10 ms·

The Most Counterintuitive Recession Ever

100 points by elsewhen 6y ago

mtw 6y ago
Too early, we're still in the middle of the pandemic. Who knows how numbers are going to be in October
- NotSammyHagar 6y ago
  We should have a big crash right now because all the stimulus ended, 20 million people don't have jobs and could be kicked out of their apartments and have a shortage of food access. We shouldn't celebrate before we address these larger needs.
  - SpicyLemonZest 6y ago
    I'm not saying everything's good, but those are all very solvable problems in comparison to what we expected. A few months ago, grocery stores were running out of staple items by noon and there were serious concerns of a nationwide meat shortage.
    - TomSwirly 6y ago
      Nothing concerning about that. A nationwide meat shortage is entirely good.
  - gruez 6y ago
    >We should have a big crash right now because all the stimulus ended It's probably not instantaneous. Other people in this thread mentioned that savings is up, so I'm guessing people have some money saved up, and therefore can probably last a few weeks (or months?) before running out of money. >could be kicked out of their apartments Aren't most cities still not processing evictions? Even if they did, the combination of social distancing restrictions (less court capacity) + flood of evictions probably means there's a huge backlog, which means very little people would end up getting evicted.
    - NotSammyHagar 6y ago
      My city is blocking evictions but I bet smaller cities aren't.
- BolexNOLA 6y ago
  Yeah get ready for the rent/eviction flood gates to really open. It’s going to be brutal.
  - wrsh07 6y ago
    It's not clear to me that evicting tenants who would ordinarily pay is a good strategy for landlords. Besides being a dick move, they don't have a guarantee that anyone will move in
    - mulmen 6y ago
      All the people who just got evicted? Probably a good time to invest in Uhaul. I agree, seems incredibly short sighted. I’m not a landlord so maybe I misunderstand the thinking. Is it something like tenants who get evicted then have to find even worse landlords to rent from so by evicting people in tough economic times you gain access to tenants at their lowest rate/most desperate? So effectively any tenant you get in bad economic times is someone who is more likely to be stable and reliable after recovery? I’m totally making things up at this point. It is truly baffling to me.
      - wrsh07 6y ago
        Yeah I'm sure it depends on where you live If you have tenants in NYC right now who aren't terrible, I think you want to keep them because there are a bunch of empty apts In NYC if you want a good apartment right now, you can significantly underpay for the next couple of years (if your lease is up), but a lot of people whose leases are up are leaving You make a good point, though. There will be a large shuffle for the next few months (and probably gradually back in the following years), so whoever "makes shovels" for moving will be in a good position
    - gpm 6y ago
      On the other hand if you stop evicting entirely, people suddenly have a lot less incentive to pay you. This could quickly make you short on cash. I guess you could also use it as an opportunity to get rid of the more problematic tenants in jurisdictions where that is difficult. It's not an easy problem to optimize this.
- cik2e 6y ago
  Much worse and possibly catastrophic if the government doesn’t get its shit together on the next stimulus. Now Trump gets to look like a hero with his executive orders, and honestly you can’t blame the administration for taking the easy layup. Hopefully this shames congress into doing its job because it’s unlikely that the critical unemployment benefit will be getting paid out anytime soon via this route.
  - scarface74 6y ago
    And he wants to force the states to pay 25%.
  - thechao 6y ago
    Is this one of those “there’s good people on both sides” arguments? It’s not House that can’t get their shit together, it is literally the GOP controlled Senate (specifically, Mitch McConnell) who is causing this. People are going to die because of his stonewalling — I bet it’s possible to actually calculate; what wonder how he’ll end up comparing to other psychopaths?
    - SpicyLemonZest 6y ago
      If you've come to the conclusion that the Senate majority leader is deliberately setting out to kill Americans cause he's just evil like that, you've surely made an error somewhere in your reasoning.
      - thechao 6y ago
        He’s deliberately withholding money. Money is cross-fungible with expected life-span. Therefore, the withholding of funds can be equated with loss of years; every lost ~78 years is a lost life. I used to do these analyses at UTMB Galveston when interning in the nosicomia division.
        deleted 6y ago
        [deleted]
deleted 6y ago
[deleted]
osy 6y ago
What I learned in high school economics is that printing more money means greater inflation. Why isn’t this a problem? Or rather why aren’t people more scared about it being a problem?
- ipsum2 6y ago
  Planet Money covers it pretty well, if you can ignore the fluff: https://www.npr.org/transcripts/886036317 https://www.npr.org/transcripts/886036317 tl;dr: people not buying things = deflation, but giving everyone money = inflation. How this balances out is uncertain.
- crooked-v 6y ago
  $600/week/person over any reasonable period is hardly enough to trigger serious inflation worries in the short or medium term. Even if you apply that to everyone in the US, you're looking at $180 billion a week, against a GDP of $20.54 trillion.
  - pansa2 6y ago
    $180-billion per week is $9-trillion per year - it’s almost half of GDP.
  - endogui 6y ago
    $180B per week would be $9.4T per year. Almost half of the economy in stimulus seems likely to be quite inflationary.
  - mulmen 6y ago
    You’re comparing weekly stimulus numbers to annual GDP numbers. If you compare the stimulus payments in similar annualized terms it is nearly half of GDP. $9.36 Trillion. Having said that, the relevance of GDP in a conversation about inflation is unclear to me when GDP does not account for inflation.
    - treyfitty 6y ago
      GDP is often quoted as Real GDP using chained prices. So it does account for inflation.
Torkel 6y ago
