Don’t expect the future to be like the past

Garrett MacDonald directed me to a interesting article by Paul Donovan, chief economist at UBS.

What can we forecast about next year?

Among the many interesting points, this caught my eye:

The ups and downs of the economic cycle may be less violent than they used to be. Recessions are probably less recessionary in the future (see the July Chief Economists comment “Will recessions be less recessionary in the future”).

I often point out that the US business cycle has some very bizarre features:

1.  Expansions never last more than 10 years.

2.  There are no mini-recessions.

The first is bizarre because recessions seem to occur randomly, not according to any fixed cycle.  Expansions do not die of old age.  You’d expect some expansions to just randomly drag on for more than 10 years.  The second is bizarre because you’d expect that whatever process causes recessions (some sort of shock?) would create far more mini-recessions than sizable recessions.  Think about how there are far more small earthquakes than big earthquakes.  Instead, the United States NEVER has mini-recessions, defined as an increase in the unemployment rate of more than 0.8% and less than 2.0%.  That’s just bizarre.  (And even the one 0.8% increase was due to the unusual 1959 nationwide steel strike—normally there is almost no increase in unemployment beyond random noise, unless unemployment soars much higher.)

Before you respond with good reasons why these patterns are not bizarre, I’d like to point out that other countries such as Britain and Australia do have economic expansions that last much more than 10 years, and they do have mini-recessions.  So the US really is a very weird place.  But for some reason American economists don’t seem to pay much attention to this weirdness.

I’m on record as predicting that this will be the longest expansion in history, the first that extends for more than 10 years.  Now I’d like to go on record predicting that we will see some mini-recessions in the next few decades.  I don’t see any reason why we haven’t had them; other countries have them, so why can’t we?

Here’s another interesting point:

Economics can generally predict central bank policy. This is hardly surprising. Central banks – at least, the good central banks – are run by economists.

In the past I’ve argued that economists don’t blame central banks for recessions because central banks follow the consensus of economists, and economists don’t want to blame themselves.

Economists should not make forecasts.

In the past, I’ve argued that good economists don’t forecast, they infer market forecasts.

PS.  Here are 6 British mini-recessions, in each case with the unemployment rate rising by about 1%.

And here are three recent mini-recessions in Australia, in each case with unemployment rising between 1% and 2%:

Off topic:  Did Jesus once say: “Blessed are the beta males: for they shall inherit the earth”?  Scanning the recent news headlines, it almost seems like his prediction is coming true, after 2000 years.

PS.  Here’s an excellent USA Today editorial on Trump. The press has been way too soft on him.



37 Responses to “Don’t expect the future to be like the past”

  1. Gravatar of Clefab Clefab
    14. December 2017 at 08:29

    Can’t it be that Britain and Australia could count on external demand to bail them out when their internal demand fell while the US, big as it was, could not ? Maybe this isn’t the case anymore with the US shrinking, relatively speaking, in the world stage.

  2. Gravatar of msgkings msgkings
    14. December 2017 at 10:07

    Re your off topic line, not harassing women doesn’t make you beta. In fact a true alpha doesn’t need to harass anyone, the women come after them.

  3. Gravatar of ssumner ssumner
    14. December 2017 at 10:27

    Clefab, Maybe, but Australia had a mini-recession in 2008-09, when the global economy was weak.

    Msgkings, You said:

    “not harassing women doesn’t make you beta”

    Yes, obviously. But doesn’t being a beta make one unlikely to harass (men or women?) Doesn’t it imply you are too shy to harass? I’m probably totally off base here, but that was my assumption about people.

    Maybe “beta” doesn’t mean what I thought, I assumed it meant something like “meek”.

  4. Gravatar of Rajat Rajat
    14. December 2017 at 11:03

    Whoa! In your 2011 post ( ), you actually set out some very good reasons why the US doesn’t get ‘mini-recessions’. But now you’re saying it’s just been happenstance and is likely to change. What’s changed to overcome data and recognition lags, the unobservability of the prevailing Wicksellian rate and, most importantly, the desire of Fed policy-makers to appear ‘responsible and deliberative’? I get that other countries do experience mini-recessions, but in 2011, you explained that on the basis that they might be smaller and less diversified. That would apply to Australia more than the UK, so I accept there might be other reasons. My hunch is that it’s because the US often leads the global economic cycle, which makes shocks harder to identify in real time. Bottom line: have you changed your 2011 view, and if so, why?

