Michael Ramirez Cartoon: The Food Chain
Riochet.com Editor-in-Chief Jon Gabriel is in for Jim today. Join Jon and Greg as they are pleased to see Dr. Oz and the GOP exposing John Fetterman’s radical record of coddling violent criminals. They also shudder as the government confirms a recession as the negative economic growth in the second quarter of this year becomes official, and they nod glumly as former Treasury Secretary Larry Summers ties the inflation mess back to a spending binge that started 18 months ago. And they sigh as White House Press Secretary Karine Jean-Pierre says it is not at all odd that President Biden would ask if a deceased congresswoman was in the audience because she was “top of mind.”
Join Jim and Greg as they serve up three more good martinis! First, they like where Florida Gov. Ron DeSantis stands in his re-election bid and they enjoy watching another progressive darling cruising towards defeat. They don’t like the state of the the economy but they’re also relieved to see nearly 70 percent of Americans rejecting the Biden administration’s bogus argument that we’re not really in a recession. And they cheer Virginia Gov. Glenn Youngkin for blasting Fairfax County Public Schools for failing to remove a middle school counselor for soliciting a minor for sex until almost two years after the fact.
One of my favorite polling firms is the nonpartisan TIPP. Once affiliated with Investors Business Daily, they now have their editorial operation. I highly recommend them. The famously sharp-edged conservative editorial writers at IBD can now be found at Issues & Insights. I’ll let TIPP Insights tell their own story: tippinsights site provides its readers with original, premium content on […]
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Songs for the New Depression
Bette Midler’s album Songs for the New Depression was released in January 1975. Typical of its glum times was the sour humor of “Mr. Rockefeller”, about a delusional woman trying to reach the billionaire from her perch in a phone booth. Nobody’s idea of a great song, but it has a sting of truth; she’s been wiped out by the recession, says she’s broken down, not feeling so good, and is hanging on the line because she’s finally down to her last dime. For millions of people, the album’s provocative title was the bitter truth: The biggest, baddest recession since World War II left the country reeling. Few saw it coming. Inflation was out of control. Confidence in the future plunged lower than it had ever gone, even in the depths of the Great Depression. After postwar decades of so much mass prosperity that many of our “leading thinkers” had just about grown ashamed of it, the Great Invisible Guiding Hand of Capitalism gave America a merciless slap upside the head. And man, it hurt.
Only the year before, the leadership of the country united to dump the most hated Republican of his day, someone who had won great political victories only a few years before. The new president was widely derided as an ineffectual buffoon. His attempts to beat inflation by handing out Whip Inflation Now buttons became an instant joke, and helped make him a lasting punchline of ineptitude. Our luck overseas was no better. America’s seemingly endless war finally came to an end on his watch, the way we’d always dreaded it would: disastrously, humiliatingly. Images of US foreign policy failure filled every television screen in the electrified world.
Join Jim and Greg as they hammer the Biden economic team for insisting two straight quarters of negative economic growth is not necessarily a recession. They also verbally pummel former Vice President Al Gore for comparing anyone not on board with his big government climate agenda to the police who refused to confront the shooter in Uvalde, Texas. And they get a kick out of NBC News once again wondering if this is the year that Democrats win in Texas with yet another glowing profile of Beto O’Rourke and his uphill campaign for governor.
The Black Swan Just Had a Hundred Babies
The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. The term is based on an ancient saying that presumed black swans did not exist – a saying that became reinterpreted to teach a different lesson after the first European encounter with them. The theory was developed by Nassim Nicholas Taleb starting in 2001 to explain:
- The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.
- The non-computability of the probability of consequential rare events using scientific methods (owing to the very nature of small probabilities).
- The psychological biases that blind people, both individually and collectively, to uncertainty and a rare event’s massive role in historical affairs.
