# America in recession?



## prs (29 August 2008)

What the hell are we supposed to believe? It is alleged that America is in recession and there is doubt in the market and in fact in world economics and there is an obvious downturn in share prices. Now on the ABC news it appears America is far from a recession and things aren't as bad as they seem. Any comments?


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## aacantona (29 August 2008)

Its interesting how many parallels you can draw between what is happening now and what was going on in the 70's. Below is a link of a speech Gerald Ford gave congress in 1974 - known to most as the "Whip Inflation Now" speech. Definitely an interesting watch!

http://millercenter.org/scripps/archive/speeches/detail/3283


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## dhukka (29 August 2008)

prs said:


> What the hell are we supposed to believe? It is alleged that America is in recession and there is doubt in the market and in fact in world economics and there is an obvious downturn in share prices. Now on the ABC news it appears America is far from a recession and things aren't as bad as they seem. Any comments?




Don't believe anyone. I haven't seen the story you refer to but I assume the media hacks saw the second quarter US GDP number and assume that things in the US are all fine and dandy again. GDP is a rubbery number to put it mildly. However the NBER, which makes the offical decision on whether the economy is in recession doesn't use GDP to make their determination. 

The 4 components the NBER uses are:

1) Employment - has been down 7 months in a row.  

2) Industrial production - peaked in January

3) Real personal income excluding government transfers. down for the last 4 months in a row. 

4) Real sales activity - this is the only one of the 4 that gets counted in GDP.

My opinion is that the US economy went into recession sometime in the first quarter of 2008 (probably Feb) and has poked it's head out briefly in the second quarter thanks to the rebate checks. But don't listen to me either. 

Typically the NBER makes the a call on a recession 9 months after it began on average. However it has taken as long as a year to decide in some cases so it could take until next year to hear about it. Could be tricky to call it before an election as well.


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## wayneL (29 August 2008)

Good video from Don Harold on the topic here:


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## dhukka (29 August 2008)

wayneL said:


> Good video from Don Harold on the topic here:





Not bad, he didn't mention unemployment either. As he said, inflation at 27 year highs, yet the PCE deflator, the number they use to adjust nominal GDP for inflation was an annualized 1.2%. Go figure.


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## Kauri (29 August 2008)

When Counties are going into bankruptcy methinks all is not as good as some would have us think..

Cheers
...........Kauri


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## CanOz (29 August 2008)

Thats ridiculous! Its impossible for this to happen. Anyway, I'm sure its just a one off. After all, things are looking up. Didn't you see that great GDP figure?...The US is back!



CanOz


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## dhukka (6 September 2008)

This chart of the US unemployment rate lends weight to the case that the US is in recession. Note that everytime the unemployment rate has spiked sharply the US has already been in recession.


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## Sean K (7 September 2008)

dhukka said:


> This chart of the US unemployment rate lends weight to the case that the US is in recession. Note that everytime the unemployment rate has spiked sharply the US has already been in recession.



Yeah, I think we may be able to assume that the US is already in recession and the economists will tell us that when the data for the past year surfaces.

I also note that the recessions identified seem to correlate with the initial rise in unemployment. So, I've taken a pluck and the green line on my graph below would indicate the approximate area for the recession. Of course, this one may be deeper and longer than most....

I've also been trying to compare recession with the effect on the stockmarket, and there seems to be a correlation by the graph you have presented there, and this non semilog of the DJI. I assume Australia would be the same.


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## dhukka (7 September 2008)

Thought I'd post this one as you can see the dip visually in the S&P500 during recessions. The old rule of thumb was that the bear market is usually over halfway through the recession, that went out the window with the last bear market.


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## dhukka (7 September 2008)

Only have enough historical data to cover one Aussie recession. Bear market bottomed out in the middle of it.


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## dhukka (9 May 2009)

The latest US employment data suggests the 'official' end of the US recession may only be a matter of months away. The main indicator is Initial Unemployment claims which has a pretty good track record in signaling the end of recessions. Although Continuing claims are still setting new records. Of course the unemployment rate, (a lagging indicator) will keep rising for the rest of this year and probably into 2010. 

The discussion will then turn to what type of recovery will come, at this stage it is looking tepid at best.


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## greggles (27 April 2022)

Deutsche Bank warns of a "major recession", predicting that the Fed will aggressively raise interest rates to combat inflation and this will hurt the economy.









						A major recession is coming, Deutsche Bank warns
					

Deutsche Bank raised eyebrows earlier this month by becoming the first major bank to forecast a US recession, albeit a "mild" one.




					edition.cnn.com


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## divs4ever (27 April 2022)

wowee , i know history rhymes ,  but  official data information wise ( reliability ) this seems like a chorus  (from the GFC  days )

 the economy is recovering etc etc  until it suddenly wasn't 

i suspect in real data terms that 'strong recession ' is already here  and has been  settled in for while , other-wise we wouldn't  been mentioning those 'supply-chain issues '  every so often  ( because recession/depression USED to be  terms  of negative GDP GROWTH , not QE measures  currently being implemented )


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## qldfrog (27 April 2022)

divs4ever said:


> wowee , i know history rhymes ,  but  official data information wise ( reliability ) this seems like a chorus  (from the GFC  days )
> 
> the economy is recovering etc etc  until it suddenly wasn't
> 
> i suspect in real data terms that 'strong recession ' is already here  and has been  settled in for while , other-wise we wouldn't  been mentioning those 'supply-chain issues '  every so often  ( because recession/depression USED to be  terms  of negative GDP GROWTH , not QE measures  currently being implemented )



if you have QE and the economy grows less than the QE, shouldn't be that called recession???
I give lent you one k$ today, and your budget at the end of the month is in a $800 profit, are you happy?
same for companies, 10% inflation and your sales/profit are up 5% on the year ; are you in a better shape than last year???
That is (un) common sense but not economists' one it seems


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## Tyre Kicker (27 April 2022)

greggles said:


> Deutsche Bank warns of a "major recession", predicting that the Fed will aggressively raise interest rates to combat inflation and this will hurt the economy.
> 
> 
> 
> ...