  5. Gravatar of Student Student
    14. December 2017 at 11:19


    I don’t think you misunderstand the definition of beta, I think you misunderstand the meaning of meek as meant in the beatitudes from which you are drawing.

    A better word would probably be composed.

    Meekness as used in this setting comes from the Greek word “prautes” (that means not easily provoked), which is further derived from “praus” (that refers to a well trained powerful horse).

    The horse is meek but not weak. It can take direction, it can be gentle, it’s prowess and strength has been harnessed, controlled and directed toward good ends, it hasn’t been lost.

    St Augustine in his commentary on the beatitudes links it to the prior beatitude meaning not puffed up. The meek are not weak but strong enough to be detached from the materialism of this world. They are free and composed, sober minded you might say.

    St Thomas Aquinas in his commentaries on this says that meekness moderates anger according to right reason. Again meekness does not mean weak, it means self-possessed… in control of ones passions… acting on the basis of well composed reason.

    St Francis de Sales comments, likewise, that there is nothing as strong as true meekness, there is nothing as gentle as true strength. One who is truly meek will possess the earth, while if you are not meek, it will possess you.

    Given this I think meekness is not meant to mean being a beta, it means being calculated, acting upright within the bounds of what’s the right thing to do… and drawing upon ones reason rather than ones passion.

    We’d all do well to be meek both for this life and for the life to come.

  6. Gravatar of ssumner ssumner
    14. December 2017 at 11:33

    Rajat, That was a sort of ad hoc theory, which I developed to match the data. It might be true, and it’s the best I could come up with. But on balance I think it’s likely that the US will have a mini-recession at some point before too long.

    Monetary policymakers learn from past mistakes, and eventually they’ll learn how to turn recessions into mini-recessions. Maybe level targeting will do the trick.

    Student, Thanks, I can see there’s a lot I don’t know about meekness.

  7. Gravatar of bill bill
    14. December 2017 at 12:54

    I wonder if the lack of mini-recessions correlates in some way with another observation of yours? The one about the recession that didn’t happen. I can’t find the posts, but as an example, if the Fed had truly loosened in March or May, say, of 2008, then the “recession” that started in December 2007 would not have been. Just a thought.

  8. Gravatar of Benny Lava Benny Lava
    14. December 2017 at 13:46

    American recessions are cultural. Americans love them because most Americans do not lose their jobs but get to enjoy depressed prices on cars and houses among other things. Americans are really indifferent to the plight of the unemployed so Americans by and large love recessions. That is why they occur so frequently in America.

  9. Gravatar of Mark Mark
    14. December 2017 at 13:48

    This may be absurd, just a random thought, but is it possible there’s some sort of microeconomic threshold effect that affects the size of recessions? Like, if demand for your business’s product declines a little, you cut wages or reduce staff hours, but if the decline reaches some precipice, you start laying off workers altogether, and that the jump in the effect on spending caused by losing a job vs. a wage or hour decrease, if this threshold (or many thresholds, as it surely varies by business or industry) is being crossed in many businesses across the country,, in aggregate, it could be enough to cause the downward spiral leading to a ‘real’ recession?

    Of course one would have to explain why this is peculiar to the US. In comparing it with the UK or Europe, maybe them having much more regulated labor markets (or more de facto government insurance to businesses against failure) would mitigate this. I don’t know enough about Australia though to know how to rationalize it there.

    PS: Scott, I’m tempted to assume you’re just trolling your comments sections now with the ritual links about Trump.

  10. Gravatar of Mark Mark
    14. December 2017 at 13:58

    “But doesn’t being a beta make one unlikely to harass (men or women?)”
    Indeed, it is commonly estimated that alphas are about 20X more dangerous than betas, or if you inhale them, up to 1000X more dangerous (physics joke; ionizing radiation is what I’m talking about).

    The whole nomenclature is facile anyway. Humans don’t remotely recapitulate the social hierarchy of dogs.

