Whole lot of people looking REALLY stupid this week arguing about the definition of a recession. Julius Shiskin, in a paywalled article in the Times printed in 1974, listed several indicators of a recession. One of which was the two quarters of negative "GDP". This is what people adapted as a single indicator rule of thumb.

The problem is he did not use GDP in that article but GNP, as GDP was not the standard until 1991.  Also listed other indicators for recession that have been ignored. In his work, he used 18+. Also he said the single indicator of GNP cannot properly determine recession due to the nature of time series data, and he said this in that article, his research and in congressional hearings. 

Best of all, GNP did not drop Q1 2022, only GDP did.  Which would mean no recession now using the ORIGINAL definition of a recession everyone is claiming to use.

NBER, which he worked for, always used a more nuanced definition for recession.

His full paper of economic indicators that he used.

www.nber.org/system/files/chapters/c0737/c0737.pdf


///

People want the recession to shift the Trump recession to Biden and claim he is ruining the economy, like they shifted the Bush recession onto Obama.

"US household debt surpassed $16 trillion for the first time ever during the second quarter"

"There are hints, however, that some lower-income and subprime borrowers are now struggling to keep up with their bills. The report found that the delinquency transition rate for credit cards and auto loans is "creeping up," especially in lower-income areas."

www.cnn.com/2022/08/02/economy/consumer-credit-borrowing-surge/index.html

Who in general is keeping up with their bills?

Aug 2, 2022 19:06:02 GMT Gyro LC said:

"US household debt surpassed $16 trillion for the first time ever during the second quarter"

"There are hints, however, that some lower-income and subprime borrowers are now struggling to keep up with their bills. The report found that the delinquency transition rate for credit cards and auto loans is "creeping up," especially in lower-income areas."

www.cnn.com/2022/08/02/economy/consumer-credit-borrowing-surge/index.html

The trigger moment for collapse will be when student loan payments trigger again.  Set to happen this month.  When they go live most  people will no longer be able to pay their bills.

We can all relax now... The US congress has passed the "Inflation Reduction Act"
Which is a fantastic peace of legislation... If you want bills that increase spending with ZERO reduction of inflation.

Great to know you can just slap a fashionable name on a bill and pass it.

www.forbes.com/advisor/personal-finance/inflation-reduction-act/

Reduces my costs. Medication price caps means more stuff will be available for me without trying cheaper alternatives first, and drugs that were not covered prior, can be covered now with reductions.

Gas sub $4 dollars here easing a lot of inflation tension already. Of course corporations will not lower their prices they increased because of rising fuel and thus rising shipping costs. But at least on the energy front have some easing.

CPI dropping to 8.5% showing Dark Brandon is so strong, the Inflation Reduction Act is working before it even signed into law.

Aug 10, 2022 12:55:43 GMT c said:

CPI dropping to 8.5% showing Dark Brandon is so strong, the Inflation Reduction Act is working before it even signed into law.

I am just going to talk about inflation and ignore where you obviously have your head right now.
Headline inflation has come down which  is a really good thing.
It is pretty much just off the back of energy costs reducing.

Inflation is not at it's core about energy costs, though they were like rocket fuel.
Headline inflation has dropped to 8.5% from 9.1% which is great, but everyone is overlooking the fact that 8.5% is still a terrible number.

When you drill down on the core inflation numbers:
Core prices, which exclude volatile food and energy items, increased 0.3% in July following a 0.7% rise the prior month, according to the Labor Department's Consumer Price Index.

This is still trending in the wrong direction.
The stock market went nuts on the news and is calling peak inflation.
Which it may be if you are looking at the headline rate, but I see that interest rates will keep rising until core inflation shows signs of coming down.
Powell is trying to knee cap the economy and it doesn't even look like it is limping yet.

And energy costs were where Americans were suffering the most. Red states still facing sky high energy costs as gas is still being sold overseas, and their energy companies compete for it, but for the rest of us, things are dropping fast. Gasoline down 25%. Once chips start to flow again cars will drop. Housing is dropping. Correction is coming.

I am all for Powell slamming that rate increase button. Still far too low. Since we are already in a economy shattering depression, should just rip the bandaid off and up it to 5%.

Aug 11, 2022 2:04:56 GMT c said:

And energy costs were where Americans were suffering the most. Red states still facing sky high energy costs as gas is still being sold overseas, and their energy companies compete for it, but for the rest of us, things are dropping fast. Gasoline down 25%. Once chips start to flow again cars will drop. Housing is dropping. Correction is coming.

I am all for Powell slamming that rate increase button. Still far too low. Since we are already in a economy shattering depression, should just rip the bandaid off and up it to 5%.

