The data and the following text are from James Pethokoukis of the American Enterprise Institute:
If the above forecast is correct, the National Bureau of Economic Research might wind up declaring that the U.S. economy slipped back into recession in late 2012 even though the economy was actually not yet contracting at that point.
And if that happens, economic historians might well shove aside the weak three-year recovery and call the entire 2007-2013 period the Long Recession or some such. I already have been, just like the 1980-82 period was a long recession, two downturns sandwiching a brief recovery.
This will not be just a long recession but a very long recession and it will be worldwide. Will we then, maybe, just maybe, finally then rid ourselves of this Keynesian economic madness?
The Economic Cycle Research Institute has been calling a new recession for some time and my bet is that when all the benchmark revisions are done, it would be found to have started in May/June.
The result will either be a rapid move to NGDP targeting or a Japanese future. So far bond yields are suggesting the latter.
Sleetmute
28 Sep 12 at 12:23 pm
Should Romney happen to win in 2012, I wonder if the media and American liberals will be as accepting of the “I inherited a bad situation” line from Romney in 2016, as they seem to be of Obama in 2012.
HeathG
28 Sep 12 at 12:23 pm
Did anything change in 1982? No. Will anything change this time? No.
If anything, the 1980-82 downturn increased the belief in borrowing your way out of a hole.
All the focus on GDP +/- movements is looking at the tiny detail. Who cares what the GDP growth is. Are average salaries going up or down? Is the total hours worked up or down? Is the place getting better or worse?
These are the real issues. Focusing on data with false precision (GDP to two decimal places FTW!) just leads people to make the wrong decisions from looking at the wrong data.
brc
28 Sep 12 at 1:20 pm
Slightly OT, but related to the ruination of nations (in this case Australia).
My knowledge of economics is not stellar, but I keep hearing this claim that the current lot in Canberra tax a lower proportion of GDP than the last lot.
Now I know that GDP is an aggregation of money movement and little to do with actual production, but is the claim about tax to GDP true and if so then what is happening that everything is getting worse? I know there is a gap in my knowledge, I just don’t know what is missing.
BTW, this really is a great blog.
Aqualung
28 Sep 12 at 1:25 pm
Oh, and Obama’s Libya Lies Collapse: Senate Democrats Demand Answers seems interesting.
Aqualung
28 Sep 12 at 1:29 pm
Aqualung, others might give a better answer, but here goes:
GDP includes government spending, much of which has been put on the tab, so to speak, so includes borrowed money. So the government borrowing money and spending it on itself increases GDP but doesn’t increase the tax take. Arguably it reduces the tax take as government money crowds out private sector money.
In addition, the tax take is related to profitability. So, on aggregate, if business in general is less profitable, then the tax take lowers (see mining tax). Less profits means less employment, which means less consumer spending, again which effects tax take via GST (and petrol excise, etc etc). You’d have to look at the breakdowns in government tax revenues to see which have collapsed the most.
But – in essence – Labor governments like to pass anti-business and anti-profit regulations, and they like to borrow and spend. The borrowing and spending increases the GDP because it just records money movement – but the anti-business practices reduce the tax take.
So you see a lower tax/gdp rate.
GDP is essentially meaningless – it’s like measuring the financial status of a person by number of hours worked. It’s a measure, but has nothing to do with whether they are better or worse off. 2 hours doing something productive beats 20 hours doodling on a wall, but to a stats collector, the person who spent 20 hours ‘working’ must therefore be better off.
brc
28 Sep 12 at 2:11 pm
Thanks brc. It makes a lot more sense. I knew that GDP wasn inadequate statistic because it seemed at odds with reality on the ground, but wasn’t sure how it was doing it.
Not too old to learn new stuff, I hope.
Aqualung
28 Sep 12 at 2:34 pm
Wouldn’t the ‘growth’ also depend on how they measured the inflation rate? I believe the U.S. said their inflation rate was only 1.6%, but I imagine it’s a lot higher than that, which would mean growth was lower, wouldn’t it?