  11. Gravatar of Bob Murphy Bob Murphy
    14. December 2017 at 14:56

    Hi Scott,

    I liked your old post that Rajat linked to. Back when you wrote that up, did you consider the fact that other countries *do* have mini-recessions? Or is that something you only thought about more recently?

    (I.e. I totally get that your theory back then was a plausible story to explain US data, but don’t other central banks operate on similar principles?)

  12. Gravatar of Lorenzo from Oz Lorenzo from Oz
    14. December 2017 at 16:14

    The US media has not been “too soft” on The Donald, they have been too self-indulgently obsessive.
    Which has made them too incompetent and wrongly focused to be effective and on-point.

  13. Gravatar of ssumner ssumner
    14. December 2017 at 18:06

    Bill, Yes, in that case we might have had a mini-recession.

    Mark, I’m not sure the UK or Australian labor market is all that much more regulated than the US.

    Bob, I have done a number of posts on mini-recessions, in some I did point out that other countries have them. I don’t recall if I was thinking about other countries when I wrote the 2011 post, probably not.

    Lorenzo, The media is not the problem, it’s Trump. For every mistake in the MSM, there are 100 Trump lies. He’s the problem.

  14. Gravatar of Philip Crawford Philip Crawford
    14. December 2017 at 19:47

    This post made me think of the difference between the San Andreas fault and the Cascadia subduction zone. The San Andreas is structured in such a way that there are recurring earthquakes, but they’re not super strong. Cascadia, however, can create an earthquake almost 30 times more energetic than the San Andreas. But they rarely happen. (

    One of the differences between the two is the age and flexibility of the rock. Cascadia subduction zone is young, flexible rock, and “is bulging upward and compressing eastward, at the rate of, three to four millimetres and thirty to forty millimetres a year. It can do so for quite some time, because, as continent stuff goes, it is young, made of rock that is still relatively elastic. (Rocks, like us, get stiffer as they age.) But it cannot do so indefinitely. There is a backstop—the craton, that ancient unbudgeable mass at the center of the continent—and, sooner or later, North America will rebound like a spring.”

    Anywho, perhaps our economy is younger and more flexible, so we get big recessions and not mini-recessions.

  15. Gravatar of rwperu34 rwperu34
    14. December 2017 at 20:13

    Matt Yglesias has a post today that’s right in your wheelhouse;

  16. Gravatar of Major.Freedom Major.Freedom
    14. December 2017 at 22:39

    “The press has been way too soft on him.”

    BWAHAHAHAHAHAHA, this blog is hilarious

  17. Gravatar of E. Harding E. Harding
    15. December 2017 at 14:36

    So here’s the final tax bill:

  18. Gravatar of E. Harding E. Harding
    15. December 2017 at 14:44

    “Here’s an excellent USA Today editorial on Trump. The press has been way too soft on him.”

    Take your meds

  19. Gravatar of E. Harding E. Harding
    15. December 2017 at 14:46

    BTW Trump didn’t even call Gillibrand a whore; that’s just what the editorialists’ dirty minds are thinking. Also, chain migration is bad. BTW Gillibrand is a whore.

  20. Gravatar of E. Harding E. Harding
    15. December 2017 at 14:48

    “Scanning the recent news headlines, it almost seems like his prediction is coming true, after 2000 years.”


  21. Gravatar of E. Harding E. Harding
    15. December 2017 at 14:54

    “On Tuesday, Trump summed up his willingness to support a man accused of criminal conduct: “Roy Moore will always vote with us.””

    -If you’re a real utilitarian, you understand that a vote in the Senate is worth at least several lives. Even the worst accusations against Moore don’t hold a candle to the importance of keeping the AL Senate seat. And the accusations against Moore are, given the fact they were not paralleled by anything before this year, probably false. Moore should have won. Given the current party system, it would be unethical to the extreme for Trump to do anything but support Moore for Senate.

  22. Gravatar of Major.Freedom Major.Freedom
    15. December 2017 at 21:05

  23. Gravatar of ssumner ssumner
    15. December 2017 at 21:17

    Philip, Good analogy.

    rwperu, That’s a pretty good post.

    Harding, You said:

    “If you’re a real utilitarian”

    Stay away from philosophy, it’s not your forte.