Taleb’s “black swan theory” refers only to unexpected events of large magnitude and consequence and their dominant role in history. [Source: Wikipedia]
Several red flags that an impending recession, following the inflation we are currently in, may be far more extreme than has been predicted, and quite possibly be something we haven’t seen in our lifetime. I’m not shouting conspiracy. I like to have a heads up so I can prepare within my abilities, and so offer the following observations that I’ve encountered:
Join Jim and Greg as they breathe another sigh of relief that Ron DeSantis is governor of Florida after yet another scandal for Democrat Andrew Gillum, who came within a whisker of winning in 2018. They also shake their heads as Ohio Democrat Tim Ryan is trying to play the “I’m not like those other Democrats” card as he tries to win a U.S. Senate seat – and Arizona Sen. Mark Kelly is trying the same lame strategy. But there’s just one problem! And they sigh as Treasury Secretary Janet Yellen seems to be trying to redefine a recession.
Jim Geraghty is back! Join Jim and Greg as they welcome news of Asian voters souring on President Biden in big numbers. They also react to Treasury Secretary Janet Yellen and former Treasury Secretary Larry Summers differing forecasts on whether we are headed for a recession. And they shake their heads as California gets set to hike gas taxes with prices already at record highs.
A Global Recession by Official or Private Boycott?
The economic consequences of the Russo-Ukrainian war are beginning to make themselves felt, I think. Many commodity prices are up, most notably gas and oil. If this persists, it seems likely to me that it will trigger a global recession. I’m reminded of Thomas Sowell’s famous dictum, “there are no solutions, only trade-offs.”
Here’s a graph of oil prices (Brent) over the past year, from Business Insider (note that this graph exaggerates the increase because the bottom of the graph is at $60 — sorry about that, it’s not my graph).
I just saw that the economy for the last quarter slowed to 2 percent. Normally 2 percent growth would not be bad if we were in a stable economy, but we are rising out of last year’s recession, and this reverses the direction. We should be growing much faster. Scanning the news outlets, it seems […]
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Jim Geraghty is back! Join Jim and Greg as they welcome the National School Board Association no longer accusing parents of being domestic terrorists but they still have a lot of questions. They also wince as evidence piles up that an economy that should be in a robust recovery is slowing down and possibly headed into a recession. And they get a kick out of Terry McAuliffe saying Stacey Abrams was the real winner of the 2018 Georgia governor’s race after falsely accusing Glenn Youngkin for months of disputing the 2020 election results.
Seth Barron and Nicole Gelinas discuss the coronavirus outbreak in New York City, the drastic measures being taken to control its spread, and the consequences of an economic slowdown for the city and state budget, the MTA, and New York residents.
New York—particularly New York City—is moving toward a full shutdown. Over the past week, schools have cancelled classes for an extended period and restaurants, bars, and many other businesses have closed. The historic losses in revenue to the city’s public-transit system alone will require a multibillion-dollar bailout, Gelinas believes. Read more of City Journal’s COVID-19 coverage here.
Does Hillary Really Think the Bush Tax Cuts Caused the Great Recession?
There were two reality-challenged economies theories presented at last night’s presidential debate. Donald Trump reiterated his theory that the US has been on the skids for 40 years and trade agreements are to blame. It’s more likely most Americans are far better off than they were in the 1970s, and trade is one reason why.
Hillary Clinton had an economic theory of her own. Talking about Trump’s tax cut plan, Clinton said, “Trickle-down did not work. It got us into the mess we were in, in 2008 and 2009. Slashing taxes on the wealthy hasn’t worked.”
This is not a new argument from Clinton, one she mentioned in her presidential announcement speech last year:
Popular periodicals have changed. I’ve been perusing Good Housekeeping, Readers Digest, and Women’s Day for years. Since 2008 or so, I’ve noticed some differences in tone and material. First, there’s far more shameless product placement in the women’s magazines, and perhaps in the Digest too, although it’s more prominent in publications for ladies. Now an article on house decor is not just an […]
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The Hillary Recession
This economy may be perilously close to recession. That was the message of the second-quarter real-GDP report and its meager 1.2 percent growth rate.
Over the past year, real GDP has slipped to a paltry 1.2 percent. Business investment continues to fall. Building and factory construction has dropped sharply. Productivity is flat. The profits recession is still in force.
