heads the notion that their betters know what they are doing, so interpret any failure as deliberate.

That is the story of the 2003 Iraq invasion for me.  I trusted that the office of the President had access to classified information, that could justify a preventative war.  But it turns out it was just the PNAC ... decided before Bush Jr became President plus Tony Blair (it is recently revealed) was part of the conspiracy shortly after Bush Jr became President.  I will never trust any President ever again ... not because of the man, but the very institution is a part of a banana republic.  At least Bush Sr had the good excuse that Saddam had occupied Kuwait.

But yes, we want to assume our leaders are omniscient and omnipotent ... otherwise we might be in deep shit.

[josephpalazzo]

Here's a history lesson on economic principles: http://www.theguardian.com/world/2015/nov/01/barack-obama-right-europe-wrong-great-recession-eurozone-economic-blunders

As I explained here, one  of the "tools the government can use to spur the economy, namely: (1) expansionary fiscal policy budget deficit". This is exactly what the US government did after the financial crisis of 2008.  While the EU went on a different path: austerity measures. From the article:

Back in 2010, when the half-yearly gatherings of developed and developing countries were in their infancy, the G20 met in Toronto. Up until this point, the summits had shown a welcome unity, with all nations committed to the goal of avoiding a second Great Depression.

In Toronto, the consensus broke down. Obama’s view was that the recovery was fragile and that this was the time to keep the pedal to the metal. The view in Germany, supported by Britain, was that there was a need to rein in the budget deficits that had widened during the Great Recession.

At the European Central Bank, there was concern that the deep cuts in interest rates and the unorthodox policies being pursued by the Federal Reserve and the Bank of England posed a threat to price stability. Despite the onset of a five-year sovereign debt crisis that almost destroyed the euro, the ECB raised interest rates a year later.

The result was predictable: the US recovered much faster than the EU.

A recent presentation by Peter Praet, the ECB’s chief economist, illustrated just how badly the eurozone has performed since the financial crisis. Real domestic demand in the US is now about 10% higher than it was when the Great Recession began in 2008. In Europe, despite the tentative recovery seen this year, it is still 3% lower. Over the same period, the productivity gap between the US and the eurozone has doubled in size to around 15 percentage points.

As the article goes on:

This is textbook Keynesian stuff. Unemployment is high, which means businesses are reluctant to invest. The lack of investment means that demand for new loans is weak. The weakness of demand for loans means that driving down the cost of borrowing through QE will have little impact. Therefore, it is up to the state to break into the vicious circle by investing itself, something it can do cheaply and â€"because there are so many people unemployed and businesses working well below full capacity â€" without the risk of inflation.

...

Since the recession, Britain and the US have outperformed the eurozone for the same reason they did better in the 1930s: they have made fewer macro-economic blunders. The Fed and the Bank of England were more aggressive in their use of monetary policy and when it came to fiscal policy, George Osborne quietly abandoned his original deficit reduction targets when the deleterious impact of an over-aggressive austerity strategy became apparent.

Expect France and Italy to follow a similar approach. François Hollande and Matteo Renzi will swear allegiance to the god of budgetary orthodoxy while at the same time borrowing and spending a bit more than they are supposed to. They should be applauded for doing so, because this god is a false god.

[Baruch]

Except ... the US hasn't recovered, and US to W Europe is apples to marzipan.  But I do agree that the Austerians (not Austrians) have pretty well damaged Europe so far.  This is the same economic policy as France circa 1780.

[jonb]

But yes, we want to assume our leaders are omniscient and omnipotent ... otherwise we might be in deep shit.

Is there not a Machiavellian aspect here. If you can't be loved, be feared?

Is it not in the interests of those with authority to in all situations appear as if they are powerful?

People who are in the shit and think the forces arranged against them are all powerful tend to be inert. If people who are in the shit realise the only thing that holds them there is their own inertia might be more inclined to take action.

[josephpalazzo]

More bad news:

http://www.bloomberg.com/news/articles/2016-01-21/almost-out-of-ammo-central-bankers-urged-to-stay-in-the-fight

“There’s not a country in the world that should not ease its monetary policies,” Ray Dalio, founder of hedge fund Bridgewater Associates, said in Davos on Thursday.


Obstacles to sustained global growth are everywhere.

China recorded its slowest annual expansion since 1990 and is letting the yuan fall, while stocks suffered their worst-ever start to a year and oil is the cheapest in more than a decade.

[aitm]

All governments lie to some extent, even if it is for the simple reason of avoiding panic. 

Meteor? Ha-Ha don't be so melodramatic folks....c'mon....yer in movie ville...LOLOLOL   meteor.......er......