Ellen of Tasmania
28 Sep 12 at 3:01 pm
Yes Ellen it helps if the numbers don’t suit your position to just imagine other numbers that do. Afterall it’s the Cat way.
sdfc
28 Sep 12 at 6:45 pm
Big fan of irony I see sdfc.
entropy
28 Sep 12 at 7:06 pm
Ah yes sfdc, the ABS really was on a winner rebasing the CPI during the height of the GFC when property for example dropped by 43% in some parts of Australia…yep a real winner. No one ever gooses inflation data…
.
28 Sep 12 at 7:08 pm
The ABS reviews the CPI every five or six years, there was no “goosing” of the CPI.
I prefer to use the house price index of the Rismark index to get my information on house price changes, not your one or two property sample.
sdfc
28 Sep 12 at 8:31 pm
If sdfc likes it, I can do no better than to say:
“I don’t care how you do it. Sink the Rismark!”
blogstrop
28 Sep 12 at 8:40 pm
You delusional prick. It happened to entire suburbs.
They deliberately used bizzare weightings and this concealed inflation.
.
28 Sep 12 at 8:43 pm
That’s right Dot, in Catland if you don’t like the data you can just imagine your own ABS conspiracy.
sdfc
28 Sep 12 at 8:47 pm
43% drop in whole suburbs sounds pretty severe. which suburbs dot?
SteveC
28 Sep 12 at 8:50 pm
I never said it was a conspiracy. They could have used more sensible weightings you malignant prick.
Are the Gillard/Rudd government known for putting undue pressure on civil servants?
No, perish the thought…
http://www.theage.com.au/opinion/yes-minister-meets-alice-in-wonderland-20100220-omsa.html
Also note you ‘proved’ the ABS was ‘correct’ by referring to the ‘fact’ that were ‘incorrect’.
You wouldn’t know your arse from your elbow you old hack.
.
28 Sep 12 at 8:53 pm
Prices went up by 20% in March 2009 – March 2010. again not a astonishing feat.
http://www.theaustralian.com.au/business/economics/soaring-house-prices-strengthens-case-for-rba-to-lift-interest-rates/story-e6frg926-1225861624798
Prices really went down as far as I said, even out west.
Why do you find this so unbelievable, you fact checking monkey?
Clearly the ABS should have used different weights. Anyone who is familiar with the CPI data can see that something is rotten. I suspect the fearless BS pubes wanted to. We know what gormless bullies Swan, Rudd, Gillard, Shorten and Conroy are. Good luck, impartial pubes, you’re gonna need it.
.
28 Sep 12 at 9:01 pm
WSJ: CEOs Turn Less Optimistic as Fiscal Cliff Nears
JamesK
28 Sep 12 at 9:11 pm
What more sensible weightings Dot? Of the sub-groups housing expenditure increased 48% between the 15th and the 16th series and was an increasing share of overall household spending. It is the largest spending item in the basket. What makes you think the weighting shouldn’t have increased.
I don’t doubt some areas were hit particulary hard. There were house price falls even in sunny Perth. But overall house prices did not fall anywhere near so far. Good thing too considering how much money is tied up in housing.
The CPI is a capital citywide index.
sdfc
28 Sep 12 at 9:29 pm
Because you make a habit of up “facts”
SteveC
28 Sep 12 at 9:32 pm
making up “facts”
SteveC
28 Sep 12 at 9:32 pm
No, I don’t and you have just been proven wrong, but you have the shame of a HSU official at a swingers party.
sfdc – you ask me a question where the answer is something you have been criticising me about for over an hour now.
It’s not just housing. The whole thing is screwed. If you have so much faith in it then why do rely on another market provider for say housing data ?
.
28 Sep 12 at 9:35 pm
You made up this fact:
SteveC
28 Sep 12 at 9:41 pm
You mentioned housing. How is whole thing screwed?
