The horizon is not so far as we can see, but as far as we can imagine

Fourteen Points on the World Economy as the US GDP Drops .7 Percent

So, while it generally takes two quarters for a recession to be so-called, it may be that the recession is here.

Let us recap the non-recessionary period:

  • The percentage of people employed in the US never recovered;
  • More than the total amount of growth went to the top four percent or so, with most of that going to the top one percent and most of that going to the top .1 percent;
  • The stock market had a huge bull market, even though the economy wasn’t working for anyone but the top few;
  • Outside America, the “south” of Europe never recovered in any meaningful way, and most European nations generally did badly for most of their citizens;
  • Various resource nations did well for a time, but their success was based on demand from developed nations or, more commonly, from China;
  • Chinese demand collapsed some time ago;
  • China has been printing more money than either Japan or the US; much more;
  • Japan’s “unconventional monetary policy” has been a roaring failure–if its intention was to get the Japanese economy going again;
  • The collapse in oil prices last year helped the US briefly, but because the rest of the world has rolled off a cliff and because those gains couldn’t go widespread, it was only briefly (this is as I predicted at the time);
  • Canada’s economy was hurt badly by the oil price crash, and because the mixed economy has been critically injured, there is very little else to hold up the economy;
  • Both Britain (or London…almost the same thing) and Canada have huge housing bubbles, and those bubbles, with the addition of financial games, are all that holds those economies together at this point;
  • Britain never actually recovered either, for the majority of its citizens–just a large enough minority to elect Cameron;
  • Australia has tied itself massively to resource extraction on the back of Chinese demand. There is no meaningful Australian economy whose fate is not tied to China.
  • India’s development is hollow neo-liberalism, and has seen an actual decrease in per capita calories. It is consumptive and limited to a few key areas.

Let me put this another way: The developed world is in depression. It has been in depression since 2007. It never left depression. Within that depression, there is still a business cycle: There are expansions, and recessions, and so on. Better times and worse times.

While cheap solar is a big deal, it is not yet deployed sufficiently to break the “widespread demand will crash the economy through oil price increases” problem, and this is exacerbated the by the deadlock rich elites have on most of the world’s politics and economic policies, since it is not in their interest to solve problems, but only to become more rich.  Not that solving problems is something they mind, if it makes them richer and keeps everyone else poor.

The world still has very few problems we couldn’t solve if we acted on them in a productive way (though some, like climate change and the great die-off, are beyond the point of no return for catastrophic damage), but that’s largely irrelevant while public policy remains in the hands of oligarchs. There is some reason for hope, as left-wing parties rise in Europe, but those green shoots are still nothing but green shoots.

I suggest that my readers who are able to make money do so now, you may soon find that you can’t. This is especially important if your employment is precarious.  Take care of yourselves, and take care of each other, unless you are lucky enough to live in the few rich, social democratic states left, you cannot expect much aid from your governments.

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  1. hidflect

    Yeah, pretty much agree. I’d add that the selected trend since 2000 has been to slough off the poors and increasingly count only from the upper-middle class and up. I’ve believed the rushing desire of the elites, whether conscious or not, was to get us to a Bangkok-style economy. A small enclave of massive wealth run by a few oligarchs where rents hit the $1000’s/month surrounded by a sea of labor cast-offs who sit waiting in huts for the crook of the owner’s finger. These “others” can be dropped from the statistics leaving economic measurements to focus on the “real” economy. Namely, the few square km’s where the Corporations and their main employees reside. That might explain the bifurcation in experiences and asset prices across each advanced nation.

  2. jawbone

    NPR’s top of the hour news summary was merrily noting that “experts” think there may be problems with measurements or some such things, as opposed to basic systemic problems.

    Something was repeated about the winter months not being accurately assessed or measured…bcz of cold and snow? Hhmm.

  3. Dan Lynch

    99% agree with Ian’s gloomy assessment, but will pick nits with this “the collapse in oil prices last year helped the US briefly.”

    Petro states (and the US was a petro state until the fracking bubble popped) do not benefit from a collapse in oil prices. The American consumer’s gain is the American producer’s loss, so there was no net gain for the national economy. More importantly, fracking was built on a debt bubble which has since collapsed. When debt bubbles collapse, the economy goes into recession.

    The short term economic problem is that the entire Western world has caught neoliberal austerity fever. Governments are cutting spending on domestic programs at a time when they should be increasing spending. No matter how obviously it fails, neoliberal austerity policies will not change because it is driven by ideology, and all the major parties all over the Western world have embraced the neoliberal ideology.

    The only kind of Keynesian stimulus the powers-that-be will accept is military Keynesianism. It’s not that peaceful Keynesian stimulus doesn’t work, it’s just that the powers-that-be don’t benefit from it, so they have no use for it.

    Given the neoliberal constraints, there are only 2 ways the economy will return to anything approaching full employment 1) WWIII or 2) another massive private debt bubble.

  4. Mike Cooper

    that final paragraph is possibly the most succinct piece of advice I’ve seen recently. I’ve managed to reduce my debts to zero and I’m trying to build savings. Sadly I rent rather than own my house, which I’m not happy about but don’t have enough money saved to deal with. So I’m trying to get myself ‘weatherproof’ for what is going to be a massive storm coming.

    Only problem is, where are these social democratic states that are worth being in? Sweden and Germany have both turned more neoliberal. Denmark? I don’t know.

    What’s sure is that the U.S. is declining, and it’ll drag the EU down with it, Britain especially.

