Let's first get it straight, Fed Chair Jay Powell is not the "enemy", Trump is - and he needs to be tossed into a loony bin asap. The nation will not survive even 16 more months of his reckless rule, mental misfires and chaos.
"An order to businesses to leave China? Somebody should tell Chairman Trump this isn't the People's Republic of America." - WSJ Editorial ('Just Another Manic Friday', Aug. 24-25, p. A14.)
The stability of the nation is now spiraling out of control under "Chairman Dotard's" brash edicts and his own deranged judgments, tweets and brain farts masquerading as economic policy. From last Friday through the weekend it's just been one mega-shitstorm with Trump at the center. Those who chided us earlier (like the WSJ's Holman Jenkins Jr.) that we're simply unable to countenance a "disruptive" president, now must admit we've got a rank loony tune on our hands who needs to be put into a straitjacket. Marched out of office for his own good (and ours) under the 25 th amendment, of course.
This after he went off the rails last Friday, ordering American businesses out of China - as if he's the 2nd coming of Mussolini- then sending the markets into a nosedive, tacking on even more (and higher tariffs) on Chinese goods. By one estimate from a reputable source this will cost the average American family $1,000 over the next year. Well, say hasta la vista to your Trump tax cut, kiddies.
Let's begin with the definition of a recession since that is the central topic of this post, and also how deranged Trump groupies are trying to deny its arrival. Or shift the blame in advance to the Fed and Jay Powell.. The generally accepted definition is that a recession occurs when output (generally measured as GDP) decreases for two consecutive quarters. The more technical definition is from The National Bureau of Economic Research: "when there is a significant decline in economic activity lasting more than a few months."
As reported in The Denver Post Business pages (July 25th, 'U.S. Manufacturing In a Technical Recession, How Worried Should We Be?') ) the U.S. is already in a "technical recession". This means that while the immediate statistics are showing significant slowdowns, i.e. in manufacturing output, the official econ gurus have not yet declared it as such. The reason? Such identification is generally given a year or two ex post facto. For example, the "great Recession" which began in 2008, was only deemed so in 2010-11.
But already anyone concerned ought to be paying attention, i.e. the news from last Friday (WSJ, p. B11) that the "yield curve inverted for a second day" This followed a Treasury report on Thursday showing that "manufacturing activity slowed this month to the lowest level in almost ten years."
And note, please, this was nearly 4 weeks after the Denver Post account warning that we are already in a technical recession. The $64 question then becomes: How long can it be between a technical recession and fully recognized one? I would say not that long. The hubbub in the media now is between the Trumpies who keep trying to deny it, or blame the Fed, and the rational side which knows what is happening and that - hey! - it is 99.9 percent Trump's doing.
So we begin with the observation that we continue to be ruled by an ignorant madman and presidential poseur who has not the slightest concept of the actual responsibilities of the office he occupies, the duties incumbent upon it, or the nature and aspects of the U.S. Constitution. Far less any remote knowledge of economics given he has no clue what the tariffs he's imposing are all about. All he does is flail, spout gibberish, backtrack, change his mind, and keep the global economy in a state of uncertainty as to his next brain fart- spawned move.
Incredibly, too many media and other enablers seem to have similar problems, or are willing to give this mutt a pass. So that's where we pick up and take a look at some of the codswallop spewed out in the past week for starters:
Let's first bring on a hysterical crackpot named Peter Bruno who penned the following in a Denver Post Letter to the Editor (Aug. 21, p. 12A):
"When all their bogus accusations to take down President Donald Trump have failed, the Trump haters and media have resorted to a recession to try defeat the president in re-election. Starting with Bill Maher, the leftist media have all gone on a campaign hoping an praying for a recession."
Hopefully by now, 5 days later, Bruno has had a chance to take his meds and perhaps get his weekly ECT. Mainly this bozo needs to recognize that no "leftist media" is "hoping and praying for a recession". (Also he conflates Maher's HBO comedy emphasis show with leftist media and also with corporate mainstream media). Neither the WaPo or NY Times - both corporate mainstream media- is advocating or endorsing such, though they are (correctly) publishing warnings of recession (such as in The Denver Post) based on two instances of the inverted yield curve - the latest on Thursday. It is true Bill Maher - as well as yours truly -also believes recession is the lesser of two evils, the greater of which is 4 more years of Herr Trump - which will have this nation in a permanent dumpster fire. But even so, Maher does not constitute any formal part of the media in the same way as the two newspapers mentioned. He is after all a comedian, and his show 'Real Time' on HBO is a comedy and discussion offering. To conflate Maher's facetious opinions on Real Time with sober warnings given in the mainstream corporate (not "leftist") press is to expose one's ignorance for all to see.