I think the lockdown is a large reason why it looks like this. There are simply less things to spend money on at home, and all the free time at home means people are looking over their economy. And speculating/investing.
treyfitty 6y ago
What is baffling is how the delinquency rates for credit cards have plummeted. Sure, it's easy to say in hindsight that people are buckling down, and that the stimulus payments are making it easier for those in the low income demographic to pay down credit card debt, but that can't be the complete picture. The economy was put on pause, and small businesses are being decimated. If people need financing, the status quo was to use credit card debt to keep people/business afloat as the debt is unsecured. As the article posits, the situation is quite unique and very counterintuitive...
- BolexNOLA 6y ago
  Came here to basically say this - it’s got me scratching my head for sure. I bet not taking on more debt in uncertain times but many folks don’t have a choice. Any idea what could be driving this?
  - sambull 6y ago
    Reduced cost of living. Lots of my neighbors have relatives that have moved-in recently. Houses are becoming more multi-generational/multifamily.
    - gpm 6y ago
      > Lots of my neighbors have relatives that have moved-in recently. I haven't noticed this with my neighbors (I'm not sure I would), but amongst my friends and myself I can definitely second this. It does make me wonder about this line > The real estate market has been red hot after an initial slowdown during quarantine: (Median house prices) Maybe it's the case that predominantly rich people are buying/selling right now?
      - slowbait 6y ago
        Or families are expanding as relatives are moving in?
        6y ago
jsperson 6y ago
The author Ben Carlson is one half of the Animal Spirits podcast. I enjoy and learn a lot from every episode. Highly recommended. Edit: typo
- wrsh07 6y ago
  Yikes, I did not find anything of substance on this ad-riddled page I've seen significantly better pandemic / economic coverage from Byrne Hobart, Money Stuff, etc
swalsh 6y ago
This kind of feels like a test run of Modern Monetary Theory. I guess once we have a vaccine, and the full effect of all this stimulus settles, we might find out if our fears are warranted or not.
nimbius 6y ago
looking at the markets makes it more apparent that performance madness is largely driven by 2008's quantitative easing having never been put through cessation. It was tried once with disasterous effects, and we entered this recession with the same debt still on the balance sheets. Wolfgang Streeck does a great job of explaining it in his book 'how capitalism will end' Essentially through regulatory capture, capitalists have commoditized things you shouldnt, like labor and currency. As this progressed through the past decade the markets began to drift further and further from any meaningful ties to labor or consumer confidence and spending. Markets began to perform simply due to the fact that they were a market in most cases, and so we see in 2020 though the US suffers nearly 40% unemployment and a service economy that has a failure rate of nearly 50%, markets that float along with easy access to low interest or negative interest credit as a function of the post 2008 recession are nearly entirely divorced from reality. They no longer serve as a barometer for the overall state of a nation at all. And now we enter the 2020 tax season next january with a promise that somehow this burden will be deferred yet enforced for the average citizen, which could honestly only be maintained with evermore low or negative interest loans this time issued directly citizens instead of major multinational corporations as part of a personal shift of public service (competent taxation policy in this case) to personal responsibility that began in 1993 with the US exit from the public sphere of education and ambulance services in the form of charter schools and ambulance bills. this was enhanced with the transition from low wages and savings to personal lines of low interest credit that inevitably wracked the market in 2008.
- millstone 6y ago
  Was the above post AI generated? The statistics are made up - unemployment is not 40%. It is not the case that "now we enter the 2020 tax season next january." And I have no idea what "commoditization of currency" or "deferred yet enforced" means.
Izkata 6y ago
> The real estate market has been red hot after an initial slowdown during quarantine: The spike here coincides with the riots and "defund the police", not the recession or pandemic/quarantine. It's likely people moving away from the hotspots.
- cik2e 6y ago
  The chart in the article shows the median price of homes sold. Nothing about total real estate transaction volume which is what you’d need to look at to say that the market is “red hot”. Common sense would dictate that the only people spending money on real estate right now have excess wealth and are playing around with more expensive properties.
- SuoDuanDao 6y ago
  Anecdotally, I live in a less popular region of Canada - our version of flyover country if you like - and our real estate has been on fire despite the rioting over here being fairly muted. I think a lot of homeowners in large urban centres are getting out due to fears of the pandemic and in some cases, being able to work remotely. So they're selling their condos in trendy cities like Toronto and Vancouver and buying single family homes in places like Halifax. Not sure whom they're selling to though, investors maybe... It is definitely a strange economic situation.
ethn 6y ago
We're simply not in a recession. Recessions are systemic collapses related to bad monetary policy causing a misallocation of resources.
- treyfitty 6y ago
  A recession is labeled by the NBER and has a modestly strict definition of: A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion. https://www.nber.org/cycles/june2020.html https://www.nber.org/cycles/june2020.html
  - joe_the_user 6y ago
    I don't care how many references you have claiming that a recession defined only by statistical data points, you're wrong. A coherent definition of a recession involves the stipulation that it is an endogenous crisis. Exogenous effects showing the same data points still can't be the same.
