4 ms·

It's easy to scapegoat the Fed for the ongoing recession and inevitable layoffs.

by NeverFade 4y ago

PaulDavisThe1st 4y ago
What recession? Measured with what metrics?
- pclmulqdq 4y ago
  Two consecutive quarters of negative growth is the standard definition used around the world. Except in the US today.
  - PaulDavisThe1st 4y ago
    Current economic metrics are all over the place following the worst global pandemic in a century. It's true that the metric(s) typically used to define/measure growth are down as you describe, there are lots (and lots) of related metrics that say something quite different. I think overall it's most accurate to suggest that we're in a strange time indeed, not just a repeat of the last 3 or 5 recessions.
    - pclmulqdq 4y ago
      Yes, and that the strange time we are in includes a recession. The NBER has never failed to call a recession on 2 quarters of negative growth in the past, including during the very same pandemic we are now exiting, which was also a pretty strange time. Past recessions have involved other circumstances, too. It's literally called a recession because it is a time when the economy is receding. If I had said "depression" or "financial crisis" you could argue that we don't have one of those.
      - PaulDavisThe1st 4y ago
        Unfortunate (for your case) that you cited the NBER. Their definition of a recession begins as follows: > Q: What is a recession? What is an expansion? A: The NBER's traditional definition of a recession is that it is a significant decline in economic activity that is spread across the economy and that lasts more than a few months. The committee's view is that while each of the three criteria—depth, diffusion, and duration—needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another. https://www.nber.org/research/business-cycle-dating/business-cycle-dating-procedure-frequently-asked-questions https://www.nber.org/research/business-cycle-dating/business... By that definition, even Forbes agrees that we are not yet in a recession. https://www.forbes.com/advisor/investing/are-we-in-a-recession/ https://www.forbes.com/advisor/investing/are-we-in-a-recessi...
        pclmulqdq 4y ago
        That is the NBER's definition, which is inside the US. I said originally that the definition *outside of the US* (and outside of the current time - since the NBER has de facto followed the global definition until 2 months ago) is two consecutive quarters of negative growth. The only reason the definition of "recession" is such a hot button issue in the US is that it looks bad for a political party to preside over a recession. They happen. At least 4 of the last 6 presidents presided over one. Most of them aren't that bad. It's fine to admit that the US economy has receded over the last 6 months, which it demonstrably has. EDIT: The NBER, by the way, uses many metrics to declare recessions, and they particularly overweight employment and payroll metrics. The US is currently doing very well by those measures, despite the obvious weakness in the economy. I am assuming the NBER also undervalues the effects of inflation because they don't know what to do about it. That is why most of the world uses an objective definition based on GDP growth.
        PaulDavisThe1st 4y ago
        You literally said: > The NBER has never failed to call a recession on 2 quarters of negative growth in the past, However, thus far, despite two quarters of GDP decline, they have not (and from their own definition, it is clear why they have not). Business Insider believes the state of the job market to be the primary reason why. https://markets.businessinsider.com/news/stocks/economy-nber-will-not-declare-official-recession-gdp-growth-jobs-2022-8 https://markets.businessinsider.com/news/stocks/economy-nber... > The NBER, by the way, uses many metrics to declare recessions, and they particularly overweight employment and payroll metrics You may consider it overweighted, my point was merely that the use of a single metric is mostly a feature of pundits and not civic institutions like NBER, who you mentioned as arbiters of being-in-receession.
pclmulqdq 4y ago
You could make a decent argument that they have actually caused this recession. 75 bps rate hikes immediately after a crisis where they slam rates to 0 and do a ton of QE does not sound like a particularly responsible form of monetary policy.
- paulmd 4y ago
  Both of those moves are sensible given the circumstances. What was not responsible was dropping rates 75bps in 2019, the “mid-cycle adjustment” period referenced here. The economy was already roaring and it was widely acknowledged even at the time that this was unnecessary and a concession to political pressure. https://www.forbes.com/advisor/investing/fed-funds-rate-history/ https://www.forbes.com/advisor/investing/fed-funds-rate-hist... Those politically-motivated cuts left the fed with no maneuvering room when (inevitably) a crisis did strike. And we’re still feeling the ramifications of that today, because now we get to do those rate increases during what’s already a recession, instead of during a booming 2019 economy. This whole situation is a textbook lesson on “why you don’t lower rates while the economy is already roaring just to pump the president’s numbers a little further going into an election year”.
  - rightbyte 4y ago
    > Both of those moves are sensible given the circumstances. Dunno but maybe raising rates like a year ago to slow the chock now would have been appropriate? Like, I guess they knew all the QE would end up somewhere eventually flooding the market with cash?
  - pclmulqdq 4y ago
    Another overlooked irresponsible move by the Fed in recent times was when Yellen's Fed was very slow to raise rates coming out of the 2008 recession (the Federal reserve held rates near 0 until 2016), which gave certain segments of the market a lot longer to grow with free money than they should have had. That move, in turn, also gave the fed a lot less flexibility during Trump's trade war and the following crisis. Both of those moves look to me like overreactions inspired/emboldened by Bernanke's actions in 2007-8. Powell saw that slamming rates to 0 had helped to prevent a complete collapse of the financial system in 2008 and went with it. He didn't notice that Bernanke did a whole bunch of other stuff too, and that Bernanke was one of the world's foremost experts on the economics of the Great Depression, which certainly helped in 2008.

It's easy to scapegoat the Fed for the ongoing recession and inevitable layoffs.

PaulDavisThe1st 4y ago

What recession? Measured with what metrics?

pclmulqdq 4y ago
Two consecutive quarters of negative growth is the standard definition used around the world. Except in the US today.
- PaulDavisThe1st 4y ago
  Current economic metrics are all over the place following the worst global pandemic in a century. It's true that the metric(s) typically used to define/measure growth are down as you describe, there are lots (and lots) of related metrics that say something quite different. I think overall it's most accurate to suggest that we're in a strange time indeed, not just a repeat of the last 3 or 5 recessions.
  - pclmulqdq 4y ago
    Yes, and that the strange time we are in includes a recession. The NBER has never failed to call a recession on 2 quarters of negative growth in the past, including during the very same pandemic we are now exiting, which was also a pretty strange time. Past recessions have involved other circumstances, too. It's literally called a recession because it is a time when the economy is receding. If I had said "depression" or "financial crisis" you could argue that we don't have one of those.
    - PaulDavisThe1st 4y ago
      Unfortunate (for your case) that you cited the NBER. Their definition of a recession begins as follows: > Q: What is a recession? What is an expansion? A: The NBER's traditional definition of a recession is that it is a significant decline in economic activity that is spread across the economy and that lasts more than a few months. The committee's view is that while each of the three criteria—depth, diffusion, and duration—needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another. https://www.nber.org/research/business-cycle-dating/business-cycle-dating-procedure-frequently-asked-questions https://www.nber.org/research/business-cycle-dating/business... By that definition, even Forbes agrees that we are not yet in a recession. https://www.forbes.com/advisor/investing/are-we-in-a-recession/ https://www.forbes.com/advisor/investing/are-we-in-a-recessi...
      - pclmulqdq 4y ago
        That is the NBER's definition, which is inside the US. I said originally that the definition *outside of the US* (and outside of the current time - since the NBER has de facto followed the global definition until 2 months ago) is two consecutive quarters of negative growth. The only reason the definition of "recession" is such a hot button issue in the US is that it looks bad for a political party to preside over a recession. They happen. At least 4 of the last 6 presidents presided over one. Most of them aren't that bad. It's fine to admit that the US economy has receded over the last 6 months, which it demonstrably has. EDIT: The NBER, by the way, uses many metrics to declare recessions, and they particularly overweight employment and payroll metrics. The US is currently doing very well by those measures, despite the obvious weakness in the economy. I am assuming the NBER also undervalues the effects of inflation because they don't know what to do about it. That is why most of the world uses an objective definition based on GDP growth.
        PaulDavisThe1st 4y ago
        You literally said: > The NBER has never failed to call a recession on 2 quarters of negative growth in the past, However, thus far, despite two quarters of GDP decline, they have not (and from their own definition, it is clear why they have not). Business Insider believes the state of the job market to be the primary reason why. https://markets.businessinsider.com/news/stocks/economy-nber-will-not-declare-official-recession-gdp-growth-jobs-2022-8 https://markets.businessinsider.com/news/stocks/economy-nber... > The NBER, by the way, uses many metrics to declare recessions, and they particularly overweight employment and payroll metrics You may consider it overweighted, my point was merely that the use of a single metric is mostly a feature of pundits and not civic institutions like NBER, who you mentioned as arbiters of being-in-receession.

pclmulqdq 4y ago

You could make a decent argument that they have actually caused this recession. 75 bps rate hikes immediately after a crisis where they slam rates to 0 and do a ton of QE does not sound like a particularly responsible form of monetary policy.

paulmd 4y ago
Both of those moves are sensible given the circumstances. What was not responsible was dropping rates 75bps in 2019, the “mid-cycle adjustment” period referenced here. The economy was already roaring and it was widely acknowledged even at the time that this was unnecessary and a concession to political pressure. https://www.forbes.com/advisor/investing/fed-funds-rate-history/ https://www.forbes.com/advisor/investing/fed-funds-rate-hist... Those politically-motivated cuts left the fed with no maneuvering room when (inevitably) a crisis did strike. And we’re still feeling the ramifications of that today, because now we get to do those rate increases during what’s already a recession, instead of during a booming 2019 economy. This whole situation is a textbook lesson on “why you don’t lower rates while the economy is already roaring just to pump the president’s numbers a little further going into an election year”.
- rightbyte 4y ago
  > Both of those moves are sensible given the circumstances. Dunno but maybe raising rates like a year ago to slow the chock now would have been appropriate? Like, I guess they knew all the QE would end up somewhere eventually flooding the market with cash?
- pclmulqdq 4y ago
  Another overlooked irresponsible move by the Fed in recent times was when Yellen's Fed was very slow to raise rates coming out of the 2008 recession (the Federal reserve held rates near 0 until 2016), which gave certain segments of the market a lot longer to grow with free money than they should have had. That move, in turn, also gave the fed a lot less flexibility during Trump's trade war and the following crisis. Both of those moves look to me like overreactions inspired/emboldened by Bernanke's actions in 2007-8. Powell saw that slamming rates to 0 had helped to prevent a complete collapse of the financial system in 2008 and went with it. He didn't notice that Bernanke did a whole bunch of other stuff too, and that Bernanke was one of the world's foremost experts on the economics of the Great Depression, which certainly helped in 2008.