And what’s the Hillary Clinton plan? Tax us into prosperity.
In her own words at the DNC on Thursday night, this is the fix: “Wall Street, corporations, and the super-rich are going to start paying their fair share of taxes.” Why? “Not because we resent success. [!] Because when more than 90 percent of gains have gone to the top 1 percent, that’s where the money is.”
The “R Word” Is Here and Now
As politicos focused on South Carolina and Nevada, my company was running a weekend roundtable for business owners, where we train and break bread with real people facing real challenges due to the real economy. These people aren’t statistics. They aren’t categorized or sliced and diced into compartments that make up an axis on some government chart. The employees they have laid off don’t consider themselves as U3, U6, or U12. They are real people with real families and real bills.
It is not news that many sophisticated business owners consider the “recovery” weak, at best, and think the economy is most likely in recession. While the equity markets bounce around like a beach ball in the stands of a sporting event, the real fundamentals are causing pause for even the most bullish among us. Now Bloomberg Business reports that recession is already here in several states.
The U.S. States Where Recession Is Already a Reality
January Jobs Report: Any Signs of a Looming Recession?
Not bad at all. The January jobs report — 115,000 net new payrolls, 4.9% unemployment rate — contained lots of good news: the lowest jobless rate since February 2008, a higher labor force participation rate, a higher employment rate, and average hourly earnings up 2.5% from a year earlier with the monthly jump the best since July 2009.
It’s also worth nothing that using the new jobs data, the Atlanta Fed upgraded its first-quarter GDPNow model forecast to 2.2% from 1.2% — a good sign that the US economy is not about to sink into recession after that zero-handle fourth quarter. And this from John Silvia of Wells Fargo: “… growth in the residential and nonresidential construction sectors remains evident in the 18,000 gain in construction jobs last month. These gains represent solid trends supporting continued economic growth and certainly do not signal recession.”
Not everything was great: job gains far short of 185,000 expectations (though averaging 231,000 the past three months), U-6 unemployment-underemployment rate unchanged at 9.9%, long-term unemployment worsened, labor force participation and employment rate still way below pre-recession levels, wages gains short of what you would expect to see in a full-throttle economy. Particularly vexing for Barclays was job weakness in the service sector.
The Fed Is Freaked Out about the Financial Markets
Early in the new year, on Sunday, January 3, Federal Reserve vice chair Stanley Fischer delivered a hawkish speech to the American Economic Association. Completely misreading the economy, which is woefully weak while inflation is virtually nil, Fischer strongly hinted that the Fed would be raising its target rate by a quarter of a percent every quarter for the next three years.
The next day the S&P 500 dropped 1.5 percent. In the week that followed, the broad index fell 6 percent. The week after that it fell over 2 percent. During that two-week period, the Dow Jones dropped 1,437 points.
The dollar went up. Oil plunged 21 percent. Raw material commodities dropped. And credit risk spreads in the high-yield junk market rose substantially.
Another Look at What Caused the Great Recession
David Beckworth and Ramesh Ponnuru take to the pages of the New York Times to explain concisely why it was a tight-money error by the Fed, not the burst housing bubble, that deserves ultimate blame for the Great Recession. If an op-ed isn’t concise enough for you, here is Beckworth from a chart-laden blog post:
To summarize, our argument is that the Fed was doing a decent job responding to the housing bust up until 2008. After that point it tightened monetary policy and catalyzed the reaction that lead to the Great Recession. By the time the Fed changed course in late 2008 it was too late. Interest rates had already cross the zero lower bound (ZLB). Once that happens monetary policy as it is currently practiced cannot do much.
I have blogged quite a bit about this. Of course one doesn’t have to fully buy this market-monetarist take to accept the idea that a more aggressive Fed, earlier, might have at least prevented the worst of the downturn. A bad recession, perhaps, instead of a Great Recession and Financial Crisis. Active monetary policy has a role in dealing with economic shocks — say, a simultaneous surge in oil prices and bursting of a subprime mortgage bubble. Here B&P sum up:
