And Now Here Comes The Recession Of 2011...The data this week were just ugly.

Business Insider ^ | 08/21/2011 | John Mauldin

[SeekAndFind]

The data this week was just ugly. Even the uptick in the leading economic indicators, seized upon by so many talking heads, must have a large asterisk beside it.

This week we look at the increasing probability that we are headed for recession, and the follow-on implications. Then I take a perilous and speculative journey into the realm of the political, commenting on Texas (and my) Governor Rick Perry’s rather interesting comments about the Fed and Ben Bernanke.

There is a lot to cover, and lots of charts, so we will jump right in. But please read at the end about two events coming up in the next few months that you might be very interested in attending.

The Recession of 2011?

It was relatively easy for me to forecast the recessions of 2001 and late 2007 over a year in advance. We had an inverted yield curve for 90 days at levels that have ALWAYS heralded a recession in the US. Plus there were numerous other less accurate (in terms of consistency) indicators that were “flashing red.” (For new readers, an inverted yield curve is where long-term rates go below short-term rates, a [thankfully] rare condition.)

And since stocks drop on average more than 40% in a recession, suggesting that you get out of the stock market was not such a challenging call. Although, when Nouriel Roubini and I were on Larry Kudlow’s show in August of 2006, we got beaten up for our bearish views.

[SeekAndFind]

Folks, I am expecting FReepers to tell me that we never left the recession and that it is still almost impossible for the unemployed to find work.

But Please, let's stick to the official definition of recession --- TWO CONSECUTIVE QUARTERS OF NEGATIVE GDP GROWTH.

[whitedog57]

Again, Sanders hits the nail on the head:

http://confoundedinterest.wordpress.com/

Bank deposits sky rocket, money velocity sinks, consumer spending atrophies.

Maybe Obama is trying to stimulate the economy with massive vacation expenditures!!!!

[SeekAndFind]

[depressed in 06]

This is the DumBO Depression, there is no way to put lipstick on it.

[rawcatslyentist]

>"Maybe Obama is trying to stimulate the economy with massive vacation expenditures!!!!"

Nah. Too much work for them. Why he needs another vakay just thinking about it.

[rabscuttle385]

Folks, I am expecting FReepers to tell me that we never left the recession and that it is still almost impossible for the unemployed to find work.

Depends on what part of the country one looks at - some have been in recession (or depression) for well over a decade, others never left the 2008 one, and still others dipped and rebounded.

[bert]

I have a clear vision of our economy. My mind compares the economy of today with the 2008 view from Mule Point on Cedar Mesa in Utah. The mesa instantly drops off about 1800 feet to a flat that goes on seemingly forever. It goes to and past Monument Valley in the Navajo Nation in Arizona.

There are some intermediate ridges and visible on the purple horizon are some peaks. The way down off the mesa is a wonderfully exciting hair raising road called the Mokee Dugway. It is flyover America at it's finest.

Double dip is but a cliche. It is a fur piece across the flats to the far distant highlands

[bert]

Another view.....Valley of the Gods at the immediate bottom of the Cedar Mesa

I was wrong.....not 1800 feet, only 1100 feet

[ChildOfThe60s]

But Please, let's stick to the official definition of recession --- TWO CONSECUTIVE QUARTERS OF NEGATIVE GDP GROWTH.

That's fine. However, we should factor in that the feds are monkeying with inflation stats. In the opinion of many, including myself, these GDP growth numbers are baloney. In reality, our positive GDP growth is simply inflation that is statistically disguised as a positive number.

In my business, my so called "growth" in sales is nothing more than price increases I am passing along. And when I manage to pad those increases with a little extra profit, that profit isn't even equal to inflation.

[central_va]

If you take away the $1.5T excess spending by the feds, we have negative GDP already.

[political1]

Wow I never thought about it like that.

[LostInBayport]

Posts like yours are a big reason why I love FR. An analogy, a great picture and a good story to go with it.

[FlyVet]

For years, Rush touted "greatest economic expansion in history" since Reagan. Recently, he sounds a little more subdued about that. Debt.

Just before Reagan took office, is when our deficit spending climbed upward. So, how much of our great economic expansion was fueled by debt?

I don't know the answer to that, but during the "boom", when lending policy was so loose, I could have done the same thing in my personal life: take out a max HELOC, new car loans, get a dozen Titanium and Platinum charge cards, max them out. Remodel the house, fill it with new appliances, put a new car and SUV in my garage, bass boat, ATV, motorcycle....my neighbors would think I'm rich.

But in reality, I'm Stanley Johnson.

We're all Stanley Johnson now.

[Sequoyah101]

SE Texas is starting to look like that ‘cept flatter.

Good analogy, I’ve been seeing the nation like this for some time now, even before o-POS.

There may be hope out there but it is a long, long way away.

[algernonpj]

Folks, I am expecting FReepers to tell me that we never left the recession and that it is still almost impossible for the unemployed to find work.

But Please, let's stick to the official definition of recession --- TWO CONSECUTIVE QUARTERS OF NEGATIVE GDP GROWTH.

The NBER which determines the beginning and ending of a recession does not use the classic 2 quarter definition:

Recession: How is that defined?
... The designation of a recession is the province of a committee of experts at the National Bureau of Economic Research (NBER), a private non-profit research organization that focuses on understanding the U.S. economy. ... "

According to the NBER:

Q: Why doesn't the committee accept the two-quarter definition?
A: The committee's procedure for identifying turning points differs from the two-quarter rule in a number of ways. First, we do not identify economic activity solely with real GDP and real GDI, but use a range of other indicators as well. Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology. Third, we consider the depth of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in activity." Fourth, in examining the behavior of domestic production, we consider not only the conventional product-side GDP estimates, but also the conceptually equivalent income-side GDI estimates. The differences between these two sets of estimates were particularly evident in the recessions of 2001 and 2007-2009.

OTH, the GDP deflated by a CPI that has not been corrupted over time would look a great deal like this:

[algernonpj]

http://www.freerepublic.com/focus/f-news/2766845/posts?page=15#15

Note: the charted GDP in post #15 has not been adjusted for government spending financed by debt.

[NVDave]

Thanks for posting that. I’ve been trying to educate people on the fallacy of “two quarters of negative GDP” being the definition of “recession” for quite a while here on FR.

Economics textbooks can spout this all they want, but the NBER is who defines recessions and who makes the calls as to when we enter/leave recessions, and since the Fed, BEA, BLS and CBO (as well as the IMF) all use the NBER call on recessions, it means that insofar as fiscal/monetary policy is concerned, the “two negative quarters” definition doesn’t mean jack. The policymakers use the NBER, therefore we have to as well.

[NVDave]

Here’s a little something I’ve learned in my decade+ of trading/investing about economic and sector predictions:

When you have a large number of predictions (such as we have with GDP), in many cases the actual number falls where most predictions are not.

For example, looking at the distribution graph in Exhibit 1, I see that there are holes in the distribution above 3.0%... and below 1.6%.

Now, I think we can agree that absent some incredible miracle, we’re not going to see 3.0%+ on the 2012 GDP print... that the number will probably come in sub-1.6%.

Economists are herd animals. None of them gets too far afield of the rest of the herd, so as to maintain their credibility. Guys like Roubini have made “outside the norm” predictions... and until it came true, they were laughed at by other economists.

As a whole, the entire field of economists is now a fraud. None of them have any predictive skill. On the monetarist side, the US stock market has now pretty much unwound all of QE2... and here we are with yet more banking instability. In other words, Bernanke might as well have done nothing starting about a year ago.

What will be amusing is to see what comes out of the Jackson Hole conference coming up this week. If you’re in the markets, pay attention to what is said this week, because I assure you everyone else will be.