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The Coming US Recession Charted
Submitted by Eugen von Bohm-Bawerk,
The idea of an imminent US recession may seem moot as all the self-proclaimed experts and talking heads still acts as we are well into a recovery and patiently waiting for the forthcoming escape velocity which will take care of all ills plaguing today’s over-indebted society. Never do they stop to think about why things looks as dismal as they do. Not once have it ever occurred to them that unprecedented accumulation of unproductive, or even counter-productive and destructive, debt in itself might be the very cause for low growth. No, these people have the audacity to claim low growth is the reason for high debt ratios, and only through even higher leverage against household and public income can economic growth rates be re-established on previous healthy levels to once again render out-of-control politicians lust for spending sustainable.
The sheer scale of the backwardness shown in such gross economic illiteracy suggest to us there is ulterior motives behind so-called Keynesian economic theories. No grown-ups would take this seriously if our monetary masters didn’t need to look out for their buddies running fractional reserve warehouse scams across the planet.
Perfectly in line with our thinking presented in Goebbelnomics a key aspect of communication from our money masters is to put current economic conditions up on a pedestal. Take the latest GDP forecast from the Federal Reserve as a perfect example. Despite the fact that first quarter GDP fell at an annualised rate of 0.7 per cent and higher frequency data going into the second quarter have underperformed there are people within the Federal Reserve System who still believe the US will grow by 2.3 per cent this year. For that to happen, assuming quite generously a 2 per cent annualised growth rate in the second quarter, the third and fourth quarter must each grow by 4 per cent for the math to add up.
For 2016 it is even worse. Once again we are told to expect escape velocity, but as the two charts below show, the FOMC have consistently predicted higher growth than what turned out to be the case after the fact. The exact same is true for IMF, World Bank and ECB forecasts. We do not blame them for being wrong, GDP forecasting is a fools guessing game after all, but if they were truly guessing there should not be any consistency in their error. Always too optimistic. Or always trying to condition the great masses into creating their own wealth effect and presto escape velocity.
Source: Federal Reserve, Bureau of Economic Analysis, Bawerk.net
What our two simple charts goes a long way of proving is that Goebbelnomics has very much become bread and butter of institutionalised mass-manipulation.
However, asking the very same people where they think interest rates will be at the end of 2015 they all agree that the US economy will remain on life support.
Source: Federal Reserve, Bawerk.net (note, red dots indicate the median projection)
There are only two persons in the FOMC that have the interest rate expectation right; and they believe rates will be kept at current level even after the December meeting. Perfectly in line with continuous postponement of so-called lift-off. It will as usual turn out to be a dud.
What we know already is that the US “expansion” is among the longest on record and if history rhymes, as it often does, it is soon time for a new recession – and that with both fiscal and monetary policy stretched beyond recognition.
Source: Bureau of Labor Statistics (BLS), Bureau of Economic Analysis (BEA), National Bureau of Economic Research (NBER), Bawerk.net
In GDP accounting personal consumption expenditure account for just under 70 per cent; which tells you just how lopsided the whole concept of GDP really is. The best monthly proxy for consumption expenditure is retail and wholesale sales. As the next chart shows, US retail sales has been struggling for quite some time. On a month on month comparison retail sales fell in December, January and February, had a good month in March before coming to a standstill in April.
Source: US Census Bureau, National Bureau of Economic Research (NBER), Bawerk.net
The May number was unexpectedly strong, but the seasonal adjustment factor suggest that number will eventually be revised down. Non-seasonally adjusted “core” retail sales fell compared to last year suggesting the underlying trend is weakening, not strengthening.
Source: US Census Bureau, Bawerk.net – Hat tip to ZeroHedge for adjustment factor
What is more worrisome though, from a retail sales perspective, is the build-up in inventories. The inventory to sales ratio has been on a downtrend for the last three decades due to improved demand management, but relative to trend retail inventories are pushing a two standard deviation difference. We didn’t even see this after the dot-com crash. Bloated inventories are highly indicative of a coming inventory liquidation cycle, in other words a “normal” post WWII recession.