  24. Gravatar of flow5 flow5
    16. December 2017 at 07:15

    SSumner’s dead right. And economics is an exact science (and Janet Yellen was damn good). That’s means everything, upon investigation, is explainable. Secular strangulation began in Dec. 1965. It accelerated with the passage of the DIDMCA of March 31st 1980. It accelerated again after the remuneration of IBDDs.

    Leonardo Da Vinci said it best: “Before you make a general rule of this case, test it two or three times and observe whether the tests produce the same effects”.

    #1 The 1966 S&L credit crunch (where the term credit crunch was first coined), which destroyed the residential housing market. See: Barron’s May 22, 1978 “One Crunch Too Many”

    #2 The S&L crisis (“the failure of 1,043 out of the 3,234 savings and loan associations in the United States from 1986 to 1995”), However, “in 1980 the US had 4,600 thrifts, by 1988 mergers and bankruptcies left 3000. By the mid 1990’s less than 2000 survived. The S&L crisis cost about 600 Billion dollars in “bailouts.” This is 1500 dollars from every man woman and child in the US.” Note: the DIDMCA laid the legal basis for the abolition of 38,000 non-banks, and the addition of 38,000 commercial banks, to the 14,000 we already had.

    Albert Einstein’s’ “very revolutionary” 1905 papers perhaps augmented by his “cocky contempt for authority”, were widely recognized by c. 1908. And Einstein was a genius. Leland Pritchard’s 1961 paper has yet to be recognized. Professor Pritchard never minced his words, and in May 1980 (June issue of IMTRAC, published by Dr. Christopher Y. Thomas), pontificated that: “the Depository Institutions Monetary Control Act will have a pronounced effect in reducing money velocity”. And the rest is history.

    #3 The remuneration of interbank demand deposits beginning in Oct. 2008 (which destroyed non-bank lending/investing, 83 percent of the lending market pre GFC, where the non-banks shrank by $6.2T – exacerbating the depth and duration of the recession, necessitating that the money stock, and thus reflation, expand as a monetary offset by $3.6T).

    WSJ: “In a letter of March 15, 1981, Willis Alexander of the American Bankers Association claims that: ‘Depository Institutions have lost an estimated $100b in potential consumer deposits alone to the unregulated money market mutual funds.’ As any unbiased banker should know, all the money taken in by the money funds goes right back into the banks, in the form of CDs or bankers acceptances or other money market instruments; there is no net loss of deposits to the banking system. Complete deregulation of interest rates would simply allow a further escalation of rates by the banks, all of which compete against each other for the same total of deposits.”

    Written by Louis Stone whom the movie “Wall Street” was dedicated to – Vice President Shearson/American Express

    Spread the GOSPEL

  25. Gravatar of flow5 flow5
    16. December 2017 at 07:49

    It is axiomatic accounting. Theoretically, if you compared R-gDp to inflation, you will see that during any “cycle”, in the latter stages, R-gDp decelerates as inflation accelerates.

    This would be because as interest rates rise during the so-called cycle, an increasing volume (and proportion of DFI liabilities) of voluntary savings has, up to this date, been impounded and ensconced within the payment’s system (perpetuating stagflation). DFI savings are un-used and un-spent. So, the Fed actually does intend to target output (as ssumner advocates), but ends up having to throttle inflation (producing a recession). You could check the July 2008 FOMC minutes, etc.

    From the system’s belvedere, the monetary savings practices of the public are reflected in the velocity of their deposits, and not in their volume. Whether the public saves, dis-saves, chooses to hold their savings in the commercial banks, or to transfer them to non-banks will not, per se, alter the total assets or liabilities of the commercial banks, nor alter the forms of these assets and liabilities.

    Because the payment’s velocity of commercial bank-held savings is zero, these funds obviously are not being made available by their owners — for either direct or indirect investment (they are lost to investment until activated by their owners outside the payments system).

    And the growth of time “savings” deposits is almost exclusively at the expense of other demand drafts. If the public would shift into other types of earning assets outside of the payment’s system, then savings would have an income velocity. If a transfer in the ownership of commercial bank deposits takes place, this becomes a velocity of one when the funds are spent/invested.

