Tag Archives: Recession

Are We Already in Recession? by Charles Hugh Smith

Charles Hugh Smith argues the US economy is already in a recession. He’ll get no argument from SLL. From Smith at oftwominds.com:

If we stop counting zombies, we’re already in recession.
How shocked would you be if it was announced that the U.S. had just entered a recession, that is, a period in which gross domestic product (GDP) declines (when adjusted for inflation) for two or more quarters?
Would you really be surprised to discover that the eight-year long “recovery,” the weakest on record, had finally rolled over into recession?
Anyone with even a passing acquaintance with the statistical pulse of the real-world economy knows the numbers are softening.
— Auto/light truck sales: either down or off a cliff, depending on how much lipstick has been applied to the pig.
— Restaurant/dining sales: down.
— Tax receipts: down.
— Retail sales: flat, stagnant or down, depending on the sector and if the numbers have been adjusted for inflation/loss of purchasing power.
— Rents in high-rent regions: finally softening after years of relentless increases.
— Consumer debt: hitting new highs.
— Corporate profits: stripped of gimmickry, stagnant or down.
Those who study recessions know that employment often tops out just before the economy rolls over into recession. Strong employment is the last gasp of an expansionary phase.
There are several fundamental reasons why we might be in a recession that manages to avoid the official definition. The starting place is the artificial nature of the eight-year long “recovery” since 2009; in the view of many observers, the economy never really exited the 2008-09 recession.
Those in this camp look at fundamentals, not the stock market, which has been held up as a proxy for the real economy, when in fact it is only a proxy for financialization and official selection of the market as the (easily manipulated) signifier of economic vitality and prosperity.
To continue reading: Are We Already in Recession?
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Why This Market Needs To Crash, And likely will, by Chris Martenson

This article’s conclusions are nothing you haven’t heard from SLL and its guest posters, but it is well reasoned and well supported. From Chris Martenson at peakprosperity.com:

Like an old vinyl record with a well-worn groove, the needle skipping merrily back to the same track over and over again, we repeat: Today’s markets are dangerously overpriced.

Being market fundamentalists who don’t believe it’s possible to simply print prosperity out of thin air, we’ve been deeply skeptical of the financial markets ever since the central banks began their highly interventionist policies. Since 2009, they have unleashed over $12 Trillion in new money into the world, concentrating wealth into the hands of an elite few, while blowing asset price bubbles everywhere in the process (see our recent report The Mother Of All Financial Bubbles).

Our consistent view is that price bubbles always burst. Which is why we predict the world’s financial markets will implode spectacularly from today’s heights — destroying jobs, dreams, hopes, economies and political careers alike.

When this happens, it will frighten the central bankers enough (or merely embarrass them enough, being the egotists that they are) that they will respond with even more aggressive money printing — and that will then cause the entire money system to blow up. Ka-Poom! First inwards in a compressed ball of deflation, then exploding outwards in a final hyperinflationary fireball (see our recent report When This All Blows Up…).

It really cannot end any other way. Money is not wealth; it is merely a claim on wealth. Debt is a claim on future money. The only way to have faith in our current monetary policies is if one believes that we can always grow our debts at roughly twice the rate of GDP — forever. That is, compound the claims at twice the rate of income year after year from here on out.

This would be like having your credit card balance rolled over every month as the balance grows at 10% each year, while your income advances at only 5% per year. Eventually you simply have a math problem: your income becomes swamped by your debt service payment. First you are insolvent, then bankruptcy eventually follows.

To continue reading: Why This Market Needs To Crash, And likely will

 

This Is How the Status Quo Unravels: As the Pie Shrinks, Everybody Demands Their Piece Should Get Bigger, by Charles Hugh Smith

Demographics and debt guarantee that the American pie will shrink for a long time. That will inevitably lead to political conflict. From Charles Hugh Smith at oftwominds.com:

Fragmentation, discord, discontent, class war: this is the inevitable result of a shrinking pie.

The politics of the past 70 years was all about horsetrading who got what share of the growing pie: the “pie” being cheap energy, government revenues and consumption, sales and profits.

Horsetrading over a growing pie is basically fun. There’s always a little increase left for the losers, so there is a reason for everyone to cooperate in a broad political consensus.

