“No tomorrow? That means there’d be no consequences. No hangovers. We could do whatever we wanted!” – Groundhog Day
An economist falls off a cliff. During the fall, he notes, “So far, so good. It’s different this time. Soft landing ahead!”
Note: no podcast this week. Hoping to have a new computer that can hear things as soon as my staff gets the specifications together.
Last week I let on that I thought a recession was coming. I mean, I always think a recession is coming, so that was no big surprise, but it looks like from preliminary data that the economy is actually contracting this quarter, so, if we match it with one more quarter of contraction that’s the textbook definition of a recession. Or maybe the economy is having a baby. I slept through that part of health class.
It is a long-used trick of sitting presidents to treat the economy like a 1980s high school kegger in order to get re-elected. The plan is generally simple: lower interest rates, make great big troughs of money available, and, bada-bing, the economy is bada-booming on election day and the cheerleaders are doing keg stands.
Nixon mastered this with his re-election bid in 1972.
Well, add the hangover from Nixon’s economic Everclear™ to the crude oil embargo (thanks, Israel) and the result was the miasma of suck that was the 1970s economy – stagflation. Every president has done some variation of this act since then, with varying degrees of success, but since 2000 or so, each president has tried to avoid all of the consequences of the Boozing. How? Boozing some more.
And I heard they were banning cheese in Great Britain. Or at least extra sharp cheddar.
I’m guessing that one can avoid a hangover by staying drunk all the time, though I don’t have personal experience in attempting that strategy. Although it is probably more enjoyable than a hangover, there are always consequences to replacing all of your blood with ethanol.
There is a difference with this current economic hangover that we’re working on because, first, we’ve been drinking soooooo long. Like I said, this has been going on since at least 2000.
So, there’s that. But that’s not the only thing impacting the economy right now.
Another major factor is Trump. I think, like many people, Trump sees the size of the national debt and knows that this can’t go on. He’s also a guy who has nothing at all to lose. He can shoot the Moon and try to go for all of it.
He’s doing exactly that. Tariffs? As I’ve written before, when the United States had tariffs, we were a strong economy with manufacturing. Post WW2, when we went away from tariffs to help the rest of the world rebuild out of the rubble? Not so much.
If Trump puts tariffs on Canadian goods, no one can say he has ties to Poutine.
Trump’s America also (so far) is an America that wants peace. For decades we’ve been shadowboxing against Russia, which is like Hulk Hogan™ attempting to defeat a room full of kittens. I mean, jeez, Hulk®, their eyes aren’t even open yet. Russia is not a threat to the United States. Except for the nukes.
Others want war, though. The neocons and people like Victoria Zoolander want war the in the Ukraine, probably because Russia gave them a wedgie in the 1980s or because they have Raytheon© stock. I saw one Canadian tweet, “Well played, Americans, look at all of the billions of dollars in weapons you won’t get to sell.”
To be clear, I’m all in favor of weapons, just ask The Mrs. when I make goo-goo eyes at a .50 cal. I think every father should be given their choice of an M2 or an M60. But to try to mock the United States for not getting profits on weapons that are killing people, right now?
That’s . . . disturbing.
Also as a factor, in Trump’s America government is likely to be D.O.G.E.’d into shrinking for the first time since we demobilized from World War II. When that happened, we transitioned more-or-less seamlessly into the economic boom of the 1950s, but it didn’t hurt that the rest of the world was like Sergeant Hulka: “All blown up, sir!”
This shrinking government sector will take the heat off of inflation in many things, but tariffs will raise prices. Where it ends up is uncertainty.
Who doesn’t like uncertainty? Wall Street®.
Physicists should never look down at their speedometers. If they do, they’ll have no idea where they are.
The final big factor in this recession is that the insiders who have been putting the Bacardi 151™ into the punch bowl for all these decades don’t want to help Trump. That’s probably a good thing. The more government meddling into the economy, the longer it normally takes to shake itself back into order.
I want the recession to be:
Short.
Sharp.
Cleansing.
Like hangovers, recessions are painful. They can wreck lives. But they are required to clean out the economy from time to time.
And the economy hasn’t been cleaned out in forever. Some areas where it really does need a bit of sprucing up:
- Government.
- Banks.
- Real Estate.