    Demand deposits are created when the payment’s system expands its earning assets: loans + investments = deposits. Deposits are the result of lending and not the other way around. The commercial banks pay for their new earning assets, with new money (not existing deposits). The commercial banks could continue to lend even if the non-bank public ceased to save altogether.

    So economists, for example, should study deposit insurance and its relationship to economic growth. The end of the FDIC’s unlimited transaction deposit insurance is prima facie evidence, it caused the temporary 2013 “taper tantrum” (put savings back to work). Hence my forecast on 12-16-12, 01:50 PM “Jan-Apr could be a market zinger” was yet another “predictive success” of this upcoming reversal in the flow of funds.

  26. Gravatar of Cameron Cameron
    16. December 2017 at 08:15


    Real and nominal GDP growth look decent this year. No doubt Trump supporters will point to him doing ??? (and this looks more demand side than supply side), but do you think this is just noise or is there a tangible cause? Could it be conservative hawks becoming more dovish with a Republican in the White House?

    Some notes on the data: RGDP/NGDP growth will probably come in at about 2.8%/4.5% in 2017, better than a good portion of the recovery.

    Both RGDP/NGDP growth (annual) slowed to a crawl in 2016 but have increased since then.

    It looks like the fed is once again running a pro-cyclical policy. Now that the labor market is good, NGDP growth will be allowed to go higher! You’re work still isn’t done.

  27. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    16. December 2017 at 08:59

    Now that we know that tax reform hasn’t fallen apart, the next big question id, ‘Will Chileans cut off their noses, to spite their faces?’

    Mr. Guillier, for his part, has rattled investors with occasionally fiery campaign rhetoric. Earlier this month he vowed to “stick our hands in the pocket of those who concentrate the income, so they help build the country for once,” before closing his speech with a quote by leftist revolutionary Che Guevara.

    Santiago’s benchmark stock index dived 4.5% the day after last month’s first round of voting.

    To be sure, fiscal responsibility retains a public appeal in Chile that budget hawks elsewhere in Latin America could only dream of. Mr. Piñera appeared to score political points this week by claiming that Mr. Guillier’s governing plan would cost four times the $10 billion over four years he has advertised.

    “He’s going to put his hands into the pockets of all Chileans,” the ex-president said.

    Having missed out on Venezuela’s fate thanks to the sainted Augusto Pinochet, will it be Chilezuela?

  28. Gravatar of Major.Freedom Major.Freedom
    16. December 2017 at 09:33

    It is a good thing a lot of people didn’t take Sumner’s advise to vote for serial killer Hillary Clinton, we would have continued down the spiral into poverty

    Barack Hussein Obama regime takes power, corruption, decay, and losing becomes the new normal.

    McCain says Ohio steel jobs not coming back

    Obama says lost auto jobs are gone

    Obama Budget: Raises Taxes and Doubles the National Debt

    As Economy Tanks Under Obama, CEOs, Investors Say, “We TOLD You So”

    Obama Warns of ‘New Normal’ for Economy

    Steve Jobs to Obama: Those jobs aren’t coming back.

    “Revised Down” (The Story of the Obama Economy)

    Obama: You Didn’t Build That Business, Somebody Else Did

    The ‘new normal’ excuse

    Why Apple will never bring manufacturing jobs back to the U.S.

    Manufacturing Jobs Aren’t Coming Back, No Matter Who’s President


    Obama’s national debt rate on track to double

    Economists Are Starting To Wonder Whether The US Economy Can Ever Again Grow Like It Used To

    Five Years Into the Obama Presidency: Slow Economic Growth, Rising Prices the #NewNormal

    Obama has doubled the national debt to $20 trillion in just 8 years

    Coal Is Dying and It’s Never Coming Back With or without help from President Obama

    Donald Trump announces he’s running for president, and then this blog, and other liberal shill sites, and CIA MSM, begin their war.

    Donald Trump says he’s going to make Apple build computers in the US

    Why Trump’s Idea To Move Apple Product Manufacturing To The U.S. Makes No Sense

    Almost Everything Donald Trump Says About Trade With China Is Wrong

    Barack Obama’s Sad Record on Economic Growth; “Congressional Budget Office (CBO) is now forecasting that America will never see 3.0% economic growth again.”!

