The One Topic No One Is Discussing

Tyler Durden's picture

Earlier, Deutsche Bank's iconoclast Jim Reid dared to point out the painfully obvious: that something has drastically changed since the Great Financial Crisis (what that "something" is, is clear to all those whose year end bonus does is not contingent on never pointing out the printerphant in the room). This time around, instead of looking back, he looks forward, to the year 2014, and brings up the two questions nobody dares to ask: i) what happens if 2014 is the year when the recession can no longer be delayed, and ii) how will the Fed, already having doubled down on every last "bullet" in its arsenal, use monetary policy to provide a burst of growth when even $85 billion in flow per month is no longer enough...

From Deutsche Bank's Jim Reid

The curveball for 2014 – A US recession

One topic no-one is really discussing is a US recession in 2014. We should start to at least consider the risk given the maturity of this cycle. By the end of 2013 this expansion will be 54 months old which is longer than the average of 39 months (median 30) since data started to be compiled on US business cycles in 1854. The average in the 100 years since the Fed was formed in 1913 is 50 months (median 42). This cycle is now the seventh-longest of the 34 cycles since 1854. Economists will explain that recessions don’t die of old age but because of imbalances that they might argue are not yet present. However consensus never forecasts a recession in advance so one has to find other ways to help us identify the end of the cycle. Across most other regions, business cycles have shortened post the GFC with many economies experiencing a dip into negative territory again sometime between 2011 and 2013 after the recovery in 2009 and 2010. A lack of policy flexibility (fiscal and monetary) post crisis is our main explanation. The US has just about escaped this due to extraordinary monetary and fiscal stimulus. However with both likely on the retreat at the same time in 2014 it’s prudent to acknowledge the already mature length of this cycle.

So the most obvious driver of financial markets in 2014 does seem likely to be how the Fed, the global economy and the market manage to handle the question of the QE taper. Whether the ECB need to implement negative deposit rates or introduce QE will also be a big driver. However experience teaches us that it’s not usually the obvious theme that ends up dominating in the following 12 months.

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Stuck on Zero's picture

This chart should have been a scatter plot. 


SafelyGraze's picture

the expansion in the 80s (100+ months) and 90s (120+ months) was just one single expansion 

with a momentary taper

starfcker's picture

I completely agree that entire period was one 25 year expansion, fueled by things that can and cannot be duplicated now. reagan slashed taxes at the top rate from 70% down to high 20 something per cent. that was huge. nothing bush or obama does with tax policy can do anything like that, because we aren't starting from such a high point. second, money had velocity back then. money bouncing around a town lifts lots of boats. money going to china does nothing for america. third, reagan simplified regulation, it was a great time to start a small business. obama is at war with small business, using every tool in the federal toolbox to crush it. small business is incompatible with centralization and globalization. We will never have even a decent economy again without a return to broad money.     e

Spitzer's picture

I'm 29 years old.   Still havn't seen a real recession in my life. House prices are still going up here in Canada

OldPhart's picture

You've been living in one you're entire life.

For the last thirty years money has become meaningless.  To you it's normal.  To us geezers, it's the damnest weirdest thing we've ever seen.  There used to be standards and rules to investing, now there are none.  Central banks have changes everything in the last thirty years.  I even, these days, doubt the rule of 72.

Late onset ADHD's picture

beyond wierd, OldPhart...

my industry for almost 30 years has been an econometric model... leading indicator of recession, lagging indicator of recovery.

the last 10 years, my "model" has been beaten to death with a lead pipe.

I'm too old for this shit.

Seer's picture

When things just don't add up you've got to question the premise.

Because the System is predicated on perpetual growth on a finite planet everyone sees it through that prism (though not being able to see the absurdness of this premise.  I suggest that we're now facing the reality that there just ain't no more growth to be had (we pulled as much forward as we could) and that all models (based on growth) are pretty much meaningless.

"I'm too old for this shit."