I have never been focused on the pain of the consumer.
My interest is always in the underlying strength of the economy.
Energy prices reduces costs to the consumer, but has little impact on the economics of inflation.

There's still too much cheap money floating around in the economy.
The fact the market bounces so high on any news that isn't outright terrible is a sign that things are still too over heated.

America subsidies the risk to large investors. Means they can make far more risky trades than a traditional model would allow. Not gonna change until they fail and the taxpayer refuses to bail them out.

Aug 11, 2022 5:22:09 GMT c said:

America subsidies the risk to large investors. Means they can make far more risky trades than a traditional model would allow. Not gonna change until they fail and the taxpayer refuses to bail them out.

That's what higher interest rates should do

I am all for high rates. But moving them to 2.5 had people screaming recession. Move any higher and they will scream that the American economy has utterly collapsed.

Plan now sadly is just to go to 4.5 by 2024 with .5 increases every six months or so.

So the markets had inexplicably convinced themselves that crossing peak inflation mean the Fed was going to pause or even drop interest rates and the markets had been rallying the last couple of weeks.

Uncle Jerome levelled on Friday, inflation is going back to 2% whatever it takes. I'm pretty sure this makes a recession a dead set certainty. Lucky if it's not a depression, the market is so overcooked that to cool it down it's going to practically kill it.

A whole generation of investors who keep forcing stocks up because the idea that they could go down is fundamentally inconceivable to them.
Rude shocks a plenty on their way.

Now they claim inflation is part of a healthy economy and rate hiking is bad. And they will flood the media with that message because the people who own media stations are on that whole buy, borrow and die financial strategy that requires near zero interest loans to remain profitable.

Aug 27, 2022 21:16:54 GMT c said:

Now they claim inflation is part of a healthy economy and rate hiking is bad. And they will flood the media with that message because the people who own media stations are on that whole buy, borrow and die financial strategy that requires near zero interest loans to remain profitable.

They're correct, but not at the current levels.
People don't really understand where economic growth comes from.
There are two ways to grow your economy... One is through exports, if you export more than you import then your economy is growing.

So the USA:




Is currently importing 650 Billion dollars more than it is exporting.... So where does the growth come from?




Essentially, all of your economic growth is debt.
Every single time someone buys something on their credit card or takes out a loan a bank is essentially creating money out of thin air.
I don't think people understand this really, that banks in the USA have ZERO requirements to hold even a fraction of the money they lend as deposits:




So in the USA you have banks loaning money out at near zero rates with no limitation to how much money they can lend.
Stupid monetary policy lead to this whole mess.

You have hedge funds borrowing money at near zero interest rates and using it to purchase shares.
When everyone is doing the same thing, the asset prices roar up in value, but it is all built on debt manufactured by artificially stupid lending practices.

Well, I am taking the GOP at their word. For a truly great enocony we should go all in inflation then. Lets get that number into triple digits by pushing universal basic income, medicare for all, free college for all, free housing for all, lets just go all out. I mean if 8% inflation is good for the economy, 108% must be fucking fantastic!!!

///

Those lending practices and that low rate will never done away with in the US. GOP takes over they will push the interest rates back towards 0. The rich demand it, and they can bribe the GOP to make it happen. The mega-donors that fuel the GOP war chests live off that buy, borrow, die loop as so the largest corporations. They will spend billions to force interest rates back to 0.

Aug 29, 2022 2:07:33 GMT c said:

Well, I am taking the GOP at their word. For a truly great enocony we should go all in inflation then. Lets get that number into triple digits by pushing universal basic income, medicare for all, free college for all, free housing for all, lets just go all out. I mean if 8% inflation is good for the economy, 108% must be fucking fantastic!!!

///

Those lending practices and that low rate will never done away with in the US. GOP takes over they will push the interest rates back towards 0. The rich demand it, and they can bribe the GOP to make it happen. The mega-donors that fuel the GOP war chests live off that buy, borrow, die loop as so the largest corporations. They will spend billions to force interest rates back to 0.

What the hell are you talking about? Are you high?

Right wing media says inflation is good now, so we need to get that shit higher. I mean if 8% is good for an economy, then 80% should be fucking fantastic.

Aug 29, 2022 4:36:12 GMT c said:

Right wing media says inflation is good now, so we need to get that shit higher. I mean if 8% is good for an economy, then 80% should be fucking fantastic.

Where are people saying inflation is good?

Got pundits now claiming that inflation is healthy for the economy to try to convince people that raising rates to combat inflation is a bad idea. US has huge money being pushed to get people to go out and do whatever they can to turn the public against rate hikes.