    Carrier Received $5.1 Million in Obama-Stimulus Cash Before Move To Mexico

    How would a Donald Trump presidency affect the stock market?

    Trump Will Cost Us, Donald Trump’s plan for creating jobs and reducing the national debt won’t make America great again

    Why Donald Trump Is Wrong About Manufacturing Jobs and China

    The Economist says Trump presidency would threaten global economy

    Bill Maher: Trump will ‘crash the stock market’

    White House struggles to explain weak economy as Obama boasts of job growth

    Obama Brags On Economic Legacy As Growth Slows to 0.5 Percent

    Obama Whines About Lack of “Credit” for Economy as it Tanks

    Trump promises he will reopen coal mines. He probably can’t

    U.S. Post-Recession Economic Growth at 70-Year Low

    Obama Responds To Questions About Carrier: Some Jobs “Are Just Not Coming Back”

    Obama: Manufacturing Jobs Outsourced To Mexico Aren’t Coming Back

    Obama Administration to Revise Total GDP Growth Down 2%

    Obama Mocked Trump For Saying He’d Keep Carrier Jobs In The U.S.

    Is anemic growth the new normal?


    Obama Will Be The Only President In US History To Never Achieve A Year Of 3% GDP Growth

    Donald Trump Promises Tax Cuts, Offset by Robust Growth Skeptics in both parties question whether policies will deliver predicted GDP and employment gains

    Can Trump grow the economy as much as he promises?

    Donald Trump still thinks his policies can boost American GDP growth to 4 percent, more than double the average rate the U.S. has seen in this century.

    In preparation for a completely unpredictable Trump presidency, I sold all stocks in my kids’ education accounts today. I urge u to do same.

    In preparation for a completely unpredictable Trump presidency, I sold all stocks in my kids’ education accounts today. I urge u to do same.

    If Trump wins, his supporters & third-party “protest voters” own the consequences. No blaming Obama when markets collapse and chaos ensues.

    Trump promises 4% growth. Economists say no way.

    Economists: A Trump win would tank the markets

  29. Gravatar of Major.Freedom Major.Freedom
    16. December 2017 at 09:34

    If Trump is elected president, it would be ‘exceedingly harmful’ to markets

    The stock market could crash if Donald Trump is elected president

    Trump elected as president

    Paul Krugman: The Economic Fallout – “If the question is when markets will recover, a first-pass answer is never”

    Trump gets his chance to be ‘greatest jobs president’

    Stock market rallies after overnight crash during Trump election.

    Donald Trump’s Stunning Win Upends U.S. Economic Forecasts

    Street processes Trump win; Dow 46 from record close

    Here’s What Will Happen to the Economy If Trump Keeps His Promises – “pitch the U.S. economy into recession and wipe out more than 4 million private-sector jobs”

    Coal jobs are not coming back, no matter what Trump says, and Republicans are starting to admit it

    Apple is exploring moving iPhone production to the US: Report

    Could Donald Trump really get Apple to ‘build a big plant’ in the US?

    Trump Still Pushing Apple to Manufacture in the U.S.

    The slew of good US economic data is because of the election — but not Trump’s win

    Trump Leans on Carrier to Keep 2,000 U.S. Jobs From Moving to Mexico

    Trump Bump? Market Continues to Rally, Set Record Highs After Election

    Trump to Announce Carrier Plant Will Keep Jobs in U.S.

    Beware of Donald Trump’s con on manufacturing jobs

    Carrier says it has deal with Trump to keep jobs in Indiana

    Why the U.S. Coal Industry and Its Jobs Are Not Coming Back

    Obama’s SICK Response To American Jobs Saved By Trump’s Carrier Deal

    Mexican official on Carrier deal: ‘Trump is telling the truth’ about saving US jobs

    Trump’s Carrier Deal Means Nothing for Future Jobs

    Dow zooms over 1,200 points since Trump victory

    Trump Announces $50B Investment from Japan’s SoftBank

    Can Trump keep his big promises on steel jobs?