And that's part of the problem, not enough new folks out there to carry the Edward Bernays brainwashing techniques- us older folks are becoming hip (some are slow) to how this all comes down.  My only option is to accept that it'll be harsh, and muscle-up, or voluntarily check-out...

Woody Allen summed it all quite well:

"We stand today at a crossroads: One path leads to despair and utter hopelessness. The other leads to total extinction."

BoNeSxxx's picture

+1 Seer (logged in at 05:20 just to do that)... I don't know who junked you -- your comment is spot on.

Growth (and the illlusion that it is ALWAYS good and neessary) serves only the money meme and the fact that it REQUIRES a constant influx of greater fools in order to sustain itself.   

Once people recognize this simple fact, many many things that once confused them begin to make sense.  Unchecked immigration in the Euro and the US is one such example.  The flood gates are open because the populace is put down as collateral (via taxation) by nations in exchange for loans from the central banks... simple and truthy - junk away trolls and FSA sympathizers. This 'system' has been in place since the ancient Phoenicians and pre-dates even the Egyptians and it has been dusted off and repeated after crashing every nation where it has been allowed to exist.

When policies don't serve the people, one has to ask 'who (or what) is being served'?  

Both Jaques Fresco and Peter Joseph have done interesting modeling on what a resource-based (non monetary) economy would look like... it's fascinating to think about really.  A world free from war, highly valued education, spiritual and thought evolution, humankind progress, etc rather than the constant cycles of boom, bust, war, collapse, kick the money changers out, prosper, allow them back in, boom, bust, war, collapse, kick the money changers out, prosper, allow them back in, rinse and repeat ad nauseam...

new game's picture

why the fuck can't people say "TOO MANY OF MYSELVES"!!!

yea you are part of the problem.  too many births w/o regard to checks and balances.

yea, modern medicine is only temp/ as check and balance will catch up.

as long as food ramps(including food byproduct ie. crap food) we will grow in numbers.

but that growth may be sputtering as mother(BITCH) EARTH SAY WHOOOO, enough already.

soon enough it will be a woody allen day of true fight for survival of food, water and shelter.

shelter is optional as nomadic will be best imo....

packs of wolves preying on darwins food of the future...

grim reality coming to a decade soon...

and 90 percent will be clueless.

I like to look at it mathematically-ie fab retrace.

6 billion growth(advent of oil) in last 110 years and retrace(demise of) 62 percent of growth=...


BandGap's picture

Me too, I have never seen anything like this. Big changes taking place in very short periods of time. The Brown Clown might not be doing anything new, but he sure has his foot on the accelerator. If people look at what he does thorught the lens that it is meanto to cause maximum confusion, the picture brightens up immeasureably.  He and his minions want nothing more than total conversion of this economy where control at the top is the ultimate goal. Doesn't matter which party is in control, either. They are one in the same.

Bizaro World's picture

"You didn't build that..."

Why would any small business owner feel the gubmint is out to get them?


Seer's picture

Yeah, this has only just started under Obama... </sarc>

"Get big or get out." - Earl Butz (assistant Secretary of Agriculture under Eisenhower; Secretary of Agriculture under Nixon)

This is about farming!  For fuck's sake, people, wake the fuck up!  NOTHING FUCKING NEW HERE!  If we're willing to centralize our food production (as Butz was encouraging- there's NO other destination when it's a race to Big and Bigger- consolidation until you hit TBTF) then we're willing to centralize EVERYTHING. (note: I need not mention Kissinger's remarks about controlling food; note #2: these are BOTH appointees by Republican administrations, which goes to point out the absurdity that one "party" is responsible for the continued march toward centralization [which is really pretty much about economies of scale])

That people are so fucking myopic (because of their fucked up partyu-programming shit) is why there's not a shot in hell of fixing a damn thing.

starfcker's picture

butz pretty much invented disposable income in america. his agricultural policies brought the cost of feeding your family from about 35% of gross income to under 20%. again, problem? better answer? again, you are demonizing policies that were good for america. i thought that's what government was for.