Source: US Census Bureau, Bawerk.net
Activity in the wholesale market may be a leading indicator for what to expect in the retail business over the coming months. Wholesale trade has been falling while inventories has been building. The inventory to sales ratio is clearly in recessionary territory.
Source: US Census Bureau, Bawerk.net
The manufacturing sector is obviously not doing any better as the weak retail and wholesale trades reverberates throughout the supply chain.
Source: US Federal Reserve, Bawerk.net
And we know for a fact that the oil and gas extraction part of the IP complex, which contributed almost 50 per cent to overall IP over the last 12 months, will not fare well in the near future as the shale industry contracts on back of falling CAPEX. When the HY energy investor wakes up, maybe due to a quarter from Yellen, the carnage will be that much worse.
Source: US Federal Reserve, Bawerk.net
Judging by the level of factory orders, we should not expect a positive contribution from industrial production regardless of the whimsical allocation from the HY investor.
Source: US Census Bureau, Bawerk.net
While some may claim the latest hiring spree suggest things are not as bad we contend that without a spurt in labour productivity this development will soon turn for the worse. US productivity has been lacklustre over the last fifteen years, and while both employment and hours grew over the last five quarters, the marginal labour added came at a severe cost. Labour productivity actually fell suggesting hiring has been nothing more than “labour inventory accumulation” and will have to be liquidated along with the rest of capital misallocations witnessed in the US economy if interest rates were ever to increase.
Source: Bureau of Labor Statistics (BLS), Bawerk.net. Hat tip to Alhambra Investment for second chart
It is also worth noting that most of the new hires is in the less productive service sector which provide low paying jobs without benefits.
Summing it all up, the last chart of US GDP together with cumulative goods sale and inventory accumulation since 2000 should tell you everything you need to know. The US economy is now on the verge of a new recession.
Source: Bureau of Economic Analysis (BEA), Bawerk.net
Our prediction, which should always be taken with a grain of salt, is that the FOMC will maintain ZIRP (we consider a 25, or even 50bp hike within the range of ZIRP) well into 2016, the US will soon experience two consecutive quarters of GDP contraction and the strong dollar will change on the prospects of another round of QE.
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This place is fooked!
Seems rather than looking downstream to find out what's happening...we should look upstream at the changing popultion (true in US and all advanced economies).
The demographic tailwinds enjoyed by Reagan and Clinton were a time when the US was annually adding 2+x's the # of 0-54yr olds than 55+yr olds. The numbers of consumers, home buyers, etc. were exploding...now we annually add almost 10 new 55+yr/olds for every 0-54yr old. The 55+ set are moving into liquidation mode and very dependent on unfunded social safety nets...not the stuff that will drive American consumerism or further indebtedness.
This trend has at least another decade before it starts to normalize so very curious the Fed's real motives in dealing with a demographic crisis as if it were a liquidity problem. The chart in the link shows it all very clearly...
http://econimica.blogspot.com/2015/06/0ne-simple-chart-explains-great.html
And the majority of new 0-54 year olds are Hispanic/Black/etc wholly dependent on other unfunded social safety nets.
The demise of white Europeans as the majority stock of America will be the .50 cal head shot to the country. Death will be instantaneous at that point. All that will be left of America is pieces of brain matter splattered all over Canada.
Interesting...all 25-54yr/old jobs growth has been latino and asian (both '00-'08 and '08-'15) while all jobs losses have been white and black in both periods.
Link lays it out.
http://econimica.blogspot.com/2015/06/not-time-to-be-white-or-black-male-and.html
The economy reminds me of a plane that is nose-high...into a stall. The pilot is saying "yeah, we're headed for the sky!", ignoring the fact that he will soon be crashing into the ground.
Natives are pussified. Latinos and Asians work longer and harder than Natices is what Corporations want.
The white Middle Class is broke; it's as simple as that. Part of the problem are those overpriced houses [mortgages] they locked into while their wages have gone no where or worse, they've been fired [ooops, I mean "restructured"].
Add that to soaring property taxes and insurance premiums and cost of kids, etc....
It's very Bleak from what i can see for them.
I was driving through a city in my state as I heard on the radio that home prices there had appreciated about 20% this last year. I checked Zillow and it looked about right.
