Is it morning in America?

Ronald Reagan (my favorite president during my lifetime), left office in January 1989. At the time, the 12-month core PCE inflation rate was 4.66%

Today, the 12-month core PCE inflation rate is 4.56%. That’s lower.

So the underlying inflation problem is not as bad as in the late 1980s? Not quite. Today, there is a bit more aggressive use of “hedonics”. That might shave about 1% off the recent PCE inflation estimate. Still, we aren’t that far off the late 1980s for core PCE inflation.

The most recent 12-month GDP deflator inflation rate is 7.58%, vs. 4.14% in the first quarter of 1989. So that measure of inflation is much worse (partly due to supply problems).

NGDP growth is running at 9.41%, vs. 8.63% in 1989:Q1. Not much different.

But nominal GDI growth is running at 11.79%, vs. 8.40% in 1989:Q1.

And note that GDP and GDI are exactly the same thing, just measured in two different ways. The best estimate of gross income/output is probably an average of the two, which actually rose in both Q1 and Q2 of 2022 (in real terms). So much for that “recession” scare.

PS. I don’t have much to say about Powell’s speech. The Fed could avoid all this market drama by switching to a level target. When will they learn?

PPS. I have yet to see a single commenter apologize for mocking my claim (made in July) that we weren’t in recession last winter. When am I going to receive my apologies from all of you?



26 Responses to “Is it morning in America?”

  1. Gravatar of George George
    26. August 2022 at 11:10

    I wasn’t here when you quibbled over definitions, of “recession” or otherwise, which is a game simpletons and hacks play, but I do see lots of historical posts on how everyone else the world over are all using the ‘wrong’ definition. I could not find any concrete definition in any past moneyillusion post. The closest I found was this waffling definition in a post titled ‘a time for nuance’:

    “Recessions are periods where output falls well below trend.”

    This is a waffling definition littered with question begging and comingled variables, because it begs the question of how long a ‘period’ is defined, as well as how ‘well below’ is defined, and it also comingles in on itself with ‘trend’ because a ‘trend’ could ITSELF BE an economy in recession. So a recession in this waffling definition could occur if there is a recession, which creates a NEW ‘trend’, and then there is a further dip in output and THEN we say aha, since output dipped below THAT ‘trend’…of recession…now we’re in a recession. Oh but that doesn’t even work either because there is no meaning of ‘well below’ or how long that ‘period’ is to last.

    If your operating definition of ‘recession’ is really this:

    “periods where output falls well below trend”

    What that really means is: YOU DON’T HAVE A DEFINITION FOR ‘RECESSION’ tied to reality as it is.

    There is no measurable mechanism from facts of reality to concluding when a recession is actually taking place using that ‘definition’.

    If I had to choose between that waffling definition, and “two consecutive quarters of negative GDP” for example, the latter is at least concretely measurable because it has concrete numerical measurable values. Two quarters is 6 months, and negative GDP is GDP growth below 0%. If those values are triggered, the WHAT and the HOW LONG, then that is merely a series of events that occur and the language used to refer to such events is “recession”.

    It is stupid to say “no we’re not” WHEN THE UNDERLYING FACTS OF REALITY ARE THE SAME. What SHOULD occur is that “ok you NAME the events as ‘recession’ while I NAME THE SAME EVENTS as ‘something else’. All that is happening when you quibble over whether we should or should not DEFINE a series of events a this or that, is not whether or not the economy IS doing such and such, it’s just a low IQ argument over what language people are ‘supposed’ to use when they speak their minds and describe what they see in reality.

    Gee, sound familiar doesn’t it, ‘comrade’?

    With the waffling definition, an economy ‘trending’ at -2% decline in GDP year after year would CREATE A NEW ‘trend’, and if output dips FURTHER NEGATIVE, by some undefined ‘well below’ amount, over some undefined ‘period’ of time, would that economy THEN be ‘defined’ as in a recession? Or WAS it already? But even that doesn’t work because all the words are just words and are not measurable.

    How about this:


    Then with THAT definition, APPLY it without bias or politics to history and then list when countries were in recession, when, AND WHY, tying it BACK to your original definition.

    I looked everywhere in the past posts on this site, and there isn’t anything I could find that does anything close to this. It’s all just smears and accusations of why everyone is wrong, assertions of economies in or not in recession without explaining how or why, and pathetic demands to be ‘apologized’ to as if it’s everyone else’s fault for being rightly confused in not knowing what it is that is being written from behind a dialectic logic firewall of word games.

    Then, after you post a concrete definition, you should apologize to all your readers for pretending that your ‘definition’ was stemming from anything other than a dishonest method structured according to the same exact logic as Karl Marx’s logic of ‘being right either way’:

  2. Gravatar of Michael Rulle Michael Rulle
    26. August 2022 at 11:46

    I don’t know how I ever thought Powell had a clue.

  3. Gravatar of James Alexander James Alexander
    26. August 2022 at 12:26

    So weird. No market drama at all in bonds, fx or commodities. Only in equities.

  4. Gravatar of Aladdin Aladdin
    26. August 2022 at 12:27

    George, if you think we are in a recession right now, do you think the federal reserve should take steps to add stimulus to the economy? That is what would be advisable correct?

    A hyper inflationary period with low unemployment is the product of too much stimulus, not too little. Its bad but we wouldn’t call that a recession.

    My understanding is that for most Americans, when asked on surveys whether we are or are not in a recession, most take that as, is conditions good or bad? They are bad, so most Americans would say we are, but it doesn’t make it true.

  5. Gravatar of Aladdin Aladdin
    26. August 2022 at 12:34

    Like sure, if you want we can go with, there is a “recession” but its totally an artifact of how we measured things, and the experiences of everyone are completely at odds with what a recession should feel like, and the measures we should take are not the measures we should do in a recession, but actually the complete opposite, aggressively.

    Explain how that is useful?

  6. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    26. August 2022 at 12:41

    Powell quoted Volcker on “expectations”. Expectations fell short last year.

    The FED does everything backwards. QT should reduce the supply of money while increasing the supply of loan funds. That way you hit inflation harder than real output.

  7. Gravatar of Edward Edward
    26. August 2022 at 13:20

    Fascinating piece.

    A couple of points can be true at once.

    1. This article refers to Kalecki on full employment in 1943. This was before Milton Friedman predicted correctly that there was no long term trade off between inflation and unemployment.

    2. It is truly revolting, sick, and gross, for Wall Street to be gleeful about the “pain” that a recession would bring and “that power would go back to the CEO” (its about damn time the working man held SOME leverage!)

    Thoughts, Scott?
    Thanks 🙏

  8. Gravatar of ssumner ssumner
    26. August 2022 at 13:23

    James, See my new post.

    Aladdin, Don’t waste time trying to placate him.

  9. Gravatar of ssumner ssumner
    26. August 2022 at 13:26

    Edward, In fairness, Wall Street didn’t seem very gleeful today.

    But yes, no one should be rooting for a recession.

  10. Gravatar of George George
    27. August 2022 at 06:30


    Despite Sumner’s false smear that I am seeking to be ‘placated’ (notice how Sumner always immediately replies to posters who send mags to me with demands to cease those communications? He’s not doing for their or your benefit), to honestly answer your question of whether I think we are or are not in a ‘recession’, the way I approach this is that we are really talking about what WORDS we SHOULD use when referencing what is the SAME underlying facts of reality.

    One thing is true that we can all agree on (except the dialectic warlocks like Rorty and his followers), that whatever WORD we use to REFERENCE the economy, there is ONE UNIQUE SET of underlying facts that IS the economy itself. We’re all REFERENCING the same underling reality.

    The question of whether I think we are or are not in a ‘recession’ is really a question of whether I would use the language ‘recession’ or some other word or words when referencing the underlying facts of reality.

    Since I, unlike the personality cult leader Sumner, want to address your mind as independently capable of understanding reality as it is, the way I would answer your question is by saying IF we use a definition of ‘two consecutive quarters of negative GDP’, which are themselves more clear and transparent words used to reference reality that we can more easily agree does or does not happen, then because those variables were indeed ‘triggered’ this year, by THAT use of language, I would say yes the word we can use is ‘recession’.

    Sumner, because he’s a political hack, his goal is to try to make Trump look bad and Biden look better, so he takes HIS intentionally vague and waffled definition, preys upon your mind, and insists that the language EVERYOBNE MUST USE is ‘recession’ when Trump was just leaving office ergo Trump’s fault, but the two consecutive quarters of negative GDP under Biden we are NOT supposed to SAY ‘recession’ to refer to the same reality, because that would make Trump look better than Biden.

    Ultimately whatever WORDS we use, one thing even hacks like Sumner cannot escape: Two consecutive quarters of negative GDP OCCURED WHEN BIDEN WAS PRESIDENT.

    All Sumner is doing now isn’t economics, it’s communist logic of ENFORCED LANGUAGE by intimidation, smears, and “I’m a victim” narcissism demanding an apology from everyone for daring to use the language they believe makes sense.

    Hope that answers your question!

  11. Gravatar of ssumner ssumner
    27. August 2022 at 11:26

    George, Aha! So there was a recession after all!! How did I miss it?

  12. Gravatar of Kangaroo Kangaroo
    28. August 2022 at 08:03

    “It is truly revolting…for Wall Street to be gleeful”

    Why? The market is simply reflecting people’s judgements about the future results of companies. it’s too bad that so many people see it as evil when the market “sees” an improving outlook.

    Why is the “working man” somehow in opposition to the stock market? It kills me when CNN says ridiculous things like (paraphrasing) “only a small number of wealthy people benefit from rising stock markets”. To the extent that such things are true it’s too bad, but stock ownership isn’t a means-tested club. Anyone can buy stock and participate in the gains. If CNN was the responsible news organization that it claims to be, it would provide information for the “working man” to safely and intelligently invest, rather than trashing on all investment.

    I worked with an immigrant gal in her 50s, who’s total savings after nearly ~20yrs of work was $72,000 – enough to live about 4yrs in our area – because she was afraid to invest in stocks and kept all her 401K money in cash. It’s tragic. Please stop telling “working people” that the stock market isn’t for them. It **IS** for them. It’s a must for them. Without it they will have nothing.

  13. Gravatar of George George
    28. August 2022 at 11:42

    “George, Aha! So there was a recession after all!! How did I miss it?”

    At what point will there be a MEASURABLE DEFINITION of ‘recession’ advanced to make any statement containing ‘recession’ one that has intersubjective mutual reciprocal awareness of meaning?

    You keep using the WORD ‘recession’, but there is no definition provided, so you can’t ask me to confirm whether the underlying facts of reality has met your firewalled informational factors or not.

    Asking again:

    Please provide a definition of recession that can be tested against measurable facts of an underlying reality that is mutually recognized as ONE SET OF FACTS all definition point or refer to.

    No waffling or deflection this time.

  14. Gravatar of Stan Greer Stan Greer
    29. August 2022 at 04:26

    Maybe you’ll get your apology after you apologize to David Henderson and the rest of us for “refuting” one of his recent posts by asserting, without having evidence to back you up, that COVID 19 deaths are underreported by health agencies. That is, you referrred to “careful studies” showing this, without being able to cite any.

  15. Gravatar of George George
    29. August 2022 at 09:32

    Remember when I said “there are thousands of affidavits testifying under penalty of perjury of witnessing election fraud”?

    Since I am honest, I want to clear the air and say I made a mistake. An error in judgment. I wasn’t accurate enough with my words. For that I apologize.