I think you accumulate as much information as possible. I’ve not seen a reference that has Australian house prices as falling on average anywhere near 43%.
sdfc
28 Sep 12 at 9:44 pm
No, I didn’t, eat shit and fuck off.
It’s called having a memory.
From now on every piece of bullshit you spin for the worst Government in Australian history will require a link from Elselvier or Blackwell Publishers, you odious little sod.
.
28 Sep 12 at 9:48 pm
Do you really want to talk about all the sub groups?
I find that tedious. There is definitely a structural break in the data when everything is rebased.
.
28 Sep 12 at 9:51 pm
Pardon me but
“Will we then, maybe, just maybe, finally then rid ourselves of this Keynesian economic madness? ”
Gee I thought Greenspan got rid of Keynes in the 1970s. Funny about that. Mr Libertarian has been practically running the show since then and this article complains about Keynes?
Something wrong with this picture.
Alice
28 Sep 12 at 9:56 pm
The changes between the series are not as great as you seem to think they are. They are adjustments to account for changing spending patterns.
sdfc
28 Sep 12 at 10:01 pm
I always do provide a link dot, because I don’t trust my memory. Forgive me for not taking you at your word.
If you could suggest a suburb I could check it at RP Data. 43% sounds absurdly high for entire suburbs
SteveC
28 Sep 12 at 10:01 pm
What, right when the change in the series occurred?
Well that’s good because I’m not you. Thank christ.
.
28 Sep 12 at 10:03 pm
Um yeah he quit before the GFC.
.
28 Sep 12 at 10:06 pm
What, right when the change in the series occurred?
Now you’re just being silly.
sdfc
28 Sep 12 at 10:06 pm
No, I am not being silly at all. Clearly you are not familiar with the data.
.
28 Sep 12 at 10:09 pm
Someone who thinks we can have a continuously adjusted CPI is being silly.
sdfc
28 Sep 12 at 10:13 pm
I never said that.
This is what I said.
.
28 Sep 12 at 10:19 pm
What weightings? What specifically is your problem and why?
sdfc
28 Sep 12 at 10:24 pm
I am repeating myself. You are not this stupid.
.
28 Sep 12 at 10:33 pm
You’ve not said anything.
sdfc
28 Sep 12 at 10:42 pm
Git.
.
28 Sep 12 at 10:45 pm
Dummy’s out again I see.
sdfc
28 Sep 12 at 10:52 pm
You make an asinine lie after you pretend you didn’t know what we were arguing about and then you proceed to cling to a high moral ground as an “adult”.
Fuck off you pathetic oxygen waster.
.
28 Sep 12 at 11:04 pm
It’s difficult to know what you are talking about, you shift position so often. You make vague accusations that the ABS are gaming the data, but when asked what your specific argument is you shit your pants.
sdfc
28 Sep 12 at 11:10 pm
It’s interesting Steve that you use a forecast that includes a “fiscal cliff” to show that Keynesian policies don’t work. When the fiscal cliff will have a large austerity effect of raising taxes and cutting spending deeply. I know there is some debate weather raising taxes is austerity, but, as the CBO forecast notes:
http://www.cbo.gov/publication/43539
if most of the current policies are continued (which I think is the Democrat’s plan) the economy would continue to grow into 2013.
WadeJ
28 Sep 12 at 11:19 pm
WadeJ
The US has a deficit of 9% of GDP and a structural deficit larger than the Grand Canyon. It’s not a question of austerity, you dope. It’s a question of whether the Us can turn itself around and not become another Greece.
Austerity, you idiot, is the leftwing definition of bringing a budget back to balance and not spending more than taken in.
JC
28 Sep 12 at 11:25 pm
That’s nonsense, the US will never become another Greece.
sdfc
28 Sep 12 at 11:29 pm
No, you are lying.
I was quite clear at 8.53, 9.01, 9.51, 10.03 and 10.09. I was also quite consistent. Your rebuttal became increasingly flimsy and childish.