Aug 29, 2022 6:03:13 GMT c said:

Got pundits now claiming that inflation is healthy for the economy to try to convince people that raising rates to combat inflation is a bad idea. US has huge money being pushed to get people to go out and do whatever they can to turn the public against rate hikes.

Where? I haven't seen any articles to this point.
Some inflation is necessary, but nowhere near current levels.

Rate rises are not the domain of either party, so that is a stupid issue to raise.
What is more accurate is the notion that Biden's administration is administering inflationary policy, which renders the rate rises ineffective.

it is like Biden has his foot on the accelerator and Powell has his foot to the floor on the brake.

I will post the next one that pops up on my twitter. And rates benefit the GOP now in the US as they are the main people who want to ensure the boy, borrow, die lifestyle stays the way for the rich avoid taxes. Dems want to close these loopholes, so they do not care about keeping the rate limit low. The GOP wants it at or near zero.

And Dems are inflationary no matter what they do while the GOP are the champions of fiscal policy. I mean Trump doing a massive tax cut followed by spending 5 trillion dollars I am sure had no actual impact on inflation.

Aug 29, 2022 6:33:47 GMT c said:

I will post the next one that pops up on my twitter. And rates benefit the GOP now in the US as they are the main people who want to ensure the boy, borrow, die lifestyle stays the way for the rich avoid taxes. Dems want to close these loopholes, so they do not care about keeping the rate limit low. The GOP wants it at or near zero.

And Dems are inflationary no matter what they do while the GOP are the champions of fiscal policy. I mean Trump doing a massive tax cut followed by spending 5 trillion dollars I am sure had no actual impact on inflation.

I don't know why you keep clicking back into your partisan talking points.
Today's inflation spans from policy enacted by Bush through to Biden and everyone in between.
Every single president and Congress has defacatad in this particular bed.

It's doesn't change the fact that Biden's current policies are making the situation worse. The more we spend while the Fed is trying to cool inflation, the higher the rates have to go for longer.

Aug 29, 2022 6:03:13 GMT c said:

Got pundits now claiming that inflation is healthy for the economy to try to convince people that raising rates to combat inflation is a bad idea. US has huge money being pushed to get people to go out and do whatever they can to turn the public against rate hikes.

Warren is pro-cheap credit, always has been given her background is in creditor's law.  Everyone is going to scream recession to keep those rates low, because they either have money that requires it or the people they work for are pressing for it.  The powers that matter in the US want 0 percent interest rates no matter how high inflation gets.  

Inflation still at 8 percent, and everyone is saying raising rates to cool it more will simply ruin the economy now.  8 percent inflation they do not consider a problem compared to interest at 3%.

Aug 30, 2022 0:10:53 GMT c said:

Warren is pro-cheap credit, always has been given her background is in creditor's law.  Everyone is going to scream recession to keep those rates low, because they either have money that requires it or the people they work for are pressing for it.  The powers that matter in the US want 0 percent interest rates no matter how high inflation gets.  

Inflation still at 8 percent, and everyone is saying raising rates to cool it more will simply ruin the economy now.  8 percent inflation they do not consider a problem compared to interest at 3%.

I only brought it up, because scanning the news feeds Warren as a Democrat is the only person claiming high interest rates are a mistake.

There are only two ways out of high inflation
1. Deflate asset prices
2. Reduce spending

The Fed really can only affect the second one.
To me there is no argument, the USA is in a recession and it will only get deeper, it comes with the territory.
Powell is trying to reduce spending.

The very definition of the word "Recession" is to "Recede" which is also the stated goal of Powell's policy.
It would be easier to collapse asset prices, but that would put the banks into serious jeopardy.
I wonder how much of the SPY market cap is actually secured with credit?

I follow the US markets pretty closely and I cannot decide whether we have:
Irrational exuberance - based in stupidity
Market manipulation - based in a desire to protect positions

The markets whether they are stocks or crypto keep bouncing off their lows.
There is no reason for optimism or for people to be buying into the markets based on Powells comments.
So we have a scenario where either the market has forgotten how to keep their powder dry because "stonks always go up" or whether we have big hedge funds manipulating prices because it is a hell of a lot cheaper to burn 100k on pushing a stock price up, than to get margin called on your $100 million dollar position.

With the Crypto market, I am 100% convinced the latter is the case. The volumes are way to thin for the sort of price swings that we are seeing.

Worldwide inflation is getting fun now. Europe in a recession and China joining them soon, with some markets entirely collapsing. Insane that one bill passed through Congress can tank the entire world simply because America spent 400 billion on its citizens.

Munger is Buffets right hand guy at Berkshire Hathaway