    The more accurate answer is TENS OF THOUSANDS of affidavits.

    In ONE state alone.

  16. Gravatar of George George
    29. August 2022 at 09:36

    Oops, I made a mistake again.

    Tens of thousands of affidavits in one state IN ONE COUNTY.

    I apologize again for posting information that could have been even more accurate.

    Maybe one definition for “election fraud” can be

    “A period when election integrity falls well below trend”


  17. Gravatar of ssumner ssumner
    29. August 2022 at 10:07

    Stan, Sorry, I forgot that lots of you commenters are in an epistemic bubble:

  18. Gravatar of Stan Greer Stan Greer
    29. August 2022 at 10:51

    As The Washington Post describes it, the Lancet study is almost pure speculation. Hence the “may be up three times higher,” which you translated into “is higher.” It is about worldwide numbers, not about U.S. numbers, which is what Henderson was talking about. The gap between what you claim and what the study actually asserts is probably why you didn’t dare to cite the Post article in response to Henderson, a colleague. But I guess such nonsense suffices for the hoi polloi who comment on your blog.

  19. Gravatar of Uncle Joe Uncle Joe
    29. August 2022 at 13:14

    Kangaroo – Well said.

  20. Gravatar of George George
    29. August 2022 at 15:42

    Speaking of ‘epistemic bubbles’, another one just burst for the TDS sufferers:

  21. Gravatar of ssumner ssumner
    29. August 2022 at 15:49

    Stan, Here’s one for the US:,and%20other%20social%20and%20economic

    This WSJ article shows some data for 4 US states—the unexplained excess deaths are strongly correlated with Covid deaths across both time and place:

  22. Gravatar of Stan Greer Stan Greer
    29. August 2022 at 17:35

    This quote from the lead author is a strong indicator to anyone who has any common sense that he is an activist not interested in getting to the truth:

    Families who have lost loved ones to COVID-19 are eligible for up to $35,000 of Federal Emergency Management Agency assistance if COVID-19 is listed on the death certificate, Stokes says. “But there are a lot of applications being denied because the certificate lists other causes of death. It’s a real issue,” he says.

    Sumner doesn’t see any problem with a quote like that. On the other hand, he is completely uninterested in data from across many countries like Israel that have done exactly what he wants with regard to COVID showing high excess mortality this year among people under 40. These are clearly not COVID deaths, so to a blinkered partisan on health matters like Sumner, they just don’t count.

  23. Gravatar of Doug M Doug M
    30. August 2022 at 08:46

    Regarding the comparison to 1989, I would like to note that the Fed funds rate was 9.5%.

    Is there a difference between hitting these numbers coming down from a period of high inflation vs. hitting these numbers coming up from a period of low inflation?

  24. Gravatar of ssumner ssumner
    30. August 2022 at 11:02

    Stan, And why have you ignored the scandal of all of those rural counties in the US that were routinely listing Covid deaths as due to some other cause? Or were you not even aware of that fact?

    You can cherry pick any quote you want, but the fact remains that there are many studies that suggest Covid deaths are much higher than reported, and the empirical evidence strongly supports those studies.

    Doug, The (real) natural rate of interest was far higher back then, as were long run inflation expectations.

  25. Gravatar of Tom M Tom M
    31. August 2022 at 09:14


    How are you defining “COVID Deaths”? Seems like there might be some miscommunication on defining your terms.

    I think everyone can agree that COVID DID result in a greater number of deaths. To me, it does not seem like the official numbers would be THAT far off in either direction from the reported numbers (+/- 500K per year).

    My guess is the “scandals” of rural counties underreporting roughly balanced out the “scandals” of urban counties overreporting.

  26. Gravatar of ssumner ssumner
    2. September 2022 at 09:52

    Tom, My best guess is that the official figures are about 10% too low. Go with the excess deaths data as the starting point.

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