There is no connection whatsoever to the economy, at least for now. We have just reinflated the bubble that last burst in 2008.
I suspect that is where a lot of the faux prosperi'ty is originating once again.
VERGE?????
So, buy CAT, TWTR and Chinese solar stocks, right?
Yes, Leo, that is the correct course of action.
My gawd...lots of negatives these days. The white shoe boys now have actual shills on here too...signed up shills - congrats and all but the people here are smarter than you and make more than you.
Your post of buying cats and twatter was clearly sarc but 2 entities being paid didn't think so. As for the article in question - it is pretty much msm. It is what msm will print when the us bubbles collapse. The actual truth is that we have already been in a pseudo depression and the greatest depression of all is coming quickly.
twitter and cat was obvious sarcasm, a truley balanced portfolio would be cat and walmart or twitter and apple.
to the moon alice. Dow Jones 1 trillion by 2022 - CNBC is working on the hats, they are trying to figure out how many zeros in a trillion. Liesman has his shoes off, counting on his toes and scratching his head as he tries to cipher it out...
Dow Jones 1 trillion - 2022 you read it on zerohedge first...
It screams MOAR Perpetual QE.
Our children will thank people like you when they are begging in the streets for many years to come...
America is finished... >>> https://www.youtube.com/watch?v=Q4oInT79CUk =(
Sure they will and will beg for scraps
I don't think the elite have enough soldiers & police to contain what's coming, unfortunately... =(
the future is beyond police and soldiers. its about bunkers and safe houses and waiting it out.
The morons are restocking their nuclear arsenals. Mutual Assured Destruction, will either be nuclear or monetary or both, but it is our destination.
Buy more canned meats, spam is now available with cheese, one can will get you body armor, bullets or fresh water, its the trade good of the 21st century.
MA,
He's just reading the tea leaves for the highest probability event - and I agree with him. IT seems that you are trying to blame him for QE.
I've disconnected my penis and attached it to the backside of my ass just in case I need it during the upcoming recession.
I think you really mean depression Eugene, we have never left the recession/depression of 2008 aside from all the money printing and government subsidized programs
LOL
So Bruce was just planning for the future?
Send your balls to Bernanke, he could use a pair. I think Janet Yellen, the white queen, has his.
"attached it to the backside of my ass"
Where exactly is the backside of an ass?
No fear. QE18 will solve all problems.
So will G&G's
Gallows Brothers. "We shall hang no slime, before their time"
Guillotine Shavers. "For a really close shave"
Bankers and Politicians are welcome.
This is what I hope to witness one day. All the liars and obfuscators (bankers and politicians) hanging from lamp posts and their heads being drug around by dogs.
Good. At least we will have something to eat.
Amen.
recession means progression for the happy few.
Its all a question of perspective and Reaganomics and Thatcherism have hatched an economy where the 1% say hello dolly and the 99% say goodbye to all that !
So choose you aisle in the church of new capitalism where zirped debt is asset in Casino market or debt is hangman's noose in real economy !
At this point, why not do 'helicopter' money? I mean, if you're going to piss away trillions, and they will during the next 'recession', you might as well give it to the people rather than the banks. Cut everyone a check for a cool million bucks. Sure, it'll cause inflation, but everyone will feel richer, and as we know feelings are superior to reality.
Bernie 2016
He knows anything else but printing for the people is certain revolution
Unfunded EBT is helicopter money
GO USA !!! GO USA !!!
Merika Stronk! Mother Fuckers!
Yup, undeniable. Rates will rise, slowly, as that how your rein in debt expansion. Bloated inventories will pressure pricing, deflation is good. Those who over extended their means will fall victim to the oligarchy squid. What part of this seems out of control to you?
On another note I was recently hired by a industrial manufacturing company. Funny thing was they were boasting about the government subsidy they acquired to go ahead with the hiring! What's even funnier is that almost 5 months later they are still looking for qualified people!! Just wow.
Rates went sky high to reign in the inflation from the '70s.
Supposedly inflation is running below 2% so rates don't have to rise... Yet prices have exploded so far this year. Even more so than the past few years. In everything that matters inflation is running at 30%+ in 2015.
True inflation says that interest rates need to skyrocket, now.