Ned Zeppelin's picture

Reagan slashed taxes, generated the beginning of the modern endless federal budget deficits and arguably spawned the Rethuglican policy of endless tax cuts and irresponsible borrowing.

No wonder it looked like a party - it was, on the world's biggest Platinum Card.

Demoncrats no better of course. But Reagan started a lot of this mess we are in now.

starfcker's picture

ned, i would disagree with you. here's why. first, reagan's tax cuts in 1981 helped pull us out of a stagnant economy (70% rates are economic killers, ask britain) within a couple of years, as the economy got stronger, he re-raised rates, particularly on the low end. people tend to value a society more when they are vested participants. think i'm wrong? with the now tax paying poor in his pocket (huh?) reagan swept to a landslide 49 state victory in 1984. why? average, not median income rose about 25% during his 2 terms, with low inflation. people's lives were made better. that changed the instant clinton signed NAFTA, in effect telling workers your labor will soon have the same value as a third world slave. 

Seer's picture

ZH even had an article not too long ago that dismissed most of the "Reagan as economic hero" shit...

GetZeeGold's picture



Your honor, I ask the prosecution to name a better President since Reagan.


That's what I thought.......the defense rests.

GetZeeGold's picture



It's a pitiful political party.


Are you talking about the progressive right or the progessive left?

What's the difference again?

GetZeeGold's picture



And here I was just hoping they would all just up and die already.

new game's picture

what part of SPENDING don't you all understand. to this day it is for the most part ignored.

if by law the government COULD NOT spend more than tax reciepts - would we have a problem?

it is not the prez- it is CONgress spending- daaaaaa..!!!

GetZeeGold's picture



It's easy to spend money when you don't have a budget.


Do you have a budget......if so.....can we borrow it?


The President submitted one but it got voted down by....well embarrassing is that crap?

new game's picture

truth is gov has become disfunctional and is not even following the law.

nation of laws? for whom? Not I, I am a senator. I am above the law...

fucking total sham ass mess-beyond repair>bring on the violence for REAL change...

jerry_theking_lawler's picture

I tend to 'disagree' with you both....this all started in 1913. All of it.

Seer's picture

The rubicon was 1971: peak US oil production; USD full-fiat; opening of "trade" relations with China.  Reagan, and every administration following Nixon's, was pretty much left with a partial deck of cards.  In order to continue playing the game it was necessary to resort to bluffing and smoke and mirrors.  It's meaningless to blame anyone here, as doing so only tends to distract from fully understanding what the year 1971 really meant: the end of real PHYSICAL growth (virtual, thanks to computing, has been holding the gap since [and is now slipping]).

starfcker's picture

seer, that's just not true. the left always likes to rewrite reagan. we were as messed up in 1980 as we are now, the only difference was as much as carter hated america, he didn't hate americans. we became a prosperous nation again under reagan. it was pretty good, i lived it. if great conditions to start and run a business with minimal interference from the federal government is not the best thing possible, what is, in your eyes? i'm not starry eyed about this, but what do you think started the 25 year economic boom graze and i are talking about? it sure as fuck wasn't globalization. do you really think gay marriage and women in combat are doing to save us economically? don't worry, bathhouse is on the job.

new game's picture

it is so hard to evaluate a period of time as current "policy makers" are gaming and pulling fwd some shape and form of il gotten gain for today at tomarrows expense! just the way it is. much more complex than anyone can put their thoughts around-too many dynamics-hence political discourse and the stupid red/blue endless discussion of who the fuck is right or wrong- it is simply the biggest gun forcing smaller guns to do as i say...violence or the threat of violence(by laws) is what rules the day-rad maryjane credit-thnx...

starfcker's picture

new game, i agree with you, but dealing with reagan we have the value of hindsight. what set reagan apart was he was very nationalist. he believed the world was a better place if america was strong and prosperous. the left hated him then as much as they do now. i don't carry around a ronnie reagan lunchbox or anything, but there is a lot of hand wringing on this site about how do we fix things. reagan showed how it's done. no bullshit. just fix things.

long-shorty's picture

I'm only in my 30s, so I don't know what life was like before I was around, but it seems to me that much of the idea of capitalism as religion, of "if it makes good business, it is good," or that profit is the ultimate arbiter of right and wrong, much of that sentiment really grew and prospered under Reagan and Thatcher.