Anyway, not content to spout his preliminary rubbish, Bruno goes on:
"Can anyone imagine the hate of some for the president would supersede the welfare of the people."
Well, can anyone appreciate the hatred for Hitler as he began to impose his own (Reich) laws by fiat? Taking away Jewish property, tossing journalists into the camps, setting up mock courts for bogus prosecutions of Weimar justices? This imp Bruno clearly doesn't grasp that the concepts of 'hate' and 'welfare' are both relative. They are relative to the person hated, and to the supposed "welfare" he would ensure or protect if his power survived an election. In the case of Trump, we've seen he ensures nothing, nada! If he did he would not have imposed a de facto hardship tax of $1,000 a year on each struggling American family arising from his tariffs. Nor would he be leaving the nation's farmers and manufacturers adrift with his deranged usurpation of the tariff power of congress. Think that is protecting welfare? No, it's inflating his own ego and power like the bully he is. Hence, he merits only utter contempt - even hate if you choose to call it that - and the welfare of the nation over his survival. Hence, rationally if his electoral survival depends on no recession, the genuine citizen and patriot must hope for recession. Better some temporary distress than total destruction. Better a bout of salmonella than getting cholera.
And for the biggest howler:
"I wouldn't mind the prognostication if it was based on solid indicators, but a very slight inversion of yield sent the stock market into a selling frenzy. I quote the reputable economist Arthur Laffer "I'm not, right now, concerned about a recession."
So let's get this straight. We are "haters" for either seeing a recession coming, or indeed counting on one to remove Trump's last prop (his 'great' economy) - to liberate the nation from this pestilence. But this nimrod is still open to the prognostication IF it "is based on solid indicators". And yet the most historical and accurate barometer of all, the inverted yield curve, he rejects. To fix ideas, an inverted curve means that bond investors expect growth to slow so much that the Federal Reserve will soon have to resort to drastic action (i.e. cutting short term rates) to support the economy. The problem inheres in when all other signs of the economy are highly stimulative including jobs numbers, and stock share prices.
But instead of acknowledging the importance of inverted yields, we see Bruno endorsing a blurb from Arthur Laffer whom he describes as a "reputable economist".
How about a disreputable charlatan and dummy, the inventor of the infamous Laffer curve? First we need a bit of background. The "Laffer curve" (see diagram below):
Was originally sketched on a napkin and on the fly, by Laffer in 1974. Laffer was then at the University of Chicago and traveled to Washington, D.C. to meet with Donald Rumsfeld, Gerald Ford's then chief of staff, Dick Cheney and Wall Street Journal editorial writer Jude Wanniski to discuss Ford's support for raising taxes.
Laffer had a new theory on why tax rates were inefficient and high, or one might say "inefficiently high".
As it happened, Rumsfeld had other commitments so dispatched Dick Cheney instead to a bar, where the meeting took place. (See, e.g. Economics for the Rest of Us by Moshe Adler, Ch. 6) Laffer then proceeded to sketch his infamous diagram on why the rich could be said to be "over taxed".
As drawn, it was totally convincing, especially for a guy like Cheney with minimal math skills. Note the line defining the highest marginal tax rate of 70% for Gerald Ford's presidency. What Laffer's curve sought to show is that by cutting that rate down, say to 50%, one could increase the revenues by nearly 35%! In other words, the economic equivalent of a perpetual motion machine. Little wonder most real economists believed him to be 52 cards short of a full deck. After all, if one could increase revenues by cutting taxes 20%, imagine what one could do by cutting them more than 40%, or even 80 percent!
Thus did Laffer's curve become the basis of Reagan's tax cuts and the whole tax cut- supply side idiocy ever since, despite the fact that in reality no community, nation or even human body has managed to survive or grow by virtue of starving. But try to tell the bulk of Americans, who continue to buy into this codswallop at a mind-boggling rate! Despite the fact there's never been evidence it's actually worked! (As per a Financial Times examination of the Bush tax cuts in Sept, 2011, showing essentially zero benefit and exploding deficits.)
In like manner, the Trump -GOP tax cuts of 2017 have been found to be a colossal flop and weren't remotely close to paying for themselves as the braying buttbrains (like Paul Ryan) claimed. All they've done is raise the deficits another $1.7 trillion.