What was $10 is now $15. What was $50 is now $75.
Sure a 50" TV has dropped below $500 but you don't buy that everyday.
You seem to be highlighting a conundrum there... Things don't quite add up. Then again when did they? People stop buying tv's they start buying food. Business landscpes shifts. Hopfully the robots run out of sun.
Inflation is limited by the deflation - people cant afford to buy things with only part time jobs and small guv transfers; except of course food prices.
8 bucks for ground chuck.
The price of meat has gone up and your old lady has just gone down. - Frank Zappa - Cosmic Debris.
I miss Frank...
The new FED Toolbox = a bag of Red Shield brand Bernanke Platinum Coin series Insta-Drop™ QE Hammers.
Ben Bernanke Platinum Coin Hammers with Insta-Drop™: the finest dropping hammers you can buy!
Bernankes are the finest in hand-held helicopter dropable monetary weapons. -IF you're dropping hammers your dropping Bennies!
...& be sure to try our new Maiden Lane line of Muppet Anvil™ and Pensioner Piano™ free fall fiscal destruction products for the flattest yield curve and low low low real rates today!!
Don't forget the Investment Banker Grade Nail Guns. Remember, 10, 10 Penny Nails make a Bernanke Buck. IBG Nail Guns are the only Fully Automatic Nail Gun on the market, the machine gun of fastening tools.
Comes with optional headstrap to reduce recoil on suicides, er I mean accidental deaths.
Can't but help but wonder whatth kids of today will have a future. Are parents that dumb to have kids and to have hight hopes?
I, and my family by extension, will come out on top after the reset... we own land in a very wet LatAm country, have a house, barn, greenhouse , well, solar panels on all, gold, guns, cash and ammo. Am I 100% ready..? Not likely, but I'm certainly trying...
Fear of an uncertain future is not a reason to deny oneself the joys of raising a family. It should just provide extra motivation to make sure that you can provide in good times and bad...
Be happy don't worry. Go buy a house on 100% ltv then go buy a brand new car with 0% for 84 months! Only in America!
Stupid sheep!
US inflation has been consistently understated by 3% to 9% for decades now. So US growth is overstated by 3% to 9%. So whenever US GDP has been under 3%, the US has been in recession. But it would be so unpatriotic to report the truth in the land of the free and the greatest nation the world has ever known.
Per the Chapwood Index, real GDP growth from 2011 to 2014 has been -6.2%, -6.5%, -6.5%, -4.1% resp.
Besides, truth is treason in a fascist, police state.
http://www.zerohedge.com/news/2015-05-29/inaccurate-statistics-and-threa...
http://www.chapwoodindex.com/
http://www.shadowstats.com/alternate_data/inflation-charts
Are We Already In Recession?
Yes, Virginia, we are in recession now.
Source: Federal Bureau of Investigation (FBI)
Our prediction, is that the FOMC will maintain ZIRP.
- Damn, Law Enforcement is coming down hard! S/
Are they now enforcing laws of economics?
"they" don't enforce shit, evidently. However, the laws take care of stuff. The economic laws are a little slower than gravity, unfortunately.
The coming U.S. implosion?
When I'm done flipping burgers , shining shoes, cleaning toilets, and feeding my bastard children, we can discuss the depression of '08.
Sleep well bitchez~ ;-)
If your wallet money is vectoring to pay housing bubble debts, then every time you pay down the principle, the former credit disapears from existence. Poof.
This means that money is NOT availabe for buying goods and services from you neighbor.
If your wallet money is vectoring away to the banker to pay usury, then that money becomes available to the banker to HOLD. The amount of usury on a long term "credit" loan from a banker is considerable. For example, a 100K home could be 300K over 30 years, due to the magick of compounding. Also, the usury is front loaded on a loan.
This means that housing bubble debts first went to pay the banker, where the usury could then be respent on luxury goods. Then later in the debt cycle, the principle begins to be paid down, and pooof, credit as money starts vanishing. This is balance sheet recession time; the party from the past needs to be paid for today.
Paying usury to the banker does not necessariy mean that he is respending on goods and services, he could easily be dabbling in financial paper and thus just making more debt claims on the future.