    - treyfitty 6y ago
      Uhhh that’s a completely different argument. A recession is a recession. Economists, bankers, and policy makers all but unanimously agree that a recession is defined by the NBER. A recession need not be an endogenous crisis. I don’t know where that’s coming from, but there have been plenty of exogenous induced recessions. 9/11 being one of them. (I know you don’t like references, so I’ll leave that up to you)
      - ethn 6y ago
        There’s nothing less scientific than defining some phenomenon as some authority’s whimsical arbitration. It’s a deeply mistaken view that all economic analysis is incontrovertibly decided by some coterie, and that somehow that is the unspoken agreement. When there is exogenous disruption, the Fed is responsible and capable of preventing a then endogenous recession. For instance, this is the first time the money stock has been raised proportionally to the extent as the money velocity has dropped—-a correct measure as described by the monetarists.
yborg 6y ago
Every time something like this happens, Keynes is proven right again.
akiselev 6y ago
Is it just me or does this feel like wishful thinking? I'm on my phone so its hard to dig into sources but the presentation just reeks of misleading by statistics. I thought the main unemployment number included only people looking for work? If states dropped the LFW requirement from unemployment, that number would drop despite lots of people still on unemployment, no? I assume federal unemployment statistics focuses on other less state dependent metrics. Similarly the median house price is a farce if, like in the GFC, there's plenty of easy capital available for a land grab at the top. The prices could easily reflect increased competition and asset inflation, not something new about this financial crisis - and it wouldn't really be new, would it?
- roenxi 6y ago
  > Similarly the median house price is a farce if... Alternatively, what if people have stopped buying/selling cheap housing? If everyone except millionaires has dropped out of the market (say, due to lockdown restrictions) then the median house price will rise even if the market is dying. Particularly if the wealthy are desperately trying to turn cash into assets in response to the government largess. I suspect Mr. Carlson fell for Simpson's paradox with that one; it seems unlikely that the property market is booming. That chart isn't enough evidence.
  - jhart99 6y ago
    Here are the stats from NAR. The average price has increased, but the volume is off by 10% year over year. The last slide shows sales volume by price. It isn't what I expected. It looks like sales are up around the median price while both the high and low end are way down. https://www.nar.realtor/sites/default/files/documents/ehs-06-2020-summary-2020-07-22.pdf https://www.nar.realtor/sites/default/files/documents/ehs-06...
  - ultrasaurus 6y ago
    Over the past few months tens of thousands of high-income workers have been told they can WFH forever, and an above average house in most of the country looks awfully cheap compared to SF house on SV salaries.
joe_the_user 6y ago
It's hard to even figure out what a "10% unemployment rate" means. I recall unemployment rate calculations involved something like "of the people actively looking for work (according to the most recent definition), X percent can't find it". Looking at ostensibly more objective "Labor force participation rate", it seems work decline precipitously at the start of the lockdown and has now, indeed, shot back up by 1/2 or 1/3 the amount. But what it all means is hard to gauge. For example, the long increase from 1970 to 1990 involved the (re)entry of women into the workforce. The present a labor force participation rate now equal to that of 1973 might not involve the re-emergence of the happy homemaker. https://fred.stlouisfed.org/series/CIVPART https://fred.stlouisfed.org/series/CIVPART
- herdrick 6y ago
  It's people actively looking for work --------------------------------------------------- people actively looking for work + people with jobs
  - joe_the_user 6y ago
    Yeah, kind of like what I except but with ascii graphics. But my implicit point is "people actively looking for work" has been a quantity whose definition shifts and who method of measurement shifts and which is inherently difficult to measure.
lettergram 6y ago
I don't feel this article focused enough on the primary driver - deferments. Credit card, mortgage, auto, rent payments were all deferred the same time money was handed out. At the same time, the ability to spend money to travel, go out to eat, etc all evaporated. This let people pay off debt, save, or invest. All of which is probably good considering... There are multiple super scary looming issues: * Commercial real estate is about to collapse * Renters are about to have to start paying again (although, with Trumps executive order, maybe not?) * Auto repos are about to pick back up * Those who are required to use credit cards to finance their lives are about to be cut off (banks are limiting increases) * Wave two of the virus is going to increase * Civil unrest from elections, pandemic, racism, etc. are going to [probably] continue to escalate * Inflation will start to hit (we can already see it in the stock market and some food prices). This will effectively reduce any stop-gap mechanism. * Unemployment insurance is going to start dropping off for people (who did apply). States typically have 12 - 24 weeks[1], plus the additional 13 weeks from the CARES Act. * Although unemployment is dropping, part of that is their counting mechanism. Many left the job market (my parents just retired), job openings are dropping (we will see Junes tomorrow[2]), a second pseudo-lockdown will likely continue through the end of the year. * Many small businesses haven't really "recovered" and are still running red. Many will be out of business by the end of the year. * Oil prices are stagnant, but any kind of lockdown will cause this to drive down further.[3] * Airlines aren't expecting a recovery any-time soon. [4] [1] https://www.forbes.com/sites/zackfriedman/2020/04/29/unemployment-benefits-extended/#7a66ba652a51 https://www.forbes.com/sites/zackfriedman/2020/04/29/unemplo... [2] https://tradingeconomics.com/united-states/job-offers https://tradingeconomics.com/united-states/job-offers [3] https://www.marketwatch.com/investing/future/crude%20oil%20-%20electronic https://www.marketwatch.com/investing/future/crude%20oil%20-... [4] https://www.barrons.com/articles/german-airline-lufthansa-says-it-expects-flying-slump-to-last-until-2024-51596722375 https://www.barrons.com/articles/german-airline-lufthansa-sa...
