White-Hot Cycles of Silence

Every once in a while, however, even the mainstream media meanders closer to the actual economics (small “e”) of the real world. Sometimes the evidence simply overwhelms the ideologically enforced myths, leading honest inquiry to tremendous if unorthodox clarity.

One of those cases was written up in The New York Times late in September 2018. If only to (correctly) bash Trump’s “boom”, still there was every reason to suspect before the man took the White House why his economic message centered appropriately around the fakeness of the faulty unemployment rate may have resonated in exactly those states which put the otherwise brash, abrasive New Yorker over the top of the 2016 election.

This one is as historically validated as IP, meaning that the NBER has recognized the close similarities and correlations between negative changes which show up in this broad measure of private economy income (thus, excluding transfers) and the near-certain tendency for real-world contraction. When Real Personal Income Excluding Transfer Receipts stumbles, you can be assured something big is not right.

Whether what’s wrong is recession, this is a question you don’t want to leave to either the media or Economics. They’ve both already pre-answered with the either/or presented up top.

Start with the year 2001; while even today the public gets that year’s recession mixed up with the events of September 11 (again, such a poor job of reporting on economics and economic history), the downturn itself clearly began half a year before them.

Not only did this economic series peg the recession, it also gave up the aftermath which wasn’t recovery, at least not one straight away (therefore, to George W. Bush’s early campaign struggles over “his” “jobless recovery”). During the eighteen months immediately following the trough, the economy was neither in recession nor legitimately recovering.

And this is why Alan Greenspan’s Fed was still cutting rates instead of hiking them as had been projected all the way until June 2003, almost two years after the recession had been declared over (by the NBER).

Fortunately for at least Mr.

The man Bush tapped to replace outgoing Alan Greenspan at the Fed, Ben Bernanke, he would follow no such fortune – to which the entire world would pay a huge price. The very next month after Federal Reserve Chairman Ben Bernanke would tell Congress in March 2007 subprime was contained, in addition to the plethora of contrary curve and market signals, again Real Personal Income excluding Transfer Receipts declared him a fool (to be fair, the data has been revised many times over time though the original series wasn’t actually that far off from the updated pattern).

Part of this non-boom to the decade-long “recovery” effort had to do with all the things it took until September 2018 for The New York Times to notice: “sharp slowdown in business investment, caused by an interrelated weakening in emerging markets, a drop in the price of oil and other commodities, and a run-up in the value of the dollar.”

In short, the eurodollar cycles which aren’t the same as the mainstream’s theory about the business cycle.

Yet, even the data, like the market indications, is consistent including the powerful message contained within this key BEA measure of private economy income.

As you can probably already tell, all this to set up the latest data for, yes, Real Personal Income Excluding Transfer Receipts. Ugly:

Americans, like their counterparts around the rest of the world, are falling further behind, here in the data represented by falling real incomes; the 2-year change for the data (above) is substantially less than at any time during any of the 2012, 2015, or 2019 near recessions.

And, obviously, this takes account of the various massive helicopters Uncle Sam had blithely disbursed last year and the first part of this year.

In fact, despite the helicopters and the obscene glare from “inflation” and the goods economy gone nuclear, even US consumer spending on the whole remains substantially behind the prior trend (which was a post-2008 not-booming trend) due to an impaired services sector which may never come back.

What this data, like the markets, is telling us is that maybe, just maybe despite all the noise about consumer prices and consumers buying up durable goods transitorily, the 2020 “recession” was not papered over and filled in and up by the generous “donations” from Uncle Sam.

While perhaps still a “growth scare”, it’s not really the same as what may be pictured from most if not all commentary; those declare this as a possible slowing down from a white-hot pace, when the actual thing by data and market is a global system reverting to a damaged mean after an all-too-fake bout of artificial activity. It’s hardly stagflation, it’s like 2010 all over again.

Economics is forcing everyone including the FOMC to make the same regrettable errors; from being unable to interpret data apart from anachronistic assumptions about the business cycle to stupidly dismissing these market signals, all to maintain economic silence about what’s really happening. Again.