I am not going to summarise it just in case you are a slow learner.
I don’t care if your problem is you’re dishonest or an imbecile.
Fuck off.
.
28 Sep 12 at 11:29 pm
Hmm, not only the section highlighted in red, but the 2013 Q4 Forecast – a whopping 4% after negative and abysmal 1%?
Is this a statistical version of crossing the Grand Canyon?
John A
28 Sep 12 at 11:36 pm
Dot
You run the gamut from an ABS conspiracy theory to a rant about house prices and an advocation of a continuously adjusted CPI. You are all over the place.
sdfc
28 Sep 12 at 11:42 pm
How do you think having it’s own currency would save it from falling living standards like Greece’s?
Unlike Japan a large portion of US debt is foreign financed which means exchange rate risk.
JC
28 Sep 12 at 11:43 pm
You continue to lie you snivelling piece of shit.
These are outrageous, blatant lies.
.
28 Sep 12 at 11:54 pm
The best road to large falls in living standards in the US would be to reduce cash flow in the economy by a sharp contraction in the deficit.
As for Greece, in case you haven’t noticed it’s a basket case which has largely outsourced its central bank and currency.
sdfc
28 Sep 12 at 11:59 pm
“That’s nonsense, the US will never become another Greece.”
It’s half way there. At the present trend, should get there in ten years.
I would hope the present trend doesn’t continue, but it would if sdfc’s advice was followed.
2dogs
29 Sep 12 at 11:42 am
While I didn’t just imagine the numbers, sdfc, it is quite true that my belief that U.S. inflation is higher than 1.6% is only anecdotal. Prices have risen quite substantially in the catalogues I recieve from there (10-25% average), and Americans I listen to certainly believe it’s higher.
But however you look at it, my question is still perfectly valid. IF the inflation is higher, then the growth would be lower, would it not?
Ellen of Tasmania
29 Sep 12 at 12:37 pm
[...] American economy unraveling – media silent [...]
#media-fail … | pindanpost
29 Sep 12 at 2:53 pm
Yes Dot, you are right in general theme, a number of the back suburbs of the Gold Coast and Sunshine Coast, during the reign of Anna Blight, particularly in sub-markets such as units and townhouses, took quite severe falls (up to 30%, sometimes even more) and they are still falling. Also, re the ABS:
They deliberately used bizzare weightings and this concealed inflation.
You are right here too Dot. No-one sensible takes any notice of any payment being linked to the CPI. It has no track record of being relevant to real purchasing power for ordinary people, like some people’s parents I know on defined-benefit pensions linked to it. They are complaining like hell about it.
Ellen’s comment about prices in America could also apply to prices in Australia. Tomatos now ten dollars a kilo. Even I am shocked. Are they rubies?
Elizabeth (Lizzie) B.
29 Sep 12 at 6:18 pm
= Um yeah he (greenspan) quite before the GFC
Oh ha ha – yeah right – so the build up to the GFC happened under Keynes watch? He died decades before. His ideas were killed off by Mr LKibertarian decades agi (Like in the 70s) and Greenspan and all his disciples ran treasury ad economic polucy since then (Rubin and the two faced Summers).
Oh believe you me = (equal) you stupid fool
The GFC happened as a result of Greenspan the dickhead and it was his policies, not Keynes that laid the US low. Keynes had been shafted in favour of thirty years of libertarian low tax policies that stripped US manufacturing to the bone and enabled their rich to get obsceneley rich while every else got poorer.
How do I keep my fucking patience when people like equal live? Why do you live equal – is it to help the wealthy screw everyone else even more?
All I want is someone to fix the mess but here we have people hailing the policies of fools as their panacea.
Alice
29 Sep 12 at 8:11 pm
Im so mad my spelling is shite but I dont care.
Equal you are so far off track you wouldnt know your arse from what you see in the mirror.
Alice
29 Sep 12 at 8:13 pm