- cloudking 6y ago
  I agree, the article feels cherry picked. Look at the entire picture not just what's going well. The S&P 500 is performing well, because it's being driven by big tech stocks that were largely unaffected by the pandemic. There is a flood of retail investors enabled by mobile apps, many of them are inexperienced. There is stock mania, trading without looking at fundamentals.
benignslime 6y ago
Fuck thinking about this critically -- just bow to your new overlords. HEIL TRUMP
Spooky23 6y ago
Everything is great except for the 30M unemployed. People aren’t paying rent and entire industries are truly and completely fucked. The conjecture here is baffling for a website that supposedly is rich in common sense.
cs702 6y ago
In short, Covid-19 triggered an economic tsunami, but so far the US federal government has held it at bay: * Since March, the Federal Reserve has created "out of thin air" approximately $3 trillion dollars in new monetary assets, to support asset prices and prevent another financial crisis. This figure is about 3x greater than the $1 trillion of monetary assets created in all of 2008 and 2009, during the worst of the financial crisis. Source: https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL * In addition to the above monetary intervention, the federal government launched a ~$3 trillion rescue package at the beginning of the pandemic (including all those PPP loans that won't be repaid, all that spending on special unemployment benefits, all sorts of support for states, businesses, etc.), and now the debate is whether to spend an additional ~$1+ trillion (the last figure floated by the US treasury) or an additional ~$3.4 trillion (as proposed by congress). Source: https://www.reuters.com/article/health-coronavirus-usa-congress/corrected-update-1-pelosi-mnuchin-eye-narrower-us-covid-19-aid-through-2020-idUSL1N2FB068 https://www.reuters.com/article/health-coronavirus-usa-congr... The federal government is supporting the economy in an unprecedented manner to an unprecedented degree, to prevent it from collapsing until the virus is fully under control. All economic statistics reflect this unprecedented massive economic support. They do not reflect the "true underlying state" of the economy. There's nothing counterintuitive about that.
- danaris 6y ago
  > The federal government is supporting the economy in an unprecedented manner to an unprecedented degree, to prevent it from collapsing until the virus is fully under control. All economic statistics reflect this unprecedented massive economic support. And while this is true to an extent, it's also important to note that the government is supporting some parts of the economy (corporations, the stock market) significantly more than others (workers, the unemployed), and with the failure of the Republicans to agree to a new stimulus bill that wasn't 99.9% "bail out the wealthy and grant immunity to corporations that force their employees to work without adequate safety measures", that latter part is going to start showing in a big way, real soon.
  - millstone 6y ago
euix 6y ago
There is no such thing as a free lunch. Money is not created out of "thin air", all that is happening is that the present generation is borrowing from the future generation and generations that are yet to be born. The young and unborn subsidize the old. The way this kind of borrowing shows up in society is in low marriage rates and smaller families and eventually lower birth rates as people cannot find the stability or financial ability to start families or even to establish stable relationships, which eventually leads to low consumption as your demographic basis simply needs less of everything. As long as you have political will you can keep kicking the can down the road at the cost of a declining population. In liberal western societies this is partially made up by immigration from developing countries, but that creates another host of issues and tensions between recent arrivals and natives.
- millstone 6y ago
  Money is free, but it is not a lunch. You can't eat it. It doesn't actually do anything at all by itself, which is why you CAN create it out of thin air! What matters is real productive capacity. Factories that build stuff, fields that grow crops, people learning skills. If next year, we have shuttered factories and fallow fields and a less skilled workforce - then the future has paid the price! Perhaps the government saves the future by borrowing today. The Fed issues bonds, Jeff Bezos buys them, and in 50 years Jeff Bezos's kids own bonds, that yours and my children pay for through taxes. But that is a wealth transfer between people in the future, not a transfer from the future to today.
Danieru 6y ago
Lots of people missing the core thing here: savings rate. When the propensity to save increases it reduces consumption. Falling credit card debt, reductions in mortgage delinquency, those are all trailing results of the increase in savings. People are spending less with most people's income staying steady. This money is flowing into assets and reducing debt. In normal times this would be a welcomed reversal of the American trend. Yet this effect is temporary and instead will only serve to hurt the velocity of money. "Why is there no inflation despite massive printing?" is also a common refrain. Here to the savings rate is to blame. With less consumption the velocity of money has shrunk and the effective money supply shrank with it. Thus the FED's insane money printing is in part only there to counter act the deflationary pressure. Again: everything comes back to the savings rate.
- bamboozled 6y ago
  Except, isn't retail spending right up, or even through the roof?
thewileyone 6y ago
Simply put, people have stopped buying stuff they don't need. They've changed their spending patterns and found that they have extra cash to pay their bills, invest, etc. Gee, if only they'd have been encouraged to do that earlier.

100 points by elsewhen 6y ago

mtw 6y ago

Too early, we're still in the middle of the pandemic. Who knows how numbers are going to be in October

NotSammyHagar 6y ago
We should have a big crash right now because all the stimulus ended, 20 million people don't have jobs and could be kicked out of their apartments and have a shortage of food access. We shouldn't celebrate before we address these larger needs.
- SpicyLemonZest 6y ago
  I'm not saying everything's good, but those are all very solvable problems in comparison to what we expected. A few months ago, grocery stores were running out of staple items by noon and there were serious concerns of a nationwide meat shortage.
  - TomSwirly 6y ago
    Nothing concerning about that. A nationwide meat shortage is entirely good.
- gruez 6y ago
  >We should have a big crash right now because all the stimulus ended It's probably not instantaneous. Other people in this thread mentioned that savings is up, so I'm guessing people have some money saved up, and therefore can probably last a few weeks (or months?) before running out of money. >could be kicked out of their apartments Aren't most cities still not processing evictions? Even if they did, the combination of social distancing restrictions (less court capacity) + flood of evictions probably means there's a huge backlog, which means very little people would end up getting evicted.
  - NotSammyHagar 6y ago
    My city is blocking evictions but I bet smaller cities aren't.
BolexNOLA 6y ago
Yeah get ready for the rent/eviction flood gates to really open. It’s going to be brutal.
- wrsh07 6y ago
  It's not clear to me that evicting tenants who would ordinarily pay is a good strategy for landlords. Besides being a dick move, they don't have a guarantee that anyone will move in
  - mulmen 6y ago
    All the people who just got evicted? Probably a good time to invest in Uhaul. I agree, seems incredibly short sighted. I’m not a landlord so maybe I misunderstand the thinking. Is it something like tenants who get evicted then have to find even worse landlords to rent from so by evicting people in tough economic times you gain access to tenants at their lowest rate/most desperate? So effectively any tenant you get in bad economic times is someone who is more likely to be stable and reliable after recovery? I’m totally making things up at this point. It is truly baffling to me.
    - wrsh07 6y ago
      Yeah I'm sure it depends on where you live If you have tenants in NYC right now who aren't terrible, I think you want to keep them because there are a bunch of empty apts In NYC if you want a good apartment right now, you can significantly underpay for the next couple of years (if your lease is up), but a lot of people whose leases are up are leaving You make a good point, though. There will be a large shuffle for the next few months (and probably gradually back in the following years), so whoever "makes shovels" for moving will be in a good position
  - gpm 6y ago
    On the other hand if you stop evicting entirely, people suddenly have a lot less incentive to pay you. This could quickly make you short on cash. I guess you could also use it as an opportunity to get rid of the more problematic tenants in jurisdictions where that is difficult. It's not an easy problem to optimize this.
cik2e 6y ago
Much worse and possibly catastrophic if the government doesn’t get its shit together on the next stimulus. Now Trump gets to look like a hero with his executive orders, and honestly you can’t blame the administration for taking the easy layup. Hopefully this shames congress into doing its job because it’s unlikely that the critical unemployment benefit will be getting paid out anytime soon via this route.
- scarface74 6y ago
  And he wants to force the states to pay 25%.
- thechao 6y ago
  Is this one of those “there’s good people on both sides” arguments? It’s not House that can’t get their shit together, it is literally the GOP controlled Senate (specifically, Mitch McConnell) who is causing this. People are going to die because of his stonewalling — I bet it’s possible to actually calculate; what wonder how he’ll end up comparing to other psychopaths?
  - SpicyLemonZest 6y ago
    If you've come to the conclusion that the Senate majority leader is deliberately setting out to kill Americans cause he's just evil like that, you've surely made an error somewhere in your reasoning.
    - thechao 6y ago
      He’s deliberately withholding money. Money is cross-fungible with expected life-span. Therefore, the withholding of funds can be equated with loss of years; every lost ~78 years is a lost life. I used to do these analyses at UTMB Galveston when interning in the nosicomia division.
      - deleted 6y ago
        [deleted]

deleted 6y ago

[deleted]

osy 6y ago

What I learned in high school economics is that printing more money means greater inflation. Why isn’t this a problem? Or rather why aren’t people more scared about it being a problem?

ipsum2 6y ago
Planet Money covers it pretty well, if you can ignore the fluff: https://www.npr.org/transcripts/886036317 https://www.npr.org/transcripts/886036317 tl;dr: people not buying things = deflation, but giving everyone money = inflation. How this balances out is uncertain.
crooked-v 6y ago
$600/week/person over any reasonable period is hardly enough to trigger serious inflation worries in the short or medium term. Even if you apply that to everyone in the US, you're looking at $180 billion a week, against a GDP of $20.54 trillion.
- pansa2 6y ago
  $180-billion per week is $9-trillion per year - it’s almost half of GDP.
- endogui 6y ago
  $180B per week would be $9.4T per year. Almost half of the economy in stimulus seems likely to be quite inflationary.
- mulmen 6y ago
  You’re comparing weekly stimulus numbers to annual GDP numbers. If you compare the stimulus payments in similar annualized terms it is nearly half of GDP. $9.36 Trillion. Having said that, the relevance of GDP in a conversation about inflation is unclear to me when GDP does not account for inflation.
  - treyfitty 6y ago
    GDP is often quoted as Real GDP using chained prices. So it does account for inflation.

Torkel 6y ago

I think the lockdown is a large reason why it looks like this. There are simply less things to spend money on at home, and all the free time at home means people are looking over their economy. And speculating/investing.

treyfitty 6y ago

What is baffling is how the delinquency rates for credit cards have plummeted. Sure, it's easy to say in hindsight that people are buckling down, and that the stimulus payments are making it easier for those in the low income demographic to pay down credit card debt, but that can't be the complete picture. The economy was put on pause, and small businesses are being decimated. If people need financing, the status quo was to use credit card debt to keep people/business afloat as the debt is unsecured. As the article posits, the situation is quite unique and very counterintuitive...

BolexNOLA 6y ago
Came here to basically say this - it’s got me scratching my head for sure. I bet not taking on more debt in uncertain times but many folks don’t have a choice. Any idea what could be driving this?
- sambull 6y ago
  Reduced cost of living. Lots of my neighbors have relatives that have moved-in recently. Houses are becoming more multi-generational/multifamily.
  - gpm 6y ago
    > Lots of my neighbors have relatives that have moved-in recently. I haven't noticed this with my neighbors (I'm not sure I would), but amongst my friends and myself I can definitely second this. It does make me wonder about this line > The real estate market has been red hot after an initial slowdown during quarantine: (Median house prices) Maybe it's the case that predominantly rich people are buying/selling right now?
    - slowbait 6y ago
      Or families are expanding as relatives are moving in?
      - 6y ago

jsperson 6y ago

The author Ben Carlson is one half of the Animal Spirits podcast. I enjoy and learn a lot from every episode. Highly recommended. Edit: typo

wrsh07 6y ago
Yikes, I did not find anything of substance on this ad-riddled page I've seen significantly better pandemic / economic coverage from Byrne Hobart, Money Stuff, etc

swalsh 6y ago

This kind of feels like a test run of Modern Monetary Theory. I guess once we have a vaccine, and the full effect of all this stimulus settles, we might find out if our fears are warranted or not.

nimbius 6y ago

looking at the markets makes it more apparent that performance madness is largely driven by 2008's quantitative easing having never been put through cessation. It was tried once with disasterous effects, and we entered this recession with the same debt still on the balance sheets. Wolfgang Streeck does a great job of explaining it in his book 'how capitalism will end' Essentially through regulatory capture, capitalists have commoditized things you shouldnt, like labor and currency. As this progressed through the past decade the markets began to drift further and further from any meaningful ties to labor or consumer confidence and spending. Markets began to perform simply due to the fact that they were a market in most cases, and so we see in 2020 though the US suffers nearly 40% unemployment and a service economy that has a failure rate of nearly 50%, markets that float along with easy access to low interest or negative interest credit as a function of the post 2008 recession are nearly entirely divorced from reality. They no longer serve as a barometer for the overall state of a nation at all. And now we enter the 2020 tax season next january with a promise that somehow this burden will be deferred yet enforced for the average citizen, which could honestly only be maintained with evermore low or negative interest loans this time issued directly citizens instead of major multinational corporations as part of a personal shift of public service (competent taxation policy in this case) to personal responsibility that began in 1993 with the US exit from the public sphere of education and ambulance services in the form of charter schools and ambulance bills. this was enhanced with the transition from low wages and savings to personal lines of low interest credit that inevitably wracked the market in 2008.

millstone 6y ago
Was the above post AI generated? The statistics are made up - unemployment is not 40%. It is not the case that "now we enter the 2020 tax season next january." And I have no idea what "commoditization of currency" or "deferred yet enforced" means.

Izkata 6y ago

> The real estate market has been red hot after an initial slowdown during quarantine: The spike here coincides with the riots and "defund the police", not the recession or pandemic/quarantine. It's likely people moving away from the hotspots.

cik2e 6y ago
The chart in the article shows the median price of homes sold. Nothing about total real estate transaction volume which is what you’d need to look at to say that the market is “red hot”. Common sense would dictate that the only people spending money on real estate right now have excess wealth and are playing around with more expensive properties.
SuoDuanDao 6y ago
Anecdotally, I live in a less popular region of Canada - our version of flyover country if you like - and our real estate has been on fire despite the rioting over here being fairly muted. I think a lot of homeowners in large urban centres are getting out due to fears of the pandemic and in some cases, being able to work remotely. So they're selling their condos in trendy cities like Toronto and Vancouver and buying single family homes in places like Halifax. Not sure whom they're selling to though, investors maybe... It is definitely a strange economic situation.

ethn 6y ago

We're simply not in a recession. Recessions are systemic collapses related to bad monetary policy causing a misallocation of resources.

treyfitty 6y ago
A recession is labeled by the NBER and has a modestly strict definition of: A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion. https://www.nber.org/cycles/june2020.html https://www.nber.org/cycles/june2020.html
- joe_the_user 6y ago
  I don't care how many references you have claiming that a recession defined only by statistical data points, you're wrong. A coherent definition of a recession involves the stipulation that it is an endogenous crisis. Exogenous effects showing the same data points still can't be the same.
  - treyfitty 6y ago
    Uhhh that’s a completely different argument. A recession is a recession. Economists, bankers, and policy makers all but unanimously agree that a recession is defined by the NBER. A recession need not be an endogenous crisis. I don’t know where that’s coming from, but there have been plenty of exogenous induced recessions. 9/11 being one of them. (I know you don’t like references, so I’ll leave that up to you)
    - ethn 6y ago
      There’s nothing less scientific than defining some phenomenon as some authority’s whimsical arbitration. It’s a deeply mistaken view that all economic analysis is incontrovertibly decided by some coterie, and that somehow that is the unspoken agreement. When there is exogenous disruption, the Fed is responsible and capable of preventing a then endogenous recession. For instance, this is the first time the money stock has been raised proportionally to the extent as the money velocity has dropped—-a correct measure as described by the monetarists.

yborg 6y ago

Every time something like this happens, Keynes is proven right again.

akiselev 6y ago

Is it just me or does this feel like wishful thinking? I'm on my phone so its hard to dig into sources but the presentation just reeks of misleading by statistics. I thought the main unemployment number included only people looking for work? If states dropped the LFW requirement from unemployment, that number would drop despite lots of people still on unemployment, no? I assume federal unemployment statistics focuses on other less state dependent metrics. Similarly the median house price is a farce if, like in the GFC, there's plenty of easy capital available for a land grab at the top. The prices could easily reflect increased competition and asset inflation, not something new about this financial crisis - and it wouldn't really be new, would it?

roenxi 6y ago
> Similarly the median house price is a farce if... Alternatively, what if people have stopped buying/selling cheap housing? If everyone except millionaires has dropped out of the market (say, due to lockdown restrictions) then the median house price will rise even if the market is dying. Particularly if the wealthy are desperately trying to turn cash into assets in response to the government largess. I suspect Mr. Carlson fell for Simpson's paradox with that one; it seems unlikely that the property market is booming. That chart isn't enough evidence.
- jhart99 6y ago
  Here are the stats from NAR. The average price has increased, but the volume is off by 10% year over year. The last slide shows sales volume by price. It isn't what I expected. It looks like sales are up around the median price while both the high and low end are way down. https://www.nar.realtor/sites/default/files/documents/ehs-06-2020-summary-2020-07-22.pdf https://www.nar.realtor/sites/default/files/documents/ehs-06...
- ultrasaurus 6y ago
  Over the past few months tens of thousands of high-income workers have been told they can WFH forever, and an above average house in most of the country looks awfully cheap compared to SF house on SV salaries.

joe_the_user 6y ago

It's hard to even figure out what a "10% unemployment rate" means. I recall unemployment rate calculations involved something like "of the people actively looking for work (according to the most recent definition), X percent can't find it". Looking at ostensibly more objective "Labor force participation rate", it seems work decline precipitously at the start of the lockdown and has now, indeed, shot back up by 1/2 or 1/3 the amount. But what it all means is hard to gauge. For example, the long increase from 1970 to 1990 involved the (re)entry of women into the workforce. The present a labor force participation rate now equal to that of 1973 might not involve the re-emergence of the happy homemaker. https://fred.stlouisfed.org/series/CIVPART https://fred.stlouisfed.org/series/CIVPART

herdrick 6y ago
It's people actively looking for work --------------------------------------------------- people actively looking for work + people with jobs
- joe_the_user 6y ago
  Yeah, kind of like what I except but with ascii graphics. But my implicit point is "people actively looking for work" has been a quantity whose definition shifts and who method of measurement shifts and which is inherently difficult to measure.

lettergram 6y ago

I don't feel this article focused enough on the primary driver - deferments. Credit card, mortgage, auto, rent payments were all deferred the same time money was handed out. At the same time, the ability to spend money to travel, go out to eat, etc all evaporated. This let people pay off debt, save, or invest. All of which is probably good considering... There are multiple super scary looming issues: * Commercial real estate is about to collapse * Renters are about to have to start paying again (although, with Trumps executive order, maybe not?) * Auto repos are about to pick back up * Those who are required to use credit cards to finance their lives are about to be cut off (banks are limiting increases) * Wave two of the virus is going to increase * Civil unrest from elections, pandemic, racism, etc. are going to [probably] continue to escalate * Inflation will start to hit (we can already see it in the stock market and some food prices). This will effectively reduce any stop-gap mechanism. * Unemployment insurance is going to start dropping off for people (who did apply). States typically have 12 - 24 weeks[1], plus the additional 13 weeks from the CARES Act. * Although unemployment is dropping, part of that is their counting mechanism. Many left the job market (my parents just retired), job openings are dropping (we will see Junes tomorrow[2]), a second pseudo-lockdown will likely continue through the end of the year. * Many small businesses haven't really "recovered" and are still running red. Many will be out of business by the end of the year. * Oil prices are stagnant, but any kind of lockdown will cause this to drive down further.[3] * Airlines aren't expecting a recovery any-time soon. [4] [1] https://www.forbes.com/sites/zackfriedman/2020/04/29/unemployment-benefits-extended/#7a66ba652a51 https://www.forbes.com/sites/zackfriedman/2020/04/29/unemplo... [2] https://tradingeconomics.com/united-states/job-offers https://tradingeconomics.com/united-states/job-offers [3] https://www.marketwatch.com/investing/future/crude%20oil%20-%20electronic https://www.marketwatch.com/investing/future/crude%20oil%20-... [4] https://www.barrons.com/articles/german-airline-lufthansa-says-it-expects-flying-slump-to-last-until-2024-51596722375 https://www.barrons.com/articles/german-airline-lufthansa-sa...

cloudking 6y ago
I agree, the article feels cherry picked. Look at the entire picture not just what's going well. The S&P 500 is performing well, because it's being driven by big tech stocks that were largely unaffected by the pandemic. There is a flood of retail investors enabled by mobile apps, many of them are inexperienced. There is stock mania, trading without looking at fundamentals.

benignslime 6y ago

Fuck thinking about this critically -- just bow to your new overlords. HEIL TRUMP

Spooky23 6y ago

Everything is great except for the 30M unemployed. People aren’t paying rent and entire industries are truly and completely fucked. The conjecture here is baffling for a website that supposedly is rich in common sense.

cs702 6y ago

In short, Covid-19 triggered an economic tsunami, but so far the US federal government has held it at bay: * Since March, the Federal Reserve has created "out of thin air" approximately $3 trillion dollars in new monetary assets, to support asset prices and prevent another financial crisis. This figure is about 3x greater than the $1 trillion of monetary assets created in all of 2008 and 2009, during the worst of the financial crisis. Source: https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL * In addition to the above monetary intervention, the federal government launched a ~$3 trillion rescue package at the beginning of the pandemic (including all those PPP loans that won't be repaid, all that spending on special unemployment benefits, all sorts of support for states, businesses, etc.), and now the debate is whether to spend an additional ~$1+ trillion (the last figure floated by the US treasury) or an additional ~$3.4 trillion (as proposed by congress). Source: https://www.reuters.com/article/health-coronavirus-usa-congress/corrected-update-1-pelosi-mnuchin-eye-narrower-us-covid-19-aid-through-2020-idUSL1N2FB068 https://www.reuters.com/article/health-coronavirus-usa-congr... The federal government is supporting the economy in an unprecedented manner to an unprecedented degree, to prevent it from collapsing until the virus is fully under control. All economic statistics reflect this unprecedented massive economic support. They do not reflect the "true underlying state" of the economy. There's nothing counterintuitive about that.

danaris 6y ago
> The federal government is supporting the economy in an unprecedented manner to an unprecedented degree, to prevent it from collapsing until the virus is fully under control. All economic statistics reflect this unprecedented massive economic support. And while this is true to an extent, it's also important to note that the government is supporting some parts of the economy (corporations, the stock market) significantly more than others (workers, the unemployed), and with the failure of the Republicans to agree to a new stimulus bill that wasn't 99.9% "bail out the wealthy and grant immunity to corporations that force their employees to work without adequate safety measures", that latter part is going to start showing in a big way, real soon.
- millstone 6y ago

euix 6y ago

There is no such thing as a free lunch. Money is not created out of "thin air", all that is happening is that the present generation is borrowing from the future generation and generations that are yet to be born. The young and unborn subsidize the old. The way this kind of borrowing shows up in society is in low marriage rates and smaller families and eventually lower birth rates as people cannot find the stability or financial ability to start families or even to establish stable relationships, which eventually leads to low consumption as your demographic basis simply needs less of everything. As long as you have political will you can keep kicking the can down the road at the cost of a declining population. In liberal western societies this is partially made up by immigration from developing countries, but that creates another host of issues and tensions between recent arrivals and natives.

millstone 6y ago
Money is free, but it is not a lunch. You can't eat it. It doesn't actually do anything at all by itself, which is why you CAN create it out of thin air! What matters is real productive capacity. Factories that build stuff, fields that grow crops, people learning skills. If next year, we have shuttered factories and fallow fields and a less skilled workforce - then the future has paid the price! Perhaps the government saves the future by borrowing today. The Fed issues bonds, Jeff Bezos buys them, and in 50 years Jeff Bezos's kids own bonds, that yours and my children pay for through taxes. But that is a wealth transfer between people in the future, not a transfer from the future to today.

Danieru 6y ago

Lots of people missing the core thing here: savings rate. When the propensity to save increases it reduces consumption. Falling credit card debt, reductions in mortgage delinquency, those are all trailing results of the increase in savings. People are spending less with most people's income staying steady. This money is flowing into assets and reducing debt. In normal times this would be a welcomed reversal of the American trend. Yet this effect is temporary and instead will only serve to hurt the velocity of money. "Why is there no inflation despite massive printing?" is also a common refrain. Here to the savings rate is to blame. With less consumption the velocity of money has shrunk and the effective money supply shrank with it. Thus the FED's insane money printing is in part only there to counter act the deflationary pressure. Again: everything comes back to the savings rate.

bamboozled 6y ago
Except, isn't retail spending right up, or even through the roof?

thewileyone 6y ago

Simply put, people have stopped buying stuff they don't need. They've changed their spending patterns and found that they have extra cash to pay their bills, invest, etc. Gee, if only they'd have been encouraged to do that earlier.