    I think the elites actuall want WWIII in a way, it’d solve many problems for them.

  5. Mike Cooper

    PS: you’re also right in implying that the only ‘recovery’ any nation has had, has been through a combination of financial chicanery, spin/lies, statistical distortion, and propaganda.

  6. Socialist

    You can call it what you want, neoliberalism, keynesianism or any other tag, but as long as private ownership of the means of production is allowed this is what CAPITALISM descends to every time. Which is always bad for the working class and is bad (although, not as bad as for the working class) for the capitalists themselves. Only an irrational and contradictory system behaves in this way, creating these never ending bubbles, unemployment, low wages, privatization of every thing imaginable and so on. This time there is no clear working class anti-capitalist agenda in the air (what we have is rich vs. poor which is not really the reason for the trouble we are in but the exploiter vs. exploited is the case), this time there is no New Deal around to save the common folk from the step decline in their quality of life and steep rise in their subjection to the ruling class. This time there is no October Revolution in Russia to scare capitalists in capitalist countries to make concessions for the working class. What we can hope for is that this time around there is something different, yet imperceptible that can get us out of this mess in a more or less humane way. Otherwise, the world that is already places in a very tight position could really become unbearable for the vast majority of the population.

    Also, concerning your last piece of advice. Finland, a country considered a very good example of a well function social democracy, is quickly descending into the new wild capitalism paradigm and so is the rest of Europe.

  7. John

    Steve Keen, one of the few economics professors that correctly predicted the crash and also current recession, explains the madness very succinctly in the interview below.

  8. Sam Adams

    War is prosperity. China is the white whale and is next.

  9. Mr.Murder

    China top solar stock had “enron like” crash with 14B US invested(Matt O’Brien) the next day its entire index opens a value firestorm and flushes 6.5% the Wall St ripoffs in energy sector went across the pond.

  10. someofparts

    “I suggest that my readers who are able to make money do so now, you may soon find that you can’t.”

    By this, do you mean more layoffs, more companies out of business?

  11. “it is not in [the elites’] interest to solve problems, but only to become more rich”

    Not to worry, once the cohort that took David Brooks’ “How and why to be a humble plutocrat” course at Yale comes of age, I’m sure they’ll have different values and lead us out of the muck

  12. off topic:

    NDP leads an election poll. it’s obvious that Justin with his support of C 51 is been hits. It is not over, but it may be the end of the beginning.

  13. Brian

    Posts like this always remind me of two quotes – Samuelson’s old joke that “Wall Street indexes predicted nine out of the last five recessions!” and Yogi Berra’s sage comment that “It’s tough to make predictions, especially about the future.”

    I don’t repeat these comments because I disagree with Ian, I’d just like to point out that it’s hard to predict exactly how or when the music stops and how bad it will be. We could muddle through for a while longer as we’ve been doing (for a quarter? a year? two years?). Or maybe some untapped technological innovation (or another asset bubble) will give us some more time. Alternatively the wheels could come off next week if some new disaster hits.

    Those caveats out of the way I basically agree with Ian’s larger conclusion. While we can organize and write blog posts and try to change things for the future, there’s probably about as much we can do to stop the coming downturn as to stop a train that’s already jumped the rails. All we can do now is brace for impact.

    With that in mind, IMHO it’s important to remember that there are a lot of things we can still do in our own lives that might improve our chances in the years ahead. Some of these things have the added benefits of A) being good for us even if we don’t lose our jobs and B) fending off some of the sense of hopelessness that can come from being at the mercy of forces you can’t control.

    In that spirit, I’d humbly like to offer a few suggestions:
    – If you have the ability to work extra hours (and get paid for it) do it.
    – Reduce non-essential expenditures if possible.
    – Pay down as much debt as you can now if you have the means.
    – If you have a 401K, IRA or other investments, shift to a conservative strategy if you’re not already there. Hopefully you can minimize your losses if there’s a market crash.
    – If you have health insurance now, get that physical you’ve been putting off, go to the dentist and get your teeth cleaned, get your kids their shots etc while you still can.
    – More generally, do the best you can to take care of your health – if you don’t already eat right and exercise, start now. It’ll be good for you even if you hang on to your job.
    – Most important of all, tend to your relationships with others: your family, friendships, your neighbors, and your social and professional networks. These are the people who may be able to help you find a new job if you get laid off, take care of the kids so you can go to work, provide financial assistance when you need it, and more importantly provide the companionship and friendship you’ll need to get you through. And if you’re lucky enough to hang onto your job, some of them will not be and are going to need your help to get by. Do the right thing and help them if you can, just as you’d hope they would help you if the situation were reversed.

    Of course, if the economy completely collapses or WWIII breaks out or the zombie apocalypse hits none of these steps may help. But if (as I think more likely) the near future beings something like the recent past – ongoing socio-economic decline without total societal collapse – then they might just make a difference.

  14. nihil obstet

    I wouldn’t support the working more unless you are now working significantly less than most American workers, who don’t have enough life outside of chasing money as it is. You’re unlikely to earn enough extra to make a real difference if the economy goes to hell, and more importantly you’re selling your life to fear. I’ll second strongly all the things that make sense both inside and outside economics — live healthy, be kind and supportive within your community, reduce the role of materialistic desire in your mind and spending.

  15. Brian

    nihil obstet – I’d say it depends on your circumstances, how much money you have and how much you need etc, but yes, you raise a valid point. Thanks

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