So Bruno's invocation of the quote by a numskull like Laffer - to defend his argument of no evidence for recession- falls flat. As flat as Laffer's curve over the last 3 decades.
But one of the best responses to Bruno's nonsense appeared in yesterday's Denver Post letters section, compliments of Dick Dunn, from Longmont. He wrote:
"Why and how have Americans become so gullible? It is blatantly obvious that Donald Trump's failed tariff war has both restricted economic growth and made financial markets incredibly unstable - as well as crippling various American industries. Yet too many Americans are willing to give him a pass and accept his blame game against the Fed,"
Well the reason too many Americans are that way, Mr. Dunn, is because critical thinking is no longer required as part of American higher education. So too many - like Peter Bruno- just accept blather from "on high" or from a degenerate power monger and authoritarian narcissist like Trump.
But even Bruno's fulsome efforts are pitiful besides the PR swill spewed in a WSJ column by Andy Puzder and Jon Hartley ('Recession Fears Are Overblown', Aug. 21, p. A15).. Therein the two clowns trot out a bevy of distractions and canards. So we're supposed to buy into the claims made that the economy is going strong ("GDP rose 2.1 % in 2nd quarter, consumption looks strong, productivity -output per hour increased" etc.) ? Thanks but no thanks.
Interestingly, merely a day after this bollocks was published the WSJ editorial warned (p. A16):
"If Mr. Trump wants to give the economy a policy boost to prevent a recession, he can cut his trade uncertainty tax This is the pall over business investment that is a major result of his trade policies."
Noting before this that "business investment is falling amidst a climate of policy uncertainty" and Trump is not even aware of how his "trade brawls with the rest of the world are weakening the economy".
Oh and that includes the global economy by the way, which is in a dynamic interplay with ours, so despite Puzder and Hartley's efforts to isolate the U.S. from the world, this isn't going to work. And we can further note ('Stumbling Global Economies Heighten Fears of Recession' Aug. 23, p. A5) that:
"Manufacturing activity is falling in most of the world's advanced economies, another sign that a deepening global slowdown is weighing on the U.S. expansion."
In other words, the global economic ills affect our own future, and can't be ignored. Yet, neither Messrs. Puzder and Hartley or our letter writer Bruno, mention the global connections, the adverse effects and especially the god awful negative impacts of Trump's ill-conceived trade war and tariffs. An unforced economic error of monumental proportions if ever there was one. As the WSJ piece goes on (ibid.):
"The International Monetary Fund last month said a sharp deceleration of global trade driven by trade tensions slowed the global economy more than expected in the spring. It forecast global growth, adjusted for inflation, would fall to 3.2 % this year from 3.6% last year and 3.8 % in 2017."
Adding:
"The decline in U.S. factory activity appears to be tied to these factors."
IN other words, the slowdown in global growth affects our own and the source of both is Trump's erratic trade policy and tariffs, especially the latter directed at the world's 2nd largest economy. All of which shows that the selective (cafeteria-style) arguments proposed by those pooh-poohing recession border on the pathetic, if not the laughable.
The WSJ editorial again:
"Mr. Trump and his trade Rasputin, Peter Navarro, claim there's been no harm from his tariffs. But his actions belie the claim."
Then pointing out how he delayed a new round of tariffs on some imports from China lest they raise consumer prices before Christmas. Hence, if the tariffs created no harm such a move would not be necessary. All of this was before Trump upped the ante for economic pain globally on Friday, by threatening to tack on 30 % tariffs on another $250b b of Chinese goods (on Oct. 1st) . Oh, and a further roughly $300b of Chinese fare will see tariffs rise to 15 % on December 15th (WSJ today, p. A6). Last but not least let's recall Dotard ordering - via tweet- all U.S. businesses to depart from China and find other markets elsewhere. Where? In Vietnam which has barely one tenth the population and vastly fewer workers to ensure the manufacturing capacity is maintained? Far less the QA procedures which were developed in cooperation with China over decades.
Really want to know why the current technical recession may well morph into a formal one? Look no further than the deranged, authoritarian narcissist mutt we're saddled with as president - now blowing out more brain farts at the G7 meeting. To the point a fellow UK buffoon (Boris Johnson) even had to take him to task, i.e. "We don't like tariffs on the whole!", WSJ, today, p. A6, 'U.S. Left Isolated At Summit' )
See also:
And:
And:
