19 ms·

U.S. economy shrank at a 1.4% annual rate in the first quarter

158 points by Bostonian 5y ago

JKCalhoun 5y ago
https://archive.ph/q7416 https://archive.ph/q7416
incomingpain 5y ago
GDP: -1.4% DOW: -8.36% YTD S&P500: -12.22% YTD NASDAQ: -20.17% YTD Inflation: 8.5% Interest rate: 0.5%(increasing once by 0.25%) Balance of trade: $-89.2B >they still think the Fed will be able to rein in inflation without triggering a recession. It was raised once and everything is collapsing underneath. Don't know how you look at all this and think 'it'll be fine'. There's a general rule that this kind of behaviour like this and this is obvious enough. What's more important is the reality of civil unrest.
- usrn 5y ago
  They're saying there will be food shortages this year. Combined with mass immigration from failed states (so already bringing violence + spreading what little we have even thinner) civil unrest is certain.
  - paywallasinbeer 5y ago
    The White House is saying the opposite in relation to food shortages: https://twitter.com/TPostMillennial/status/1519040538779037701 https://twitter.com/TPostMillennial/status/15190405387790377...
    - incomingpain 5y ago
      https://www.bloomberg.com/news/articles/2022-03-24/biden-says-to-expect-real-food-shortages-due-to-ukraine-war https://www.bloomberg.com/news/articles/2022-03-24/biden-say... In terms of farmers retiring with a non-zero reduction of food produced but also farmers in north america getting more $ to ship their food overseas. In addition to food inflation pushing food prices up to unaffordable levels. I agree with biden, food shortages will be happening.
      - paywallasinbeer 5y ago
        That seems like an odd mismatch between Biden and Psaki. Do you think it's possible Biden was speaking about the World, more specifically Europe, and Psaki was speaking about the US? If not, I am curious as to why you think there is a mismatch between them on this issue. Non paywall link to that article: https://archive.ph/Rbnv4 https://archive.ph/Rbnv4
        Consultant32452 5y ago
        I have no idea what's going to happen with food, but it's very common for Biden to say something and then Psaki or other administration officials to walk it back.
        incomingpain 5y ago
        There has been quite a few examples of Biden saying something and the white house backpedaling on the comment. It's a very real issue that lots of people beyond Biden have commented on. Ukraine does produce significant food/calories. This is almost certainly going to be bad for europe. I made the obvious case about what might happen soon. I am happy to believe Psaki is the one who is wrong. Which is not really difficult to believe given trackrecord.
  - JaimeThompson 5y ago
    States as in countries or states as in US states?
    - thoughtstheseus 5y ago
      Countries. The war in Europe is disrupting food production and fertilizer sourcing. There’s enough food but the logistics are screwy and many countries do not store food.
  - giraffe_lady 5y ago
    Wait do we have little now? When did that change because when I look around I see much, much that we won't share. Do immigrants always bring violence? Why did their states fail anyway? Could we have had a hand in that, bear some responsibility? Whatever the specifics of the answers you see to these questions your comment sucks. It's using racist fears to stoke xenophobic resentment.
    - usrn 5y ago
  - causi 5y ago
    Maybe not this year and maybe not in the US, but next year much of the world will see significantly reduced food production both as a result of war/sanctions with food-exporting nations and a global fertilizer shortage. https://i.imgur.com/DqKpRbU.gif https://i.imgur.com/DqKpRbU.gif
- MaysonL 5y ago
  > food scarcity How much food rotted at the Texas border after Governor Abbott's PR stunt held it up? Estimated to be over $4Billion.
  - BitwiseFool 5y ago
    Something about that $4 Billion figure seems exaggerated, intangible, or simply an on-paper calculation. Assuming a truck carrying food is 6 hours late, how much spoilage does that actually cause? Would a pileup on an interstate causing an hours long delay likewise have its "impact" calculated to be in the tens of millions?
    - bluejekyll 5y ago
      I haven’t seen a $4 billion number, $9 billion is the total trade. $240 million is the estimate lost due to spoilage, and the longest waiting time looks to have been 30 hours: https://www.businessinsider.com/texas-gov-greg-abbott-truck-inspection-policy-creates-logjam-2022-4?op=1 https://www.businessinsider.com/texas-gov-greg-abbott-truck-...
    - s1artibartfast 5y ago
      I don't know about fruit, but nuts like pistachios will spoil after 12 hours in a truck. You have a finite time before picking and processing before they rot, and a tractor trailer is about the worst environment as the the load can cook itself from the waste heat of biological activity in a large poorly ventilated volume.
  - incomingpain 5y ago
    >How much food rotted at the Texas border after Governor Abbott's PR stunt held it up? Estimated to be over $4Billion. https://medium.com/the-haven/texas-gov-abbotts-racist-border-stunt-causes-240-million-in-produce-to-rot-7916af25a7b0 https://medium.com/the-haven/texas-gov-abbotts-racist-border... This article says $240 million and he reversed the policy? So it's not an ongoing issue? Also if food is 'rotting' because he is sitting in a truck for perhaps a day longer? Perhaps it was rotting before?
- JKCalhoun 5y ago
  > A civil pillar like food scarcity will spark more than civil unrest. Probably will be civil war before midterms happen. Like what happened with the Great Depression? I saw no mention of food shortages in the article. My sense is that civil wars are when states/governments fight, not hungry people. You could have stopped at civil unrest.
  - incomingpain 5y ago
    Arab spring is a more modern example. https://www.businessinsider.com/ukraine-russia-bread-food-prices-civil-unrest-arab-spring-egypt-2022-3 https://www.businessinsider.com/ukraine-russia-bread-food-pr... https://medium.com/something-about-everything/food-riots-and-the-arab-spring-4886e4c3604 https://medium.com/something-about-everything/food-riots-and... >My sense is that civil wars are when states/governments fight, not hungry people. You could have stopped at civil unrest. What happens when food is scarce and people are starving for possibly the first time in their life? Anxiety, depression, etc is well established. Then people are going to want to know why they are starving.
    - Balero 5y ago
      The food scarcity we have experienced in the pandemic is more like people wondering why there are no peppers or chicken this week. But there is plenty of other food to eat. I think any issues we have will be people not having their first option of food, not going hungry.
      - codefreeordie 5y ago
        Maybe in your neck of the woods. I had a solid weeklong period here where no store within 15 miles had any fresh dairy products, meats, produce other than herbs, or bulk grains (flour, rice, pasta, etc).
        Balero 5y ago
        Out of interest, where were you? Just to flesh out my experience. In the UK we defiantly had some things missing from shelves, but it would be running out of strawberry cereal bars and having to have raspberry ones instead. Aside from some short term (about 2 weeks) issues with everyone buying all the loo roll, there wasn't anything that couldn't be replaced.
- ianhawes 5y ago
  Not sure if you noticed but we had massive food scarcity in March and April 2020 and the most inconvenient thing about it was waiting in line to pay and my kids not having hot dogs for several months. Not saying civil unrest isn’t a possibility, but I’m not sure economic uncertainty could do any worse than airborne-once-in-a-lifetime pandemic
  - indymike 5y ago
    > Not sure if you noticed but we had massive food scarcity in March and April 2020 and the most inconvenient thing about it was waiting in line to pay and my kids not having hot dogs for several months Where was this? I had a few trips to the grocery where specific items were out of stock or rationed (i.e. limit 2 per customer), but never saw a shortage of processed meats.
- boringg 5y ago
  I think you are living too deep in your fears - lots of doom and gloom here. There isn't anything relative to a food shortage about to happen in the US and certainly we aren't on the cusp of a civil war. DC is actually less acrimonious than it was. The equity market is not the economy and a lot of the financial websites make money on hyping up the latest quarterly numbers. Are there concerns here? Yes, there always are - is the world about to end from this? Absolutely not.
  - incomingpain 5y ago
    - alexk307 5y ago
      What are you talking about? Biden is going to use nuclear weapons against US citizens? I assure you, there is no food shortage in the United States. The S&P500 went down 15%, calm down, it'll go back up.
      - incomingpain 5y ago
        nemacol 5y ago
        > Obviously Biden threatened to nuke insurrectionists. That is an insane takeaway from the clip you shared. No reasonable person would listen to those words and take it as a direct threat to bomb insurrectionists. I think you are a troll.
    - suetoniusp91 5y ago
      Go out and touch some grass. Sitting at a computer screen and reading about the world creates a warped reality. Live life don't read about it
  - imtringued 5y ago
    It's kind of funny how the worst things imaginable happened and everything is still fine. We literally just need to defend Ukraine and wait things out.
- altacc 5y ago
  From a non-US perspective, it seems that a lot of Americans are quick to conclude that a civil war is around the corner, even on HN where one would hope for a more nuanced analysis. There can't be that many boogaloo boys on this forum, so I wonder how common this narrative is in the US at the moment to make it a go-to conclusion. Is it really common to hear talk of this in the US? From what I see of human nature, most people are willing to accept a good deal of change and discomfort before they are willing to jeopardise their relatively stable & comfortable lives (relative compared to countries where you actually see armed uprisings, revolutions & civil war).
  - germinalphrase 5y ago
    There is a distinct element of the American psyche that focuses on anti-government suspicions, self determination, armed resistance, etc. It’s part of our founding mythos and reinvents itself in all sorts of contexts. Doesn’t mean it is at all realistic for our present circumstances. I don’t happen to think so. An increase in stochastic violence? Sure. Actual, organized civil war? No chance.
    - afarrell 5y ago
      It is also a part of the family histories of many Americans. Many of them are descended from people who made the decision to flee 1000s of miles before things got really bad.
  - gsibble 5y ago
    There are a lot of very angry conservatives who are getting angrier by the day. And they own the vast majority of the guns.
    - germinalphrase 5y ago
      That cohort is still a numerical minority and while they may own the majority of civilian firearms, the United States government absolutely owns the majority of effective weapons. That said, calling the potential conflict a “domestic insurgency” is not much of a comfort compared to “civil war” even if the former is unlikely to be an existential threat to the country.
- dntrkv 5y ago
  Oh yeah, remember the civil war of 1982? When inflation was 14% and The Fed raised rates to purposefully start a recession? Give me a break, we’ve been through much worse. Let’s stop with the FUD please.
  - usrn 5y ago
    People got along a lot better with their neighbors in the 80s than they do now.
    - dntrkv 5y ago
      I think you’re confusing people’s online rhetoric with their IRL interactions. If there was no civil war after 2008, there sure as hell won’t be one this time when people are doing better by most metrics. American’s financial situations are actually quite good right now. Everybody is just anxious as fuck, for many reasons.
      - usrn 5y ago
        An odd thing to say after people spent the last couple summers burning things down
        dntrkv 5y ago
        Again, that’s not the first time that’s happened. We’ve had worse and it didn’t lead to civil war. Think about what a civil war would entail. It is literally war between neighbors. You really think Americans are ready to kill each other en masse and give up everything they have, for what? It’s easy to make proclamations about some abstract idea of “civil war” but the reality is that most Americans are doing relatively well and would not stake their lives on something that doesn’t even promise a better outcome.
        AYBABTME 5y ago
        I walk and drive around and don't see much burning.
MaysonL 5y ago
US economy grew at a 6.9% rate in the fourth quarter last year.
- bko 5y ago
  How much of that was due to inflation? Remember these numbers are nominal GDP. So if price levels doubled and nothing else changed, GDP would more or less double as consumption went up due to higher prices. The worrying thing is there are no monetary levers available without the risk of higher inflation. And if people don't think GDP matters, its actually a very good indicator of all sorts of well being measures such as unemployment and premature deaths among other things [EDIT] This is real GDP. I was mistaken
  - mtoner23 5y ago
    This is real gdp
  - jlmorton 5y ago
    No one reports nominal GDP changes. BEA reports real GDP changes using the GDP implicit price deflator.
    - bko 5y ago
      You're right. My mistake. I'll write an edit
  - Danieru 5y ago
    GDP is always reported as "Real GDP" with the inflation taken out. In fact the need to survey inflation to calculate GDP is the primary motivator for surveying inflation in the first place. Surveying for inflation is a ton of work, but its worth it to know GDP.
  - beamatronic 5y ago
    I believe there are many monetary levers that can be pulled at any time. They all revolve around government holding back business. For example, restrictions on building houses. Government needs to get out of the way of productive people.
recursivedoubts 5y ago
Shows just how sensitive our economy is to small interest rate fluctuations, having lived around the zero bound for over a decade. We've encouraged everyone to lever out as far as possible while at the same time making real production more and more difficult (or, during the early lock downs, impossible) and, well, the long run is here. Keynes was right: he's dead. Unfortunately, we, and our children, are not.
- kasey_junk 5y ago
  The US Fed didn’t raise interest rates until March, much too late to cause this number.
  - recursivedoubts 5y ago
    They began talking about raising rates much earlier. Markets and the economy are forward looking.
    - VHRanger 5y ago
      Markets didn't react until around Feb 2022. Look at mortgage rates for instance. Or just equities indeces.
    - kasey_junk 5y ago
      All of the predictions ahead of this number and the article itself were predicting this based on inventory surpluses that had been built up in the previous 2 quarters. That seems a more directly attributable cause than fears of interest rate increases. In fact, if you anticipate interest rate increases it makes more sense to bring spending forward not to delay it.
    - jlmorton 5y ago
      I'm not sure what you're suggesting. What was the mechanism by which talk of higher rates reduced GDP? Consumer and business spending both increased. Personal consumption expenditures increased at 2.7%, and business investment increased at 2.1%. The big drag in the report is from inventories and trade, which are being impacted by pandemic-related supply chain issues and geopolitics.
pjc50 5y ago
Always wondering exactly what people mean when they talk of "civil unrest", and who and how will it start. Do the various riots in 2020 America or the Jan 6 storming of the capitol count? On the other hand, Elon Musk Twitter purchase: $44bn. There's plenty of money out there still. I think it's unlikely that merely raising rates will do anything, for two reasons: firstly there's a real need to do some fiscal policy as well, and secondly this inflation is being driven by real shortages not just the bidding up of goods. Chip shortages, fossil fuel shortages due to cutting Russia off the world market, food shortages, and the war in Europe's sixth-largest country destroying a lot of production capacity. Not to mention ongoing COVID costs.
- throwaway0a5e 5y ago
  >Always wondering exactly what people mean when they talk of "civil unrest", and who and how will it start. Do the various riots in 2020 America or the Jan 6 storming of the capitol count? A whole lotta people, mostly outside the HN demographics, are real pissed off about a decade of public policy that has amounted to making their lives worse and worse at every juncture and now it's finally getting to the point where ends are hard to meet. I am not dumb enough to try to make specific predictions but that's a pretty substantial powder keg.
  - coldpie 5y ago
    It's been a lot longer than a decade. Reagan kicked off the looting of the middle-class in the 80s, and both parties officially adopted that policy by the mid-90s, almost 30 years ago. It takes a long time to drive an airplane as big as the US into the ground, but we're finally starting to see the tires hitting the ground now.
    - snikeris 5y ago
      Please expand on this: > Reagan kicked off the looting of the middle-class in the 80s, and both parties officially adopted that policy by the mid-90s, almost 30 years ago.
  - krapp 5y ago
throwaway4good 5y ago
Given that the economy grew 6.9% previous quarter, over the past two quarters, the US economy is growing at an annual rate of 5.5% - which is very high.
- radford-neal 5y ago
  If you average 6.9% and -1.4% (which is close to being a valid procedure, since the numbers are fairly small), you get 2.75%, not 5.5%.
  - deleted 5y ago
    [deleted]
  - JumpCrisscross 5y ago
    For those who are wondering, the correct calculation is (1 + 6.9% / 4) × (1 - 1.4% / 4), or ~1.37%. Economy started with 100. It grew at 6.9%, or 1.725% in the quarter, to 101.725. It then shrunk 1.4% annualised, or 0.35%, to 101.37. (Edited to account for annualisation.)
    - radford-neal 5y ago
      No. These are annual rates. The actual change in the fourth quarter was approximately 6.9/4 = 1.725% and the actual change in the first quarter was approximately -1.4/4 = -0.35%, for a total change of approximately 1.725-0.35=1.375% in the two quarters. That's an annual rate of approximately 1.375*2 = 2.75%. (All calculations approximate, but close given that the percentages are all fairly small.)
      - JumpCrisscross 5y ago
        Yup, I realised my error after commenting and inadvertently ninja edited from under you.
  - throwaway4good 5y ago
    You are right - those numbers should be averaged together; 2.75% is still high though.
taylodl 5y ago
The fact the Fed is even contemplating a rate hike tells me they're misreading what's going on. The inflation we're seeing isn't a result of a hot economy needing to be kept in check, it's the fact that 40% of China's production is on lockdown and just about every product made, regardless of where it's made, is relying on part(s) coming from China. Supply is constrained and therefore prices are rising. Likewise, supply is constrained and that's impacting industrial output - hence a shrinking economy.
- mupuff1234 5y ago
  I'm pretty sure that's why they waited so long to raise interests, as they thought supply chain issue would be resolved and all will come back to normal. Although that doesn't really explain the inflation of asset values.
  - namelessoracle 5y ago
    Supply chain issues can explain assert values rising. People/groups put money into assets instead of goods.
  - conductr 5y ago
    Saving rate went through the roof and it's not stuffed under people's mattresses
- adam_arthur 5y ago
  It's a combination. But if you look at the actual data as it relates to consumer consumption, pretty clear the primary driver was demand driven. The port backlogs that started in 2021 were due to excess consumption triggered by stimulus Retail sales chart: https://fred.stlouisfed.org/series/RSXFS https://fred.stlouisfed.org/series/RSXFS Tell me you don't see a problem here ^ ?
  - merpnderp 5y ago
    Couple that with the massive drawdown in Chinese imports and no wonder inflation is blowing up. United States Imports from China: https://tradingeconomics.com/united-states/imports-from-china https://tradingeconomics.com/united-states/imports-from-chin...
mensetmanusman 5y ago
It’s always good to remind people that: GDP ~= Population * Productivity If your population growth flat-lines (which it did last year), productivity has to compensate. Can productivity compensate if the average age is getting older (people tend to be less productive after a certain median age)? One reason investing in index funds makes sense is the underlying assumption that global population growth keeps increasing (GDP for ‘free’). I’m super interested in what investing looks like in 50-100 years as the population starts collapsing, because it might collapse faster than productivity can possibly compensate for, which means unstoppable GDP decline. GDP has to be at certain levels to support different types of economic activity. E.g. at some point, GDP might be low enough that new semiconductor research isn’t affordable (because all the workers are used up caring for the elderly for example).
- ultra_nick 5y ago
  GDP per capita seems like a more useful metric for domestic use.
- HFguy 5y ago
  It is a common mistake, but stocks don't have a positive return because GDP increases over time. They have a positive expected return over time because they have a risk premium. That is, to invest and take on risk, an investor will demand a return above and beyond the expected value of the cash flows the business generates. Whatever path of GDP and/or population is expected to be is already factored into the discounted valuation of the cashflows. That is, you aren't getting a positive expected return because population growth is increasing over time (i.e., everyone knows that, it is already baked into the price). Now, if the expected population growth changes...then the price would change. You have an expected return because you are taking on risk.
  - JumpCrisscross 5y ago
    > stocks don't have a positive return because GDP increases over time. They have a positive expected return over time because they have a risk premium You’re both right. The equity risk premium [1] is real. But it’s a premium over something. That something is, approximately, production. (It’s precisely the risk-free rate of return. Which, in the long run, is base-rate production.) [1] https://www.investopedia.com/terms/e/equityriskpremium.asp https://www.investopedia.com/terms/e/equityriskpremium.asp
SubiculumCode 5y ago
I hate this title. It makes it seem to people that our economy shrank when in fact, it just grew bigger less fast. To me its just as egregious as headlines saying that inflation in April is 7% or whatever, leading the less informed to think that inflation grew by 7% in a single month, not on an annual basis.
- radford-neal 5y ago
  First words of article: "The U.S. economy shrank at a 1.4% annual rate in the first quarter". That's an actual shrinkage, not a lower rate of growth. "Inflation in April was 7%" is indeed a frequent misleading/ambiguous phrase. They should say, "consumer prices rose in April at a 7% annual rate", or say "consumer prices increased by 0.6% in April", though constant incorrect usage might lead people to misinterpret the latter.
JumpCrisscross 5y ago
“The report is more an illustration of how GDP calculations tend to be volatile from quarter to quarter, not necessarily indicating weakness in the economy or a sign of recession. The contraction was due to a jump in imports and a drop in exports, coupled with a slower buildup of businesses’ stockpiles. On a year-over-year basis, the economy grew 3.6%. Together, trade and inventories subtracted about 4 percentage points from headline growth. Government spending shrank, also weighing on GDP. But real final sales to domestic purchasers, a measure of underlying demand that strips out the trade and inventories components, accelerated to a 2.6% annualized rate.“ [1] In case you’re wondering why the market is blowing this off while the Wall Street Journal and, I presume, CNBC, are blowing it up. [1] https://www.bloomberg.com/news/articles/2022-04-28/u-s-economy-contracted-in-first-quarter-on-surge-in-trade-gap https://www.bloomberg.com/news/articles/2022-04-28/u-s-econo...
- MatteoFrigo 5y ago
  I don't think the bloomberg explanation is right, because the net effect of imports on GDP is zero. Assume you import $1 of goods, which are consumed. Then the GDP reflects $1 consumption (either private or government) minus $1 imports, for a net zero. The goods may not be consumed immediately, in which case GDP counts $1 inventories minus $1 imports, still net zero. The thing to remember is that GDP is domestic product, so anything produced abroad is irrelevant.
  - JumpCrisscross 5y ago
    > the net effect of imports on GDP is zero Correct [1]. Net exports is a non-zero component of GDP, but "the imports variable (M) correct[s] for the value of imports that have already been counted as personal consumption (C), gross private investment (I), or government purchases (G)" [2]. [1] https://fredblog.stlouisfed.org/2018/09/do-imports-subtract-from-gdp/ https://fredblog.stlouisfed.org/2018/09/do-imports-subtract-... [2] https://research.stlouisfed.org/publications/page1-econ/2018/09/04/how-do-imports-affect-gdp https://research.stlouisfed.org/publications/page1-econ/2018...
    - deleted 5y ago
mediaman 5y ago
There's a lot of talk about high inflation rates, and what the Fed has to do to combat them, including causing a recession. It's true that inflation is high, but the data shows us that most of this is being caused by factors not related to high economic demand: it's energy and food. Core CPI also increased, but it's tempered considerably: the annualized rate of the latest month over month core CPI change is now under 4% (3.9%), having fallen from an annualized m/m rate of change of 6.5-7.5% a few months ago. 3.9% is a little higher than our target of 2%, but not as alarming as the headline rate of total CPI. Everyone made fun of the claims of "transitory" inflation from late last year, but it's looking like -- except for energy and food, which are being driven by international events -- the drivers of base inflation really were one-off events, and are not continuing at the same rate. For example, international freight increased dramatically, from around $3,500 for a 40HC from Ningbo to LA to $18-20k, but it has since stabilized to around $15k - and inflation is a rate of change, so in that area we are not seeing a continued paced increase in cost. It's just stayed expensive. Of course, energy and food matter, a lot. Food prices matter more than the price of, say, imported lawn chairs. But it's useful to ask why inflation is happening. Is it because our demand is too high and there's competition for resources? Then we need to slow down the economy to reduce competition for resources. That's the Fed's job. Or is it because there's a sudden reduction in available global oil and grain supply? Then it's not clear that causing a hard recession is going to fix it. In that case, we need to fix the decrease in supply. And in our current case, that's not easy: much of this increase is being driven by a misinformed dictator of a nuclear superpower hell-bent on escalating a regional war, and this type of problem is not one the Fed is well equipped to deal with. What we're really seeing is supply-side driven inflation. The Fed should continue to drive core inflation back down to its target level of 2-2.5%, but we are already seeing success here. The real question is what we do about energy and food, and it's not clear the Fed's actions are going to solve that problem.
ohiovr 5y ago
Inventories are rising. I'm an assembly line worker and our warehouses are getting stuffed. People are being sent home because we got too much product already. We make dryers. I can assume that the working class would put off buying dryers because more money has to go into rent and food. Nearly a fifth of my income goes to food now and about a quarter will go to rent.
mbrodersen 5y ago
It’s always good to remind people that GDP is a useless indicator for anything that really matters to people (health, safety, education, freedom etc.)
- Gibbon1 5y ago
  Income stability is a big one too. I'd rank that right behind health in importance. If you are healthy and know you're going to have income for the foreseeable future that counts for a lot.
  - mbrodersen 5y ago
    Yep agree. Good point.

158 points by Bostonian 5y ago

https://archive.ph/q7416 https://archive.ph/q7416

GDP: -1.4% DOW: -8.36% YTD S&P500: -12.22% YTD NASDAQ: -20.17% YTD Inflation: 8.5% Interest rate: 0.5%(increasing once by 0.25%) Balance of trade: $-89.2B >they still think the Fed will be able to rein in inflation without triggering a recession. It was raised once and everything is collapsing underneath. Don't know how you look at all this and think 'it'll be fine'. There's a general rule that this kind of behaviour like this and this is obvious enough. What's more important is the reality of civil unrest.

usrn 5y ago
They're saying there will be food shortages this year. Combined with mass immigration from failed states (so already bringing violence + spreading what little we have even thinner) civil unrest is certain.
- paywallasinbeer 5y ago
  The White House is saying the opposite in relation to food shortages: https://twitter.com/TPostMillennial/status/1519040538779037701 https://twitter.com/TPostMillennial/status/15190405387790377...
  - incomingpain 5y ago
    https://www.bloomberg.com/news/articles/2022-03-24/biden-says-to-expect-real-food-shortages-due-to-ukraine-war https://www.bloomberg.com/news/articles/2022-03-24/biden-say... In terms of farmers retiring with a non-zero reduction of food produced but also farmers in north america getting more $ to ship their food overseas. In addition to food inflation pushing food prices up to unaffordable levels. I agree with biden, food shortages will be happening.
    - paywallasinbeer 5y ago
      That seems like an odd mismatch between Biden and Psaki. Do you think it's possible Biden was speaking about the World, more specifically Europe, and Psaki was speaking about the US? If not, I am curious as to why you think there is a mismatch between them on this issue. Non paywall link to that article: https://archive.ph/Rbnv4 https://archive.ph/Rbnv4
      - Consultant32452 5y ago
        I have no idea what's going to happen with food, but it's very common for Biden to say something and then Psaki or other administration officials to walk it back.
      - incomingpain 5y ago
        There has been quite a few examples of Biden saying something and the white house backpedaling on the comment. It's a very real issue that lots of people beyond Biden have commented on. Ukraine does produce significant food/calories. This is almost certainly going to be bad for europe. I made the obvious case about what might happen soon. I am happy to believe Psaki is the one who is wrong. Which is not really difficult to believe given trackrecord.
- JaimeThompson 5y ago
  States as in countries or states as in US states?
  - thoughtstheseus 5y ago
    Countries. The war in Europe is disrupting food production and fertilizer sourcing. There’s enough food but the logistics are screwy and many countries do not store food.
- giraffe_lady 5y ago
  Wait do we have little now? When did that change because when I look around I see much, much that we won't share. Do immigrants always bring violence? Why did their states fail anyway? Could we have had a hand in that, bear some responsibility? Whatever the specifics of the answers you see to these questions your comment sucks. It's using racist fears to stoke xenophobic resentment.
  - usrn 5y ago
- causi 5y ago
  Maybe not this year and maybe not in the US, but next year much of the world will see significantly reduced food production both as a result of war/sanctions with food-exporting nations and a global fertilizer shortage. https://i.imgur.com/DqKpRbU.gif https://i.imgur.com/DqKpRbU.gif
MaysonL 5y ago
> food scarcity How much food rotted at the Texas border after Governor Abbott's PR stunt held it up? Estimated to be over $4Billion.
- BitwiseFool 5y ago
  Something about that $4 Billion figure seems exaggerated, intangible, or simply an on-paper calculation. Assuming a truck carrying food is 6 hours late, how much spoilage does that actually cause? Would a pileup on an interstate causing an hours long delay likewise have its "impact" calculated to be in the tens of millions?
  - bluejekyll 5y ago
    I haven’t seen a $4 billion number, $9 billion is the total trade. $240 million is the estimate lost due to spoilage, and the longest waiting time looks to have been 30 hours: https://www.businessinsider.com/texas-gov-greg-abbott-truck-inspection-policy-creates-logjam-2022-4?op=1 https://www.businessinsider.com/texas-gov-greg-abbott-truck-...
  - s1artibartfast 5y ago
    I don't know about fruit, but nuts like pistachios will spoil after 12 hours in a truck. You have a finite time before picking and processing before they rot, and a tractor trailer is about the worst environment as the the load can cook itself from the waste heat of biological activity in a large poorly ventilated volume.
- incomingpain 5y ago
  >How much food rotted at the Texas border after Governor Abbott's PR stunt held it up? Estimated to be over $4Billion. https://medium.com/the-haven/texas-gov-abbotts-racist-border-stunt-causes-240-million-in-produce-to-rot-7916af25a7b0 https://medium.com/the-haven/texas-gov-abbotts-racist-border... This article says $240 million and he reversed the policy? So it's not an ongoing issue? Also if food is 'rotting' because he is sitting in a truck for perhaps a day longer? Perhaps it was rotting before?
JKCalhoun 5y ago
> A civil pillar like food scarcity will spark more than civil unrest. Probably will be civil war before midterms happen. Like what happened with the Great Depression? I saw no mention of food shortages in the article. My sense is that civil wars are when states/governments fight, not hungry people. You could have stopped at civil unrest.
- incomingpain 5y ago
  Arab spring is a more modern example. https://www.businessinsider.com/ukraine-russia-bread-food-prices-civil-unrest-arab-spring-egypt-2022-3 https://www.businessinsider.com/ukraine-russia-bread-food-pr... https://medium.com/something-about-everything/food-riots-and-the-arab-spring-4886e4c3604 https://medium.com/something-about-everything/food-riots-and... >My sense is that civil wars are when states/governments fight, not hungry people. You could have stopped at civil unrest. What happens when food is scarce and people are starving for possibly the first time in their life? Anxiety, depression, etc is well established. Then people are going to want to know why they are starving.
  - Balero 5y ago
    The food scarcity we have experienced in the pandemic is more like people wondering why there are no peppers or chicken this week. But there is plenty of other food to eat. I think any issues we have will be people not having their first option of food, not going hungry.
    - codefreeordie 5y ago
      Maybe in your neck of the woods. I had a solid weeklong period here where no store within 15 miles had any fresh dairy products, meats, produce other than herbs, or bulk grains (flour, rice, pasta, etc).
      - Balero 5y ago
        Out of interest, where were you? Just to flesh out my experience. In the UK we defiantly had some things missing from shelves, but it would be running out of strawberry cereal bars and having to have raspberry ones instead. Aside from some short term (about 2 weeks) issues with everyone buying all the loo roll, there wasn't anything that couldn't be replaced.
ianhawes 5y ago
Not sure if you noticed but we had massive food scarcity in March and April 2020 and the most inconvenient thing about it was waiting in line to pay and my kids not having hot dogs for several months. Not saying civil unrest isn’t a possibility, but I’m not sure economic uncertainty could do any worse than airborne-once-in-a-lifetime pandemic
- indymike 5y ago
  > Not sure if you noticed but we had massive food scarcity in March and April 2020 and the most inconvenient thing about it was waiting in line to pay and my kids not having hot dogs for several months Where was this? I had a few trips to the grocery where specific items were out of stock or rationed (i.e. limit 2 per customer), but never saw a shortage of processed meats.
boringg 5y ago
I think you are living too deep in your fears - lots of doom and gloom here. There isn't anything relative to a food shortage about to happen in the US and certainly we aren't on the cusp of a civil war. DC is actually less acrimonious than it was. The equity market is not the economy and a lot of the financial websites make money on hyping up the latest quarterly numbers. Are there concerns here? Yes, there always are - is the world about to end from this? Absolutely not.
- incomingpain 5y ago
  - alexk307 5y ago
    What are you talking about? Biden is going to use nuclear weapons against US citizens? I assure you, there is no food shortage in the United States. The S&P500 went down 15%, calm down, it'll go back up.
    - incomingpain 5y ago
      - nemacol 5y ago
        > Obviously Biden threatened to nuke insurrectionists. That is an insane takeaway from the clip you shared. No reasonable person would listen to those words and take it as a direct threat to bomb insurrectionists. I think you are a troll.
  - suetoniusp91 5y ago
    Go out and touch some grass. Sitting at a computer screen and reading about the world creates a warped reality. Live life don't read about it
- imtringued 5y ago
  It's kind of funny how the worst things imaginable happened and everything is still fine. We literally just need to defend Ukraine and wait things out.
altacc 5y ago
From a non-US perspective, it seems that a lot of Americans are quick to conclude that a civil war is around the corner, even on HN where one would hope for a more nuanced analysis. There can't be that many boogaloo boys on this forum, so I wonder how common this narrative is in the US at the moment to make it a go-to conclusion. Is it really common to hear talk of this in the US? From what I see of human nature, most people are willing to accept a good deal of change and discomfort before they are willing to jeopardise their relatively stable & comfortable lives (relative compared to countries where you actually see armed uprisings, revolutions & civil war).
- germinalphrase 5y ago
  There is a distinct element of the American psyche that focuses on anti-government suspicions, self determination, armed resistance, etc. It’s part of our founding mythos and reinvents itself in all sorts of contexts. Doesn’t mean it is at all realistic for our present circumstances. I don’t happen to think so. An increase in stochastic violence? Sure. Actual, organized civil war? No chance.
  - afarrell 5y ago
    It is also a part of the family histories of many Americans. Many of them are descended from people who made the decision to flee 1000s of miles before things got really bad.
- gsibble 5y ago
  There are a lot of very angry conservatives who are getting angrier by the day. And they own the vast majority of the guns.
  - germinalphrase 5y ago
    That cohort is still a numerical minority and while they may own the majority of civilian firearms, the United States government absolutely owns the majority of effective weapons. That said, calling the potential conflict a “domestic insurgency” is not much of a comfort compared to “civil war” even if the former is unlikely to be an existential threat to the country.
dntrkv 5y ago
Oh yeah, remember the civil war of 1982? When inflation was 14% and The Fed raised rates to purposefully start a recession? Give me a break, we’ve been through much worse. Let’s stop with the FUD please.
- usrn 5y ago
  People got along a lot better with their neighbors in the 80s than they do now.
  - dntrkv 5y ago
    I think you’re confusing people’s online rhetoric with their IRL interactions. If there was no civil war after 2008, there sure as hell won’t be one this time when people are doing better by most metrics. American’s financial situations are actually quite good right now. Everybody is just anxious as fuck, for many reasons.
    - usrn 5y ago
      An odd thing to say after people spent the last couple summers burning things down
      - dntrkv 5y ago
        Again, that’s not the first time that’s happened. We’ve had worse and it didn’t lead to civil war. Think about what a civil war would entail. It is literally war between neighbors. You really think Americans are ready to kill each other en masse and give up everything they have, for what? It’s easy to make proclamations about some abstract idea of “civil war” but the reality is that most Americans are doing relatively well and would not stake their lives on something that doesn’t even promise a better outcome.
      - AYBABTME 5y ago
        I walk and drive around and don't see much burning.

MaysonL 5y ago

US economy grew at a 6.9% rate in the fourth quarter last year.

bko 5y ago
How much of that was due to inflation? Remember these numbers are nominal GDP. So if price levels doubled and nothing else changed, GDP would more or less double as consumption went up due to higher prices. The worrying thing is there are no monetary levers available without the risk of higher inflation. And if people don't think GDP matters, its actually a very good indicator of all sorts of well being measures such as unemployment and premature deaths among other things [EDIT] This is real GDP. I was mistaken
- mtoner23 5y ago
  This is real gdp
- jlmorton 5y ago
  No one reports nominal GDP changes. BEA reports real GDP changes using the GDP implicit price deflator.
  - bko 5y ago
    You're right. My mistake. I'll write an edit
- Danieru 5y ago
  GDP is always reported as "Real GDP" with the inflation taken out. In fact the need to survey inflation to calculate GDP is the primary motivator for surveying inflation in the first place. Surveying for inflation is a ton of work, but its worth it to know GDP.
- beamatronic 5y ago
  I believe there are many monetary levers that can be pulled at any time. They all revolve around government holding back business. For example, restrictions on building houses. Government needs to get out of the way of productive people.

recursivedoubts 5y ago

Shows just how sensitive our economy is to small interest rate fluctuations, having lived around the zero bound for over a decade. We've encouraged everyone to lever out as far as possible while at the same time making real production more and more difficult (or, during the early lock downs, impossible) and, well, the long run is here. Keynes was right: he's dead. Unfortunately, we, and our children, are not.

kasey_junk 5y ago
The US Fed didn’t raise interest rates until March, much too late to cause this number.
- recursivedoubts 5y ago
  They began talking about raising rates much earlier. Markets and the economy are forward looking.
  - VHRanger 5y ago
    Markets didn't react until around Feb 2022. Look at mortgage rates for instance. Or just equities indeces.
  - kasey_junk 5y ago
    All of the predictions ahead of this number and the article itself were predicting this based on inventory surpluses that had been built up in the previous 2 quarters. That seems a more directly attributable cause than fears of interest rate increases. In fact, if you anticipate interest rate increases it makes more sense to bring spending forward not to delay it.
  - jlmorton 5y ago
    I'm not sure what you're suggesting. What was the mechanism by which talk of higher rates reduced GDP? Consumer and business spending both increased. Personal consumption expenditures increased at 2.7%, and business investment increased at 2.1%. The big drag in the report is from inventories and trade, which are being impacted by pandemic-related supply chain issues and geopolitics.

pjc50 5y ago

Always wondering exactly what people mean when they talk of "civil unrest", and who and how will it start. Do the various riots in 2020 America or the Jan 6 storming of the capitol count? On the other hand, Elon Musk Twitter purchase: $44bn. There's plenty of money out there still. I think it's unlikely that merely raising rates will do anything, for two reasons: firstly there's a real need to do some fiscal policy as well, and secondly this inflation is being driven by real shortages not just the bidding up of goods. Chip shortages, fossil fuel shortages due to cutting Russia off the world market, food shortages, and the war in Europe's sixth-largest country destroying a lot of production capacity. Not to mention ongoing COVID costs.

throwaway0a5e 5y ago
>Always wondering exactly what people mean when they talk of "civil unrest", and who and how will it start. Do the various riots in 2020 America or the Jan 6 storming of the capitol count? A whole lotta people, mostly outside the HN demographics, are real pissed off about a decade of public policy that has amounted to making their lives worse and worse at every juncture and now it's finally getting to the point where ends are hard to meet. I am not dumb enough to try to make specific predictions but that's a pretty substantial powder keg.
- coldpie 5y ago
  It's been a lot longer than a decade. Reagan kicked off the looting of the middle-class in the 80s, and both parties officially adopted that policy by the mid-90s, almost 30 years ago. It takes a long time to drive an airplane as big as the US into the ground, but we're finally starting to see the tires hitting the ground now.
  - snikeris 5y ago
    Please expand on this: > Reagan kicked off the looting of the middle-class in the 80s, and both parties officially adopted that policy by the mid-90s, almost 30 years ago.
- krapp 5y ago

throwaway4good 5y ago

Given that the economy grew 6.9% previous quarter, over the past two quarters, the US economy is growing at an annual rate of 5.5% - which is very high.

radford-neal 5y ago
If you average 6.9% and -1.4% (which is close to being a valid procedure, since the numbers are fairly small), you get 2.75%, not 5.5%.
- deleted 5y ago
  [deleted]
- JumpCrisscross 5y ago
  For those who are wondering, the correct calculation is (1 + 6.9% / 4) × (1 - 1.4% / 4), or ~1.37%. Economy started with 100. It grew at 6.9%, or 1.725% in the quarter, to 101.725. It then shrunk 1.4% annualised, or 0.35%, to 101.37. (Edited to account for annualisation.)
  - radford-neal 5y ago
    No. These are annual rates. The actual change in the fourth quarter was approximately 6.9/4 = 1.725% and the actual change in the first quarter was approximately -1.4/4 = -0.35%, for a total change of approximately 1.725-0.35=1.375% in the two quarters. That's an annual rate of approximately 1.375*2 = 2.75%. (All calculations approximate, but close given that the percentages are all fairly small.)
    - JumpCrisscross 5y ago
      Yup, I realised my error after commenting and inadvertently ninja edited from under you.
- throwaway4good 5y ago
  You are right - those numbers should be averaged together; 2.75% is still high though.

taylodl 5y ago

The fact the Fed is even contemplating a rate hike tells me they're misreading what's going on. The inflation we're seeing isn't a result of a hot economy needing to be kept in check, it's the fact that 40% of China's production is on lockdown and just about every product made, regardless of where it's made, is relying on part(s) coming from China. Supply is constrained and therefore prices are rising. Likewise, supply is constrained and that's impacting industrial output - hence a shrinking economy.

mupuff1234 5y ago
I'm pretty sure that's why they waited so long to raise interests, as they thought supply chain issue would be resolved and all will come back to normal. Although that doesn't really explain the inflation of asset values.
- namelessoracle 5y ago
  Supply chain issues can explain assert values rising. People/groups put money into assets instead of goods.
- conductr 5y ago
  Saving rate went through the roof and it's not stuffed under people's mattresses
adam_arthur 5y ago
It's a combination. But if you look at the actual data as it relates to consumer consumption, pretty clear the primary driver was demand driven. The port backlogs that started in 2021 were due to excess consumption triggered by stimulus Retail sales chart: https://fred.stlouisfed.org/series/RSXFS https://fred.stlouisfed.org/series/RSXFS Tell me you don't see a problem here ^ ?
- merpnderp 5y ago
  Couple that with the massive drawdown in Chinese imports and no wonder inflation is blowing up. United States Imports from China: https://tradingeconomics.com/united-states/imports-from-china https://tradingeconomics.com/united-states/imports-from-chin...

mensetmanusman 5y ago

It’s always good to remind people that: GDP ~= Population * Productivity If your population growth flat-lines (which it did last year), productivity has to compensate. Can productivity compensate if the average age is getting older (people tend to be less productive after a certain median age)? One reason investing in index funds makes sense is the underlying assumption that global population growth keeps increasing (GDP for ‘free’). I’m super interested in what investing looks like in 50-100 years as the population starts collapsing, because it might collapse faster than productivity can possibly compensate for, which means unstoppable GDP decline. GDP has to be at certain levels to support different types of economic activity. E.g. at some point, GDP might be low enough that new semiconductor research isn’t affordable (because all the workers are used up caring for the elderly for example).

ultra_nick 5y ago
GDP per capita seems like a more useful metric for domestic use.
HFguy 5y ago
It is a common mistake, but stocks don't have a positive return because GDP increases over time. They have a positive expected return over time because they have a risk premium. That is, to invest and take on risk, an investor will demand a return above and beyond the expected value of the cash flows the business generates. Whatever path of GDP and/or population is expected to be is already factored into the discounted valuation of the cashflows. That is, you aren't getting a positive expected return because population growth is increasing over time (i.e., everyone knows that, it is already baked into the price). Now, if the expected population growth changes...then the price would change. You have an expected return because you are taking on risk.
- JumpCrisscross 5y ago
  > stocks don't have a positive return because GDP increases over time. They have a positive expected return over time because they have a risk premium You’re both right. The equity risk premium [1] is real. But it’s a premium over something. That something is, approximately, production. (It’s precisely the risk-free rate of return. Which, in the long run, is base-rate production.) [1] https://www.investopedia.com/terms/e/equityriskpremium.asp https://www.investopedia.com/terms/e/equityriskpremium.asp

SubiculumCode 5y ago

I hate this title. It makes it seem to people that our economy shrank when in fact, it just grew bigger less fast. To me its just as egregious as headlines saying that inflation in April is 7% or whatever, leading the less informed to think that inflation grew by 7% in a single month, not on an annual basis.

radford-neal 5y ago
First words of article: "The U.S. economy shrank at a 1.4% annual rate in the first quarter". That's an actual shrinkage, not a lower rate of growth. "Inflation in April was 7%" is indeed a frequent misleading/ambiguous phrase. They should say, "consumer prices rose in April at a 7% annual rate", or say "consumer prices increased by 0.6% in April", though constant incorrect usage might lead people to misinterpret the latter.

JumpCrisscross 5y ago

“The report is more an illustration of how GDP calculations tend to be volatile from quarter to quarter, not necessarily indicating weakness in the economy or a sign of recession. The contraction was due to a jump in imports and a drop in exports, coupled with a slower buildup of businesses’ stockpiles. On a year-over-year basis, the economy grew 3.6%. Together, trade and inventories subtracted about 4 percentage points from headline growth. Government spending shrank, also weighing on GDP. But real final sales to domestic purchasers, a measure of underlying demand that strips out the trade and inventories components, accelerated to a 2.6% annualized rate.“ [1] In case you’re wondering why the market is blowing this off while the Wall Street Journal and, I presume, CNBC, are blowing it up. [1] https://www.bloomberg.com/news/articles/2022-04-28/u-s-economy-contracted-in-first-quarter-on-surge-in-trade-gap https://www.bloomberg.com/news/articles/2022-04-28/u-s-econo...

MatteoFrigo 5y ago
I don't think the bloomberg explanation is right, because the net effect of imports on GDP is zero. Assume you import $1 of goods, which are consumed. Then the GDP reflects $1 consumption (either private or government) minus $1 imports, for a net zero. The goods may not be consumed immediately, in which case GDP counts $1 inventories minus $1 imports, still net zero. The thing to remember is that GDP is domestic product, so anything produced abroad is irrelevant.
- JumpCrisscross 5y ago
  > the net effect of imports on GDP is zero Correct [1]. Net exports is a non-zero component of GDP, but "the imports variable (M) correct[s] for the value of imports that have already been counted as personal consumption (C), gross private investment (I), or government purchases (G)" [2]. [1] https://fredblog.stlouisfed.org/2018/09/do-imports-subtract-from-gdp/ https://fredblog.stlouisfed.org/2018/09/do-imports-subtract-... [2] https://research.stlouisfed.org/publications/page1-econ/2018/09/04/how-do-imports-affect-gdp https://research.stlouisfed.org/publications/page1-econ/2018...
  - deleted 5y ago

mediaman 5y ago

There's a lot of talk about high inflation rates, and what the Fed has to do to combat them, including causing a recession. It's true that inflation is high, but the data shows us that most of this is being caused by factors not related to high economic demand: it's energy and food. Core CPI also increased, but it's tempered considerably: the annualized rate of the latest month over month core CPI change is now under 4% (3.9%), having fallen from an annualized m/m rate of change of 6.5-7.5% a few months ago. 3.9% is a little higher than our target of 2%, but not as alarming as the headline rate of total CPI. Everyone made fun of the claims of "transitory" inflation from late last year, but it's looking like -- except for energy and food, which are being driven by international events -- the drivers of base inflation really were one-off events, and are not continuing at the same rate. For example, international freight increased dramatically, from around $3,500 for a 40HC from Ningbo to LA to $18-20k, but it has since stabilized to around $15k - and inflation is a rate of change, so in that area we are not seeing a continued paced increase in cost. It's just stayed expensive. Of course, energy and food matter, a lot. Food prices matter more than the price of, say, imported lawn chairs. But it's useful to ask why inflation is happening. Is it because our demand is too high and there's competition for resources? Then we need to slow down the economy to reduce competition for resources. That's the Fed's job. Or is it because there's a sudden reduction in available global oil and grain supply? Then it's not clear that causing a hard recession is going to fix it. In that case, we need to fix the decrease in supply. And in our current case, that's not easy: much of this increase is being driven by a misinformed dictator of a nuclear superpower hell-bent on escalating a regional war, and this type of problem is not one the Fed is well equipped to deal with. What we're really seeing is supply-side driven inflation. The Fed should continue to drive core inflation back down to its target level of 2-2.5%, but we are already seeing success here. The real question is what we do about energy and food, and it's not clear the Fed's actions are going to solve that problem.

ohiovr 5y ago

Inventories are rising. I'm an assembly line worker and our warehouses are getting stuffed. People are being sent home because we got too much product already. We make dryers. I can assume that the working class would put off buying dryers because more money has to go into rent and food. Nearly a fifth of my income goes to food now and about a quarter will go to rent.

mbrodersen 5y ago

It’s always good to remind people that GDP is a useless indicator for anything that really matters to people (health, safety, education, freedom etc.)

Gibbon1 5y ago
Income stability is a big one too. I'd rank that right behind health in importance. If you are healthy and know you're going to have income for the foreseeable future that counts for a lot.
- mbrodersen 5y ago
  Yep agree. Good point.