I know the Fed is talking tough but surely it will be ‘steady as she goes’ approach over the next couple of quarters.


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## greggles (27 April 2022)

Tyre Kicker said:


> I know the Fed is talking tough but surely it will be ‘steady as she goes’ approach over the next couple of quarters.




Hopefully, but you never know what's in store, or how things will play out. This current spike in inflation looks to be the worst in a generation, and with war in Eastern Europe and the flow on effects generated by it, inflation doesn't look like it's going to be curtailed anytime soon.


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## Dona Ferentes (27 April 2022)

There is a powerful recalibration of all financial assets occurring, driven by expectations of significantly higher interest rates and the withdrawal of liquidity.

The need for a significant tightening in monetary policy is, to state the obvious, due to much higher than anticipated inflation.

Furthermore, the U.S central bank has now told us until it is blue in the face to take them at their word.  Their words are, ‘_we will do whatever it takes’_ to drive inflation back down to their target of 2% inflation.

https://www.federalreserve.gov/monetarypolicy/beigebook202204.htm

The latest Beige Book has references to cost and wage pressures scattered throughout its 32 pages. ...read the section on ‘Prices’ for each Federal Reserve District.

The Beige Book, which Powell reads, tells us that companies are continuing to experience significant increases in input and wage costs.

_...... whether all this brings about a sharp contraction or can be managed is the challenge._


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## macca (27 April 2022)

If the FED had done their job over the past 6 months there could have been a gradual increase in the interest rate, instead, after much procrastinating, they are now looking like a rabbit in a spot light


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## divs4ever (27 April 2022)

qldfrog said:


> if you have QE and the economy grows less than the QE, shouldn't be that called recession???
> I give lent you one k$ today, and your budget at the end of the month is in a $800 profit, are you happy?
> same for companies, 10% inflation and your sales/profit are up 5% on the year ; are you in a better shape than last year???
> That is (un) common sense but not economists' one it seems



 have been watching such antics since 2012 ( it might have been happening before  ,  but  i hadn't joined the dots )  , with jaw and eyes wide open 

 now for 5 years economists have been saying   'trust me ' ( i know what i am doing ) and i do my best to control my chuckles 

 the HARD bit  is trying to find a better path for ME  

 2011 to 2016  i was doing nicely with corporate debt  , BUT i noticed  the debt at reasonable returns  were sliding deeper and deeper into unsecured territory  ( and the good stuff  i already  had was being redeemed OR rolled other into unsecured  garbage  offerings )

 so those 10% to 12% ( per year ) fixed income returns  were being replaced by HIGH risk - low return  bail-in fodder 

 don't worry about the official definitions they will change them , when it suits THEM ( maybe tomorrow , maybe next year )

 listen to  the economists , sure , but only as an indication to how markets might move  ( some poor dears  still think those overpaid talking heads  can do more than create a mess , and therefore move the market  , but not the underlying economy )


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## divs4ever (27 April 2022)

macca said:


> If the FED had done their job over the past 6 months there could have been a gradual increase in the interest rate, instead, after much procrastinating, they are now looking like a rabbit in a spot light



 but the Fed MUST be doing the job , Powell  got rehired  , and only the blatant front-runners got replaced 

 but maybe the job being done  has nothing to do with improving the US economy


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## Tyre Kicker (27 April 2022)

The Yanks and Powell have had the luxury of keeping an eye on inflation monthly - and it was obvious to Blind Freddy that they were wrong re inflation being transitory a fair while ago. Need only read back through the ‘Inflation’ thread to confirm that, which was exactly what most of us knew and were saying.

Surely the Fed doesn’t go over the top and cause another huge problem.


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## over9k (27 April 2022)

Maybe the inflationary pressures are supply side through russian oil being cut off?


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## divs4ever (27 April 2022)

over9k said:


> Maybe the inflationary pressures are supply side through russian oil being cut off?



 well the sanctions are NOT the solution i would be trying  ,  but the inflation problems were obvious  as soon as most governments  reacted to the virus  , but was the inflation storm clouds forming before the start of 2020  , 

 some would suggest Trump starting the tariff wars  was the breeding ground of the current inflation cycle 

 now IN THEORY , bringing US manufacturing  back home  from being partially/fully out-sourced  (  it would help slow the IP leakage as well ) was a better choice , than the previous policy of shipping manufacturing jobs off-shore ( apart from slashing production  costs and increasing profit margins )

one inflation pressure rarely discussed is regulation/compliance costs  ( which tend to increase without reference to the CPI )

but theory and application of the theory often have different outcomes 

and inflation  tends to be a compounding problem   so it can accumulate ( keep the same rate year after year  OR accelerate  , and even slowing inflation  still rises prices  , just not as much as last year )

you could almost claim inflation is baked into the capitalist system , but that would not be true ( all the time ) cutting costs  via better efficiency  can reduce prices in a beneficial way  ( unless it spurs over-consumption  or excess waste )


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