    U.S. Steel to restart more Granite City operations

    U.S. Steel will reopen Keetac mine

    Ford invests $700M in Mich., cancels plan for Mexico plant

    Shuttered U.S. Steel McKeesport plant gets new life

    Fiat Chrysler announces $1 billion investment in US manufacturing, 2,000 new jobs

    Alibaba founder Jack Ma meets with Trump, pledges to create 1 million US jobs

    Apple plans to make servers in Mesa data center

    IMF Upgrades U.S. Growth Forecast as Donald Trump Reshapes Global Outlook

    Inauguration of Trump as president resistance salt production intensifies

    Forget 4% growth: 3% would be a major feat for Trump after record drought

    Apple-Supplier Foxconn Weighs $7 Billion U.S. Display Plant

  30. Gravatar of Major.Freedom Major.Freedom
    16. December 2017 at 10:57

    Why Sumner REALLY dislikes Trump:

  31. Gravatar of Major.Freedom Major.Freedom
    16. December 2017 at 12:16

    Reason #49,746 to never visit commie cesspool California

  32. Gravatar of Major.Freedom Major.Freedom
    16. December 2017 at 12:28

    Commiefornia no longer filing water quality reports:

  33. Gravatar of ssumner ssumner
    16. December 2017 at 16:35

    Cameron, Growth has picked up slightly this year, but more so in many other countries. It’s still fairly slow, not much different from the past 8 years.

    It’s possible that expectations of a tax cut and a few cuts in regulation boosted growth slightly, say a few tenths of a percent.

    Patrick, You asked:

    “will it be Chilezuela?”

    Fortunately no, regardless of who wins.

  34. Gravatar of B Cole B Cole
    16. December 2017 at 17:03

    Tim Duy perhaps explains why the US has big recessions…the Fed does not like low unemployment rates…

    If a central bank bows to the NAIRU totem…then low unemployment is the road to the Weimar Republic….

  35. Gravatar of E. Harding E. Harding
    16. December 2017 at 19:52

    “Stay away from philosophy, it’s not your forte.”

    Yes it is.

    Major Freedom, great comments.

  36. Gravatar of flow5 flow5
    17. December 2017 at 05:12

    @ Cameron: “but do you think this is just noise or is there a tangible cause?”

    Rates-of-change in monetary flows, volume X’s velocity = RoC’s in P*T (American Yale Professor Irving Fisher’s “equation of exchange”). There are some inherent drawbacks in the make-up of the variables, but in macro, the dominant correlations and trends are obvious.

    Professor Irving Fisher’s transaction’s concept of money velocity, or the “equation of exchange”, is an algebraic way of stating a truism; that the product of the unit prices, and quantities of goods and services exchanged P*T, is equal, for the same time period, to the product of the volume, and transactions velocity of money.

    The “transactions” velocity (a statistical stepchild), is the rate of speed at which money is being spent, i.e., real money balances actually exchanging counter-parties. E.g., a dollar bill which turns over 5 times can do the same “work” as one five dollar bill that turns over only once.

    It is self-evident from the equation that an increase in the volume, and/or velocity of money, will cause a rise in unit prices, if the volume of transactions increases less, and vice versa. Of course, this is just the “unified thread” of algebra, estranged from “general field theory” of macro-economic modeling, where the chorus is: “All analysis is a model” – Ken Arrow

    Essentially, 2016 represented a deceleration in long-term monetary flows, the proxy for inflation (based on the distributed lag effect of money flows, one which has been a mathematical constant for over 100 statistical years). In 2017, the RoC in money flows reversed. But Janet Yellen remarkably rose policy rates to counteract the expected rise. I.e., raising the remuneration rate destroys money velocity, throttling back AD.

    Money velocity reversed its path beginning in the 2nd qtr. of 2017. And the distributed lag effect has driven prices up in the last half of this year (as the model almost perfectly predicted).

    But there will be a reversal in the RoC of both long-term and short-term money flows in 2018. The first half will show some deceleration. The question is now whether velocity has increased enough to prevent a recession? (as my model underweights Vt).

  37. Gravatar of Benny Lava Benny Lava
    17. December 2017 at 06:41

    B Cole,

    Absolutely correct. Labor crushing recessions are a favorite of the Fed. Note that in the past Sumner has proved that the Fed and big bankers have purposefully created them. IE the lesser depression of 1921 and the recession in the depression of 33. This is a part of American culture. Strange but true.

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