I just got back from vacation, and was greeted by the United States’ 2022Q2 GDP release which hit the dreaded “two quarters of contraction” status. Some people have decided that this counts as a “technical recession,” although it is unclear where the adjective “technical” comes from.Bond Economics
Since I am catching up with everything, I am unable to do a detailed analysis. If I do anything, I will postpone it until next week. I just want to add yet more words to the “is is a recession?” debate.
My view is straightforward: the NBER declares U.S. recessions, and I am not going to refer to a downturn in U.S. data as a “recession” unless the NBER has declared one. The thing to keep in mind that the declaration can arrive with a considerable lag, so I have no issues with texts arguing that one is currently in progress without the NBER committee declaring anything, so long as that condition is noted....
"Technical Recession" (Sigh)
Brian Romanchuk
http://www.bondeconomics.com/2022/07/technical-recession-sigh.html
See also
Econbrowser
Chris Cillizza, Ill-informed Non-Economist, on the Definition of a Recession
Menzie Chinn | Professor of Public Affairs and Economics, Robert M. La Follette School of Public Affairs, University of Wisconsin–Madison, co-editor of the Journal of International Money and Finance, and a Research Associate of the National Bureau of Economic Research International Finance and Macroeconomics
http://econbrowser.com/archives/2022/07/chris-cillizza-ill-informed-non-economist-on-the-definition-of-a-recession
8 comments:
“ Mr. Cillizza received a BA”
Just need to stop right there…,
I know Mike keeps this data. He has the figures going way back.
If you were just to chart the rate of change in the deficit going back 5 years what does that picture look like compared to the SP 500 ?
Not the size of the deficit comparison month over month, but the rate of change. Also year over year rate of change.
I'm willing to bet it creates a lovely picture because one thing I'm learning is rate of change is very important in the plumbing.
Because there is a year/ 5 quarter lag in the flows.
The rate of change is more important to markets than the nominal numbers that tend to generally rise anyway and are not all that informative.
It is the liquidity waves rocking the boat back and forth, but a little less each time given the currency creation impulse is smaller each time. So the up phase we about to have will not be all that big and the down phase to come after will not be as deep.
There will be a general flattening of the impact to markets as the fiscal flows become smaller as compared to how they were during the covid crisis where we were getting world war two levels of spending in terms of % of GDP.
The downward rate of change in the deficit that has happened this year because of the 5 quarter lag is going to show up next year. I'm pretty sure that's going to happen. If I was a betting man around one of the seasonal inflection points next year. Not as deep as we have just seen but it will show up.
There is a very easy way to check it out. Look at the rate of change of the deficit going back a year/ 5 quarters to see if the rate of change in the deficit warned what was going to come in 2022.
My money is on the rate of change of the deficit plummeted. A year to 5 quarters before 2022.
I bet the rate of change of the deficit was decent right up until around June 2020. Plummeted and picked up again start of 2021 and plummeted again until June 2022.
I bet the rate of change of the deficit is a leading indicator of what happens roughly 5 quarters down the road.
Wouldn't be surprised if bank lending acts in a similar way.
Graph the rate of change data and I bet it leads what happens. Or at the very least points in the right direction.
That's just using Alan's deficit numbers in column G.
Looking at the 5 quarter lag graph.
https://seekingalpha.com/article/4523188-the-white-house-fed-inflation-and-flow-of-funds-for-july-2022#comment-92982142
Was bumping my gums with Alan this morning.
I know Mike keeps his own rate of change figures for the deficit every month. Probably every time he collects the figure from the daily treasury statement it will have a rate of change beside it knowing Mike. No doubt a yearly one.
“ I bet the rate of change of the deficit was decent right up until around June 2020.”
Sure the first fiscal response to Covid was in late March then they did the PPPs and they delayed income tax due date, etc..
Suspended the SLR on May 15th…
Increased TGA by over 1T starting ma4ch 23rd..,
In short the rate of change in the deficit today shows up 5 quarters later.
That makes perfect common sense to me and a complete no brainer because of the time it takes the rate of change in liquidity to reach the business profit margins and then stocks.
At the very beginning Mike always said around 2 quarters. He used the ship analogy and looking at the sea in front and not what you have already sailed over.
Mike always looked 2 quarters out. 6-8 weeks. He always did it.
The real data is showing it is longer than that. It is the rate of change not the nominal value.
I applied for a spread betting account with IG last night.
Plan is to spread bet the 10 year.
So I will leave you all in peace and quiet and I loved my time here over the many years. But I'm off to a new challenge. Try and keep myself young lol.
Hopefully I won't have a stroke doing so.
Good luck and wishing each and every one of you all the best !
Delboy
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