The Golden Age of The Reagan Recession
Over at the Calculated Risk blog, a chart showing the decline in personal income during the past eight recessions:
The Ford-Carter recession was pretty deep. Personal income dipped more than 5%. The Carter-Reagan recession seems pretty shallow: not even a 3% decline in personal income. Bush-Clinton was pretty deep, but nothing compares to the -- let's be fair here -- Bush-Obama personal income crash of over 10%.
This suggests two things to me. 1. That this recession isn't going to get better soon. That's an awfully large hole in personal income that needs to be filled. And 2. That when the government was smaller and less entangled in the private sector, took less of our paychecks, and meddled less in our business, recessions and recoveries were faster.
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Comments:
Dec '10
Re: The Golden Age of The Reagan Recession
Income isn't the only thing taking a hit.The price of fuel that is both a direct and an indirect hit on every struggling family remains high. The biggest variable for families at the median is food and fuel. Disposable income disappears quickly when fuel prices go up and drag everything else up. As a government worker my income has been stable or rising throughout the recession and yet I'm budgeting harder now than I did in the beginning, and it's not just because of paying off a new range or washer.
Jan '11
Re: The Golden Age of The Reagan Recession
The line I heard on the Sunday chat replays on the internet was that the actual unemployment and growth figures don't matter ... it's only about the trend.
Look at the red troughs in this graph. If it was water, and the troughs represented how deep you were ... a barely moving trend back toward the surface really won't do us a lot of good. We'll have drowned long before we come close to air.
Apr '11
Re: The Golden Age of The Reagan Recession
Well, yes, of course.
Edited on February 6, 2012 at 6:40pmDec '10
Re: The Golden Age of The Reagan Recession
And another thing, when inflation really kicks in, as it must after printing this much money, then it really won't matter if wages have crept up close to the peak.
Apr '11
Re: The Golden Age of The Reagan Recession
This is a hugely under-appreciated phenomenon. The economy has been moribund enough that pushing more money in hasn't yet caused the huge inflation to come, but inflation will be one of the dominant stories of the next administration (or possibly the one after that, if a Euro-collapse sucks enough dollars overseas; as so often with Austrian economics, you can tell how much trouble is being stored up, but not when it's going to be unleashed).
Dec '10
Re: The Golden Age of The Reagan Recession
The interventions into this most recent crisis both deepened and prolonged the crisis. I see them as actions taken out of sheer panic with no preparatory analysis of how this recession differed in kind and scope from previous recessions: too much of the wrong remedies were applied, when much less of the right remedies would have worked a lot better (as would have no intervention at all, most likely).
Aug '10
Re: The Golden Age of The Reagan Recession
So true. And yet the ruling class lives in complete denial of this fact.
God help us.
Re: The Golden Age of The Reagan Recession
I'm sensing Rob that like your old mucker Toby you are becoming more politically sound with age....
Aug '11
Re: The Golden Age of The Reagan Recession
High food and fuel prices are what have hit us the hardest -- of course, because those things are necessities (yes, greenies, fuel is a necessity) -- but I understand that when the government measures inflation, they don't use food and fuel because they're considered "too volatile." So when someone tries to tell you that inflation is only at 3% . . . remind them that if we measured inflation the way we used to (i.e., using food and fuel) then it's more like 11%.
But this is concerning . . .
So many people . . . us included . . . have had to draw on savings to make it through this recession, or had our investments take a huge hit, that the "awfully large hole to be filled" for many of us are the holes left in our retirement savings.
In other words, it's not going to be enough to make it to the other side of the recession and start earning a better wage. We've got to earn a wage good enough to make up for what was lost when everything crashed.
Dec '10
Re: The Golden Age of The Reagan Recession
It's not quite that bad yet, but I'm sure it will get there. I'm assuming "too volatile" can easily be translated as "will make us look bad."
Aug '11
Re: The Golden Age of The Reagan Recession
The King Prawn
It's not quite that bad yet, but I'm sure it will get there. I'm assuming "too volatile" can easily be translated as "will make us look bad." · 2 minutes ago
That second chart on your link, which uses the inflation-measuring method from 1980 does show currently 11% annual inflation. The 1990 method, yeah, more like 7%.
And the federal government tells us it's 3%.