Horsetrading over a shrinking pie is not fun. Everybody is shrilly demanding their piece of the pie should either grow or be left untouched; any cuts must come out of someone else’s slice.

Everyone turns on their most compelling emotion-based defense: “we wuz promised” is a reliable standard, as is “we need more money to defend the nation from the rising threat of XYZ.” “Help those in need” plays the heartstrings effectively–as long as the “help” comes out of somebody else’s pocket.

Everyone sharpens their knives, the better to carve a slice off somebody else’s slice of the pie. A passive-aggressive free-for-all ensues as everyone reacts with aggrieved defensiveness to any attempt to diminish their slice, even as they launch shrill attacks on everyone else’s defense.

As the pie shrinks, the motivation to join a broad consensus vanishes like mist in Death Valley. Any cooperation is merely a brief tactical move designed to carve a big chunk off another player’s slice. Once that’s accomplished, the alliance quickly splinters as the survivors battle over the meager spoils.

To continue reading: This Is How the Status Quo Unravels: As the Pie Shrinks, Everybody Demands Their Piece Should Get Bigger

Recession 2017? Things Are Happening That Usually Never Happen Unless A New Recession Is Beginning, by Michael Snyder

Real GDP increased an estimated 1.6 percent in 2016, and for each $1 increase in growth, debt increased $5.70. If you have to borrow $5.70 to generate a buck’s worth of growth, are you even growing? Notwithstanding growth bought with debt and the official statistics, SLL argues that the economy has been in a recession, headed for depression, for several years (see Debtonomics Archive). More support from Michael Snyder at theeconomiccollapseblog.com:

Is the U.S. economy about to get slammed by a major recession? According to Gallup, U.S. economic confidence has soared to the highest level ever recorded, but meanwhile a whole host of key economic indicators are absolutely screaming that a new recession is beginning. And if the U.S. economy does officially enter recession territory in 2017, it certainly won’t be a shock, because the truth is that we are well overdue for one. Donald Trump has inherited quite an economic mess from Barack Obama, and it was probably inevitable that we were headed for a significant economic downturn no matter who won the election.

One of the key indicators to watch is average weekly hours. When the economy shifts into recession mode, employers tend to start cutting back hours, and that is happening right now. In fact, as Graham Summers has pointed out, we just witnessed the largest percentage decline in average weekly hours since the recession of 2008…

In addition to the decline in hours, Summers has suggested that there are a number of other reasons to believe that a new recession is here…

The fact is that the GDP growth of 4%-5% is not just around the corner. The US most likely slid into recession in the last three months. GDP growth collapsed in 4Q16, with a large portion of the “growth” coming from accounting gimmicks.

Consider the following:

• Tax receipts indicate the US is in recession.
• Gross private domestic investment indicates were are in a recession.
• Retailers are showing that the US consumer is tapped out (see AMZN’s recent miss).
• UPS, another economic bellweather, dramatically lowered 2017 forecasts.

To me, even more alarming is the tightening of lending standards. In our debt-based economy, the flow of credit is absolutely critical to economic growth, and when credit starts to get tight that almost always leads to a recession.

To continue reading: Recession 2017? Things Are Happening That Usually Never Happen Unless A New Recession Is Beginning

After Obama, a New Dawn or More of the Same? by William L. Anderson

President Trump will be faced with a decision: let a painful economic contraction perform its therapy on the economy, or use the same sorts of gimmicks President Obama did to try to kick the can down the road. From William Anderson at mises.org:

Nearly four decades ago, political pundits were shocked as voters turned away President Jimmy Carter and voted in Ronald Reagan, who promised to bring fundamental change to Washington and the indwelling political establishment. At the time, unemployment was rising quickly and inflation raged in double-digits, and Reagan had promised to deal with the economic failures by cutting income tax rates, slashing government spending, and reducing the regulatory burden.

As we know, Reagan succeeded in convincing Congress to do one of those three things — cut income tax rates — but the spending and regulatory monster continued to grow. The Carter administration already had initiated most of the major deregulation initiatives, and Reagan’s role in that area was minor at best. Reagan had to deal with something else in 1982 that threatened to turn his presidency into a one-term failure: a major recession in which the nation’s unemployment rate rose to above 10 percent and the disappearance of whole swaths of the nation’s industrial sector, resulting in what has been called the “Rust Belt” of the northern United States.

