The Deflationary Recession of 2009?

In my last diary, I explained how an increase in the money supply faster than the rate of inflation, coupled with a "positively sloped bond yield curve 12 months prior, which has in the past always indicated the ending of a recession, appeared to be going positive now. A much more detailed explanation, with supporting graphs going back about 50 years, of this "Kasriel recession indicator" can be found here. While almost all financial indicators are based strictly on the post World War 2 inflationary period, the "Kasriel infallible recession predictor" accurately "predicts" the 1929 downturn, the 1933-37 and 1939-41 expansions.

Why the recession *should be* ending

No, I have not lost my mind, although with a slew of just awful economic data for September and October spilling out, the title of this blog entry is a contrarian statement to say the least. What I mean is, measured by the indicators of past recessions going back all the way through the Great Depression, the shallow recession that I believe started approximately last December, and primarily affected Wall Street with only a glancing blow at Main Street, ought to be ending.

Hints of a year-end economic respite?

The recession is here (and has been since last December). It's going to hang around for a while longer at least. And layoffs and unemployment are almost certainly going to continue to increase right through election day, which is bad news for the people who will lose their jobs, but at least has the silver lining that it will increase the chances of Democrats doing very well indeed this November.

That being said, like seeing the green shoot of a crocus popping up above the ground at the end of January, I am seeing the first nascent signs that the economy may enter a period of respite by the end of this year, either growing very slowly or at least the pace of contraction slowing down to a crawl.

The third season of recession

The headline GDP numbers this week said the economy grew at a 1.9% rate in the second quarter. Like most government numbers, things aren't nearly so rosy once you get past the headlines.
The first thing you have to understand is what the GDP Deflator is.

the GDP deflator (implicit price deflator for GDP) is a measure of the change in prices of all new, domestically produced, final goods and services in an economy.
In practice, the difference between the deflator and a price index like the CPI is often relatively small.

Global economic tipping point: at the intersection of China and Oil

The US is no longer the engine, or at least the sole engine, of global economic growth. That mantle is shared, at least, with Europe, and even moreso with emerging Asia, and nowhere so much as China, now the world's 4th largest economy and">growing at a rate of 10% a year.
That growth has run smack up against at least short term limits on the availability of resources -- metals, livestock, rice, and more than anything else, Oil.
While growth in the US peaked about two years ago and has been generally declining since, most recently measured at about 1.9% (but perhaps in a year or three retroactively to be revised into negative territory, as Q4 2007 just was), China in particular has continued to boom, as I described in China's Out of Control Inflationary Boom.

Job Losses, Wages Worsened - No End in Sight

Loss of jobs and real wages worsened in May with no end in sight; an ominous sign for financially strapped households.


Today’s BLS jobs report revises down their previous estimate of the number of jobs in March and April (by a total of -15k) and shows another loss of -49k jobs in May. Indeed, local governments kept adding jobs in May while the number of private sector jobs fell by -66k.

Widespread local government budget shortfalls for the fiscal year ahead will soon eliminate this much-needed, tax-payer-dependent source of job growth. 

 Over the past 12 months, the private sector has added only 16k jobs despite the fact that bars and restaurants added 227k and private education and health services added another 577k jobs. That is, excluding bars, restaurants and private education and health care, the private sector in the US has lost roughly 800k jobs over the past year.

Why Soros is wrong and the Morons are right

In the diary below this, my esteemed co-contributor midtowng argues that "we are facing the most serious recession of our lifetime." He notes that while he might be ignored, you ought to pay attention to George Soros, and belittles the politicians and other morons (I guess that would include me) who have argued that this recession might be over by election day.
In the spirit of economic debate on this site, here's what I believe he is overlooking:

1. Soros may be a great currency trader and social commentator but...

"The global capitalist system… is coming apart at the seams". So declared capitalist and arch-speculator George Soros before a US congressional enquiry...*. He has since expanded on this in a book entitled The Crisis of Global Capitalism. What has he in mind?

Will the Recession be Over by Election Day?

The economy is always a yin and yang, with one thing tending to counterbalance another. In the past I have frequently differentiated one such tension between the "Kudlow economy" for the top 20% (actually more like top 5%) which prospered mightily during the Bush/GOP malAdministration, and the "Bonddad economy" of the bottom 80%, which saw little or nothing of the alleged prosperity.
Until late last year, consumption in the Kudlow economy more than balanced the distress in the Bonddad economy. Then, the balance changed.
I am here to deliver a message which I fear will be as welcome as a skunk at a wedding reception: I believe the balance is about to change again, at least briefly, back in favor of the Kudlow economy. Even if you disagree strongly, I hope you take the time to consider the evidence I amass below.

New Durable Goods Orders Fall

New durable goods orders and new single-family home sales both fell sharply in February as recession worsens challenging the Presidential candidates


Two economic reports from the Census Bureau today reflect the deepening recession and an urgent need for the Presidential candidates to get serious about how they will address what could be a long and severe recession with lasting consequences.

Even with prices rising sharply, the nominal value of new orders for durable manufacturing goods fell another -1.7% in February after plunging by -4.7% in January. Nominal values of new durable orders is now down -8.6% since last July to the lowest levels since March 2007.

New Orders Durable Goods Feb. 08

Retail Sales Fall Sharply in December & February

Retail sales fall sharply in December and February; price-adjusted sales now down sharply in 4 of the last 5 months as recession deepens

Today’s Census report of nominal retail sales receipts for February also revises down sharply their earlier estimate for nominal sales in December and January. Price-adjusted retail sales have now fallen sharply in four of the past five months and even nominal receipts are back to the lowest levels since last August.

Retail Sales fall behind CPI

This surely eliminates any remaining credibility for those debt industry salesmen and politicians who still deny a recession is underway.

Price adjusted retail sales down Feb. '08