Wallet money vectoring away to pay all the various payroll taxes is another large hit for American's, maybe 30 percent. That tax money is re distributed , and not in an efficient way. The loss to taxes is tiny compared to welfare for the rich, and this welfare is buried in prices, so it is invisible to most.
So, American's cannot buy each others production.
Additionally, as if it wasn't bad enough with all of the junk economics, Wall Street is shifting jobs to Asia in order to take wage arbitrage. So, American's cannot buy from their neighbors, but instead have to buy from foreigners, while finance takes rents on wage arbitrage.
If TV is telling you to BUY you really should be selling, if they tell you to SELL you should be BUYING, and likewise when they say it's a Recovery they really mean depression.
Just do the exact opposite of what the experts on TV tell you to do.
Mr. Potter knew these truths.
Bubbles can be deflated in a predictable and controlled way. You just insert the pin slowly and the air hisses out gently. I tried it with soap bubbles.
A mid-depression recession... ROFL!
I have spend a lot of time thinking about this.
But to put in a nutshell it goes like this.
There are 10 fish in the sea each man needs a fish to survive, there is enough oxygen in the air for 10 men and enough clean water for 10 men.
Problem is there are 20 men.
Scattered about and all with different interests, but some of them are game and get together and talk about fish stocks and replenishment and cleaning the shit out of the air, and saving clean water and not wasting it.
And to be fair they do a good fist of it in some cases but I see them going at at it but one thing still stands out.
There are 20 men and next year there will be 30.
And whatever they do its not going to leave enough fish water or oxygen to make me feel I might go short one day.
So, what do I do if I want to survive.
I tell you what I do, I make a lot of noise and encouragement for everyone to get behind all the conservation shit.
But in reality I know one thing, if I want to be sure I get my fish and water, and are not going to start gasping for breath then there is only way.
I'm going to go out there whilst they are ll distracted by their mumbo jumbo bollox on conservation and I'm going to kill ten men . probably 12 to be sure.
This is the preamble now, I'm not taking any chances at all now, I'm getting out and staying out for the next 5 years minimum, as i see any wars lasting at least that long and I can't see this shit going on above a year or so at the most.
Like Greece, I expected it might stretch out until year end before the inevitable happens, i could see a way that it get drawn out that long, but now I think half that time.
The crash is nearer than people think and by October the whole western world will now be in the throes of the depression ever, even if it takes another 3 years to bottom.
The cull will start during that time and it will be bloody.
How will they do it, Well you don't send your soldiers to do it, You keep them in reserve, until the cull is near its end,.
No you turn them against each other, and the easiest way to do that is starvation. and starvation is as good a way as nature ever had to cull oversized populations.
another advantage is that it is the fittest who survive.
The weak go against the wall when it comes to food.
Interesting times. Greece, China , Russia Ukraine, ME, and Africa in a state of meltdown, and the only thing missing is the utter collapse of the $US and the SPY.
When that happens I will wager its a race then to see who gets culled and who doesn't over the next few years, But a cull is coming and that I am certain of now
News anchors lie, US News lie, USG lie, Banks lie - all lie .... 'Merica
when i buy goods from China, I receive them in a week to 10 days, it used to be 3 to 6 weeks.
I think China has experienced a dramatic drop in orders if they can fill my piddle dink orders as fast as they do.
That means a lack of demand (orders) from Europe/USA, that means lack of discretionary consumer spending, that means depression.
Walmart sales and CATerpillar sales are down, the least wealthy and the most wealthy are not spending. That means depression.
Walmart is now middle class -
Dollar Store, Dollar General, The .99 cent store & Dollar Tree are where poor people shop.
I'm living in a think tank
Working for the west bank
When she needs imagination
I can get the job done
Don't ask me for my flight plan
I'm the quintessential night-man
I've got my orders in my right hand
As I sail into the sun
I'm waiting for that certain inspiration
I'm sure she'll be amused when I'm done
When she sees my lights on the water
Then she'll know leaving time has come
Go tell Leonardo, "Mona Lisa is alive."
Prepsite.org: You don’t have to be a professional prepper http://www.prepsite.org/2015/06/you-dont-have-to-be-professional-prepper...