- Manufacturing.
- Education,
These spring cleanings will be painful. A lot of people in these industries are out there doing the important work of going to Zoom™ meetings and making PowerPoints©, rather than engaging in useless tasks like growing and making food, or fixing potholes, or picking up the trash.
So, yes, this is probably a recession coming. The Government-Media-Education complex will certainly try to blame Trump, just as they tried to blame him on day two that he hadn’t yet fixed all of Biden’s booby traps.
Is the most popular red wine in prison Penal Noir?
To be clear, Trump will be partially at fault, but if the result is a true cleansing of the economy? It will be worth it. Now, where’s that black coffee?
John your best post ever!
The recession is best done fast and hard so we can get it done.
Painful but it is the way (Wish I could put that Malroran meme here)
Remember Treasury Sec. Mellon’s prescription for the 1921 recession that set the stage for the Roaring 20s… “Liquidate, liquidate, liquidate.”
I see tariffs either as short term negotiating tool or as a whole different economic trade policy like in the late 1800s. We don’t really know how this will play out.
But the goal is vigorous US growth. I think Trump will make that happen.
“To be clear, I’m all in favor of weapons, just ask The Mrs. when I make goo-goo eyes at a .50 cal. I think every father should be given their choice of an M2 or an M60.”
Nothing wrong with that. Heck I’ve done the google eyes over a pellet rifle. I’ve often wondered if it is ingrained in the male DNA to appreciate and understand weapons as part of the survival instinct. Women (and liberal men) don’t generally share this trait.
Agree with your choices but will pass on the M2 carbine as it isn’t left hander friendly. I shot one once and it tattooed me between the eyes with ejected brass.
BUY SILVER
We need to get out of the mindset that conflates high returns in the stock market with a healthy economy. Stocks seemed to be doing just fine under Biden, the S&P 500 went from 2584 in January of 2020 to 5881 last October before the election. Great for 401k accounts and making the wealthy even wealthier but the economy was anything but good for most people. In other words, what is good for Wall Street isn’t always or even often good for Main Street.
That seems like a good topic for a stand-alone post.
I used the wrong starting date, the S&P was at 3972 in January of 2021 when Biden took office
I remember a Gillette ad from the 1990 that said “I didn’t believe the Dow would hit 29 hundred, or I’d hit 30…”
I have no clue why I remember that, I guess it’s when 14 y.o. me saw stupid ads too much after growing up on Thundarr the Barbarian, rolling the score on Duck Hunt, shooting grouse or playing hockey.
Have no clue why I even posted this, really. Sometimes a touch of the ’tism is confusing.
John – – The Trumpeter danced around this subject in last night’s State Of Dah DisUnion speech. Wish he had focused the bully pulpit on the need for catharsis after a binge…. Which you pointed out is painful but necessary.
Our citizenry is basically ignorant about economics even though they understand why we must follow our budget to get through the month. Shame that The Trumpeter did not hammer down on that point. I guess he wanted to crow his accomplishments on a captive audience since the propaganda media was not likely to tell truths that make their Libtard backers appear to be the incompetent petulant snobs that those vermin actual are !! !?
The problem is, recessions are like snowfall:
You never know how long they’ll last, nor how deep they’ll get.
Once the bottom drops out, everything from “correction” to “Great Depression” to “Financial Apocalypse” is on the table.
We’ve certainly more than owned and deserved any of the above.
And consumers wanting an economic reset are very like Christians: they say they believe in Heaven, but no one is in any great hurry to go through the transition required to get there.
Trump’s doing a great job in bringing on the correction, and DOGE is looooooong overdue medicine.
But unless he figures out a way to make the changes permanent, it’s all just a blip, which will go away in 4-12 years.
And ultimately, the only way to make government fit back inside the box it came in, is to start stringing up all the people trying to grow it.
Until someone has the stones to address that, nothing else will matter.
I’ve seen no conga line of FBI and CIA employees – let alone crooked congressweasels – being frog-marched to federal court or prison.
I see no illegal alien round-ups.
So this is just Day 46 of Nothing Is Going To Change (With Hyperventilation For Effect).
Call me when the mass arrests and hangings start.
And if things haven’t turned around economically by the mid-terms, this is going to be the biggest political bellyflop since Warren Harding or Herber Hoover.