Ending 1970s-Style Inflation

We know the rest of the story. The economy recovered (despite interest rates that were above 10 percent) and Reagan won re-election in 1984 in a huge electoral landslide. We also know that while the Reagan administration had many failures, capital investment nonetheless turned toward the “high-technology” sectors and telecommunications.

To continue reading: After Obama, a New Dawn or More of the Same?

 

“Or We’ll Lose the Whole Middle Class”: Gallup CEO, by Wolf Richter

Regular readers of SLL know the economic recovery, such as it has been, is faltering and may be over. From Wolf Richter at wolfstreet.com:

Jim Clifton, Chairman and CEO at Gallup, who presides over endless surveys of American consumers and businesses and knows a thing or two about them, has a message for the media and the political establishment that seem to be clueless: this meme about the recovering economy – “It was even trumpeted on Page 1 of The New York Times and Financial Times last week,” he says – “I don’t think it’s true.”

In an article posted on Gallup’s website, he made his case:

The percentage of Americans who say they are in the middle or upper-middle class has fallen 10 percentage points, from a 61% average between 2000 and 2008 to 51% today.

Ten percent of 250 million adults in the U.S. is 25 million people whose economic lives have crashed.

What the media is missing is that these 25 million people are invisible in the widely reported 4.9% official U.S. unemployment rate.

Let’s say someone has a good middle-class job that pays $65,000 a year. That job goes away in a changing, disrupted world, and his new full-time job pays $14 per hour — or about $28,000 per year. That devastated American remains counted as “full-time employed” because he still has full-time work — although with drastically reduced pay and benefits. He has fallen out of the middle class and is invisible in current reporting.

And these “Invisible Americans,” as he calls them, are facing the “disastrous” emotional toll often associated with a sharp loss of household income. It hits “self-esteem and dignity,” and produces an “environment of desperation.” Even many American with good jobs and incomes are just “one degree” away from the misery of those with falling wages, or the underemployed or unemployed.

Clifton names three metrics that “need to be turned around or we’ll lose the whole middle class”:

1. According to the U.S. Bureau of Labor Statistics, the percentage of the total U.S. adult population that has a full-time job has been hovering around 48% since 2010 — this is the lowest full-time employment level since 1983.

2. The number of publicly listed companies trading on U.S. exchanges has been cut almost in half in the past 20 years — from about 7,300 to 3,700. Because firms can’t grow organically — that is, build more business from new and existing customers — they give up and pay high prices to acquire their competitors, thus drastically shrinking the number of U.S. public companies. This seriously contributes to the massive loss of U.S. middle-class jobs.

3. New business startups are at historical lows. Americans have stopped starting businesses. And the businesses that do start are growing at historically slow rates.

“Free enterprise is in free fall — but it is fixable,” he says. It all depends on small businesses. They need to thrive again. They’re “our best hope” for the economy to pick up some speed. And once they’re thriving again, they can “restore the middle class”:

Gallup finds that small businesses — startups plus “shootups,” those that grow big — are the engine of new economic energy. According to the U.S. Small Business Administration, 65% of all new jobs are created by small businesses, not large ones.

To continue reading: “Or We’ll Lose the Whole Middle Class”: Gallup CEO

US Tax Receipts Have Never Done This Without A Recession, by Tyler Durden

SLL will be vacation 8/12-8/18 and will resume posting 8/19.

US tax receipt growth is slowing dramatically. While it’s always good news when the government takes in less, in this case it also signals a weakening economy and perhaps a recession. From Tyler Durden at zerohedge.com:

US Federal Tax Receipts are rising at just 1.2% year-over-year (12-mo rolling), slowing drastically from its 13.4% YoY growth in June 2013. While “it’s probably nothing,” we thought readers may be interested to note that the last six times tax receipt growth was at this weak a level, the American economy was in recession…

So ignore US Tax receipts (hard data), ignore US productivity (hard data), ignore the bond market (hard data), and ignore GDP expectations… but pay attention to the non-farm payrolls headline data – because that’s what you’re told to do!!

http://www.zerohedge.com/news/2016-08-11/us-tax-receipts-have-never-done-without-recession