Edited on February 6, 2012 at 7:59pmDec '10
Re: The Golden Age of The Reagan Recession
DrewInWisconsin
The King Prawn
It's not quite that bad yet, but I'm sure it will get there. I'm assuming "too volatile" can easily be translated as "will make us look bad." · 2 minutes ago
That second chart on your link, which uses the inflation-measuring method from 1980 does show currently 11% annual inflation. The 1990 method, yeah, more like 7%. · 2 minutes ago
You're right. I scroll failed.
Aug '11
Re: The Golden Age of The Reagan Recession
Anyway, at a time when we're trying to reduce entitlements, we've created a situation where the next few generations of workers are going to be needing more or asking for more. It's very dangerous, and is going to require more than just a moderate recovery.
Aug '11
Re: The Golden Age of The Reagan Recession
The King Prawn
You're right. I scroll failed.
Yay, a new internet-word!
Dec '10
Re: The Golden Age of The Reagan Recession
Indeed. We're waiting until the ship has sunk just enough for our bailing efforts to appear truly historic. Oh the tales they'll tell and the songs they'll sing of our valiant effort and heroic death.
Feb '11
Re: The Golden Age of The Reagan Recession
If you've ever wondered why Bernanke said QE would last with 0% interest rates are going to last for another two years, the answer is on the Calculated Risk website. The employment levels are not going to return to 100% for another two years and that's if everything goes well. In other words, the Fed is targeting employment levels to set Fed Funds Rate and not inflation -- that is never a good sign and has always led to bad economic times in the past.
Mar '11
Re: The Golden Age of The Reagan Recession
Personal income dropping hurts because there are more costs for average possessions.
It used to be a person just bought a tv, put up the rabbit ears, and received 4 stations. The tv was a fixed cost and what you got on it was "free". Now, when people buy that flat-screen, to get anything on it a family has to pay for the programming, something they didn't have to do before. And we all know programming ain't cheap.
How about telephones? Two phones in a house 30 years ago? And one phone bill. Now, four cellphones with four bills.
Computers 30 years ago? A person could do rudimentary things with them. Once again, a computer was a fixed cost. Pay for it once and done. Now, it's a computer, plus internet, plus video games, plus wi-fi, etc.
These technologies cost WAY MORE than they did 30 years ago even though they are on the same budget lines that a family had 30 years ago, and who wants to get rid of a tv, phone, or computer?
Mar '11
Re: The Golden Age of The Reagan Recession
GOVICIDE:
These technologies cost WAY MORE than they did 30 years ago even though they are on the same budget lines that a family had 30 years ago, and who wants to get rid of a tv, phone, or computer?
In my family, we have 2 cheap computers with somewhat large monitors, the cheapest wifi connection available, and pre-paid cell phones. We stream free content over the internet, use Skype for most calls, and limit cell phone use to texting and short, important messages.
With this setup, we spend much less in inflation-adjusted dollars for our entertainment/communication package than my parents did in the early 80s, yet have access to about 10x as much content.
I detest the use of the "learning to live with less" argument that the left uses to justify no growth and prohibition of fossil fuels, but every recession, including this one, involves a necessary purging of overvalued assets, be they companies, jobs, or products. An inability of many families to live within their means was a fierce aggravating factor for this recession, and even when growth returns many will be forced to reevaluate their cost/benefit calculations.
Edited on February 6, 2012 at 9:13pmAug '11
Re: The Golden Age of The Reagan Recession
Let's hope that the bubble forming around gold and other precious metals does not break precipitously. Every shill with a few bucks is either buying or selling gold at international market rates. Gold as an inflation hedge is fine, but where is the inflation? Any reasonably sustainable consistent demand for gold was surpassed long ago; we've long since moved into hype mode. With any sign of weakness, I see a huge hedge fund move to short, which could devastate the real wealth of every hoarder now clinging to that little safe in the bedroom closet. It might soon get much lighter. We are in ozone territory with these record prices. Not much air up here fit to breathe. If the economic news repeats itself next month, look for gold to take a big hit.
Edited on February 6, 2012 at 9:50pmRe: The Golden Age of The Reagan Recession
James Delingpole · #8 · Feb. 6 at 10:20am I'm sensing Rob that like your old mucker Toby you are becoming more politically sound with age.... Well, yes, James. About many many things. But I still do occasionally fly my RINO flag proudly.