Maybe we can send that “saved money” to Ukraine so Putin can get poked in the eye from us indirectly and then get “the noodle” from someone smart in his own country.
Otherwise they’ll be writing cyrillic in Belfast or something.
Beats the hell out of withdrawing back into our own hemisphere because we can’t “project power” with a carrier task force lest they become reefs, the coffers are empty and everyone is physically damaged from our own government.
This may be incorrect, but I have a gut feeling that when it comes to tariff history, you may be mixing up cause and effect. I personally don’t think that (a) we dropped tariffs and, as a subsequent consequence, (b) had foreign manufactured goods flood in. I think that American Big Biz deliberately moved manufacturing offshore in search of cheaper labor and then, as Part 2 of that plan, had tariffs dropped as part of their profit maximization to importing cheap goods THEY produced.
Low tariffs is Globalization in action. Example: Ford car plants in Mexico.
https://insights.tetakawi.com/why-ford-is-moving-their-plant-to-mexico
So Trump raising tariffs is by definition Populism striking out at Globalism.
The thing that gets me, and I’ve harped on this before in this forum, is that raising tariffs is not the way out of the Triffin’s Paradox facing America. (Well, by definition there is never any way out of a paradox, but in this case higher tariffs is an exceptionally stupid response). I’m not the only one that thinks so.
https://www.nomuraconnects.com/focused-thinking-posts/trumps-populist-policies-and-the-triffin-dilemma/
Basically the Triffin Paradox is that IF you are a global power and want your currency to be the world reserve currency ( which our dollar is, a good good good thing for us), THEN you gotta accept massive foreign trade deficits (and ours is approaching a trillion dollars a year, a bad thing) as the mechanism to get your currency in the hands of other nations so they can use it as the world reserve currency.
Trump looks at our huge trade deficit and sees it not as a consequence of global empire (which it is) but as a threat to American workers (which it is) and is gonna fight to bring that deficit down with higher tariffs. Good for American workers. Bad for our global empire – the other 95% of Earth’s population will respond by turning away from the American market to build more markets among themselves – which don’t need the American dollar as the reserve currency to facilitate this new trade. This is de-dollarization in action, which is a far greater threat to us than depressed wages from cheap foreign goods.
I don’t think Trump is enough of a strategic thinker to dip this deep into the spinning gears of international finance. I actually think that his tariff bombshells are just shock-and-awe to get immediate trade concessions from other countries, especially Canada, Mexico and China. No years-long trade negotiations for him!
So bottom line, I agree with you John, we need a cleansing recession, hopefully a short one that doesn’t turn into a true depression, and it’s pretty inevitable that we’re gonna get it. Trump’s tariff carpet bombing will come and go so he can claim victory over all the other countries he bent to his will. But America’s fiscal problems are so deep that even after a recession it’s still hard to see a way out. Tariffs are about now. A recession is about this year.
Our growing debt servicing bomb is the real problem in the decade to come. A major reset is coming. Let’s just hope it doesn’t involve nukes.
https://x.com/anadoluagency/status/1896893172862583045
https://www.statista.com/statistics/263127/military-spending-of-the-nato-countries-1990-2011/
Trump may not be cognizent of this, but whoever put in the USMCA (in effect July 1, 2020) that review would happen in 2026 might be.
If Trump put the date in, wouldn’t he have insisted on 2024 so he could see how it was affecting the US at the end of his second term and axe it then? (/conspiracy theory, those are never right)
Seems to be a lot more talk about gold lately, especially with the adjacent talk about crypto and such. King Dollar may stay on top just by being (still) the cleanest dirty shirt by chopping off the gangrenous leg of Globalism, or it might be a regional currency that the world still wants to flock to, or do business with. Either way global ambitions are hampered by having a peg leg.
Hydroponic farmland can be reclaimed into healthy, fertile soil but it will take a big doing since all those big fertilizer herds were slaughtered 150 years ago. There is still a lot of fertile soil that can feed our own, and probably enough to export after the rebuild.
For most of the country, we’re still “enjoying” the fruits of the Great Recession (2008 – current year).
I’d have to go with the M60 over the M2–I at least have a chance of affording some .308, but .50 Cal. is out of my budget.