Congrats to Pope Francis for being the Man of the Year in 2013. Humanity does need to aspire to something more than just profit. Not saying the Catholic church has it all right and Reagan-Thatcherites have it all wrong; there is a place for both kinds of thought (like government really should make laws and rules that align incentives in a way that makes sense). But man, if life is all about the $, it is a very hollow life.

paintman's picture

Reagan wanted to cut taxes and spending. House Speaker Tip O'Neal agreed to cut taxes first and spending later. The Democratically controlled House never followed through on their end of the agreement. I think this current agreement will end up much the same.

Wahooo's picture

Budget deal. BTFD again. Always.

12ToothAssassin's picture

Stuck on Zero: "This chart should have been a scatter plot." - Better yet a Scatter Chart aka a schart.

Professorlocknload's picture

Hear that Janet? The R word. Pedal to the metal!

Everyman's picture

A recession in 2014???  How come because of "One of the greatest financial crises" in recent times since 2008-9, when "extraordinary measures" were needed, we started QE, and here we are 5 years STILL IN QE??? 


Where did this "economic expansion" and "growth" occur???


These financial idiots cannot figure out we have NEGATIVE GROWTH!!!  And have had for OVER 5 YEARS!!!

Yes_Questions's picture



+appropriate rant ups



ThroxxOfVron's picture

Those aren't 'financial idiots': those are Financial Terrrorists,

Further, that 'negative growth' you refer to would more accurately be described as Looting.

The 'extraordinary measures' and QE are Looting, Confiscation, Repression and Theft.

ISEEIT's picture

All true enough of course.

Perception, 'optics' is all that matters though and these sick f^cks can can stiil blow this bubble for quite some time.

williambanzai7's picture

No, the one topic no one is discussing is what a towering pile of FWMD DB is.

NoDebt's picture

It's a sliding scale, WB.  Compared to what other towering pile of crap?

SafelyGraze's picture

let us be the first to point out what a towering pile of crap is DB


disclaimer: the views and opinions of this post do not necessarily reflect those of mocatta and HSBC


Skateboarder's picture

I'm sure Ben's super stoked on his new job as bitch.

Yes_Questions's picture



I don't know what those acronyms stand for, but Douche is in there at least once huh?

ProtectiveFather's picture

Financial Weapons of Mass Destruction - Deutsche Bank

disabledvet's picture

maybe that's why the American branch is calling for a recession. "we're already in one."

Shizzmoney's picture

Lakshman Achuthan will have his revenge!!!111

disabledvet's picture

that really is one of the greatest songs played live in history. here it is again: saw EC live around this time in Albany, NY...poured rain the whole show...we made the front page of the paper but never got "Let it Rain."

401K of Dooom's picture

Recession in the US?  I wanna see Greece go "Mad Max: Beyond Thunderdome!"

Yes_Questions's picture



Should I laugh or cry over this?



One topic no-one is really discussing is a US recession in 2014. 


NoDebt's picture

I called the start of recession in August of this year here on ZH (and moved to 33% cash with that call).  Shows you what the fuck I know.  Even if I'm right it doesn't mean squat to the markets.  They have their own ecosystem now.  No need to be bothered by the real economy.

And, byt the way, the "real" economy (if there is such a thing) has continued to stink since the summer.  Nobody gives a crap.

Now I don't give a crap either.

fonzannoon's picture

I stopped giving a crap as well.

Peter Pan's picture

And when there is nothing left to eat, we definitely won't be giving a crap.