Link to the original article:
Economists have predicted 20 of the last 5 recessions…
Economics is great at explaining why something happened or what may happen in the future but complete shit at predicting when something will happen.
For a decade in the run up to the 2008 housing crash everyone was saying it was just around the corner but they were wrong for 9 of the 10 years.
If every year you predict the world will end or the market will crash, eventually you will be correct…
Right, but if you’re watching someone blow up a balloon, you know eventually it will pop even if you don’t know exactly when. That doesn’t mean you’re wrong to suggest we should stop inflating the balloon to avoid the pop.
If you just say the market will crash, maybe it will or maybe it won’t. If you say that the conditions exist for a crash, and describe them accurately, you’re right whether there is a crash or not.
And if you say there’s 100% chance, not only are you likely to be wrong, you’re also a useless moron deserving of ridicule.
if you’re watching someone blow up a balloon, you know eventually it will pop even if you don’t know exactly when.
There are two problems with this.
1: When a lot of people are making money by inflating the balloon, telling them to stop is not going to work well.
2: If the ballon ends up taking 20 breaths to pop and you are telling them to stop every time they blow in the ballon and it doesn’t for the first 19 times, they tend to think you are the boy who cried wolf and just keep on ignoring you.
-
You’re right, that’s why you need legislation and regulation to prevent them from blowing up the balloon. The people pointing out the causal relationship aren’t necessarily in a position to do that themselves, they need to raise awareness so that there is sufficient concern to do something about it. That ain’t happening as long as bribery is legal, but that’s not the economist’s fault.
-
That’s also not the economist’s fault. Raising the alarm and accurately predicting the causes of a crash are the things the economist are supposed to do. The boy who cried wolf was pretending when he raised the alarm. The economist is accurately describing the state of affairs, and the potential ramifications. Whether it takes 20 breaths or 100, the balloon will pop unless we take action and that remains true. If the boy who cried wolf saw wolves, and the wolves didn’t attack the sheep the first night, the boy is still doing his job to warn people. To torture this analogy a bit more, it’s like everyone can see the approaching wolves, and it is the townspeople who are the idiots for not believing the boy.
While broadly, I agree with your assessment, there is one issue I see. With each breath into the balloon, it gets closer to popping, but the beginning state of every balloon is empty and we WANT it to grow to a certain degree. If we go with 20 blows for instance, we WANT 10 of those. If you (economists) keep reminding the Blowers on each blow, then yeah, they’ll start to ignore you by blow 10. If instead we were to say, at blow 8, “hey, we’re about blown out, don’t blow too much more” it may do more good than shouting each time someone’s blowing.
-
And if you can make money by getting as close as possible to the pop while still stopping in time, many people will take that gamble
Economics is great at coming up with plausible sounding stories about why things happened, but that doesn’t mean those explanations are correct. The fact that the same theories lead to incorrect predictions is a strong indicator that the explanations are wrong, too.
Or to put it more bluntly, most of the field of economics looks a lot like a pseudoscience.
most of the field of economics looks a lot like a pseudoscience.
Well, when one of the founding assumptions is that humans make rational economic decisions, you are in for a bad time.
What if you assume they have infinite time horizons or instantaneous and free transaction costs over infinite distances?
Assume that this cow is a sphere
I called this out when I was 19 and first took econ 101.
I was like, the foundational premise of this entire field is demonstrably wrong, wtf
Yep. It is like starting geometry by saying. “Lets assume π = 3.”
Shhh. Picketty might hear you.
I may have been early but I’m not wrong
Hey that’s not fair I’m a circus clown now
A broken clock is right two times a day.
Yes, but because it is broken, you never know when it is right. So even when it is correct it is still useless.
Exactly.
A slow running clock is still broken but technically right even less often. I use that metaphor at work to describe bad co-workers.
You guys ruin everything. I hope you’re happy.
Yikes
Now that analog blocks are rare, is this even valid anymore?
They couldn’t resist adding “in blow to Biden”
Stupid fucks.
I guess biden got that blow after all
You’re thinking of Clinton.
Doesn’t economic situation affect presidential popularity in the US a lot?
Yes, which is why the Republicans use their time bomb strategy. While they’re in power, they pass something where critical parts of it expire in some number of years, which will line up with Democrats in power, then let it expire. The uninformed voters will fall for it every time.
Sort of. It may be more perception of the economy rather than the reality. There was a lot of “economically stressed” people who voted for Trump in 2016, even though all the data suggests they were not stressed, and the US economy overall was fine.
A year ago, there was data that suggested you could go either way. It was easy to come up with arguments for or against a looming recession, and you didn’t have to cherry pick that hard. People seemed to expect there was going to be a recession, but it kept not happening.
Most indicators now suggest the economy is mostly fine. Inflation still needs to come down. GDP is up. Unemployment is at historic lows. But people are still expecting things to be bad.
“Economic anxiety” was always a dogwhistle for racism.
The stock market is still in a will it/won’t it situation so my investment accoints are kindq stagnent but eventually a trajectory will be selected and things will start actually moving
Unfortunately, yeah. While there are so many economic factors that are out of the president’s control, “the economy” as a whole is always, always used by republicans as a cudgel against any sitting Dem president if there’s any amount of decline (and when it’s growing, they look for any other issue to yell about). Uninformed or stupid voters invariably believe that the head of state is solely responsible for everything.
These fucks want a recession SO BADLY and it’s just NOT HAPPENING. I love it. Go get em, Powell.
Cause they get rich during a recession by buying things on the cheap because the over-leveraged middle class suddenly can’t afford things and have to discard them to remain solvent. They sell off the extra car or dump their shares for cash to make ends meet.
How do you induce a recession/downturn? By writing about an impending collapse. If enough people believe you, they’ll tighten their figurative belts, save more and spend less, causing the very recession you wrote about.
(Above is oversimplified by you can see the general logic)
Equally big factor: they get rich when there’s NOT a recession as long as interest rates are low. Low interest rates = high stock returns, more or less. So if they can bully the Fed into lowering interest rates to avert a recession, they still get rich.
Ever notice how the stock market tanks whenever there’s a good jobs report? It’s perverse, but wall street is rooting for main street to fail. (I mean, let’s be honest, they never really cared about main street, but now their fortunes are directly tied to our failure).
If I remember correctly, a recession did happen. It used to be defined as two quarters of negative GDP growth back to back, but yellen simply changed that definition.
You do remember correctly, but you (and most people) were always wrong. The two quarters thing was a rule of thumb, not an official designation. And Yellen didn’t change it, that’s just Republican/big business propaganda.
While gross domestic product (GDP) is the broadest measure of economic activity, the often-cited identification of a recession with two consecutive quarters of negative GDP growth is not an official designation. 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. The NBER recession is a monthly concept that takes account of a number of monthly indicators—such as employment, personal income, and industrial production—as well as quarterly GDP growth. Therefore, while negative GDP growth and recessions closely track each other, the consideration by the NBER of the monthly indicators, especially employment, means that the identification of a recession with two consecutive quarters of negative GDP growth does not always hold.
https://www.bea.gov/help/glossary/recession
We got close, but there never was a recession.
Okay, then someone should update the Wikipedia article, because that still says that it’s two quarters with a 1,5% decline
Not really
In a 1974 article by The New York Times, Commissioner of the Bureau of Labor Statistics Julius Shiskin suggested that a rough translation of the bureau’s qualitative definition of a recession into a quantitative one that almost anyone can use might run like this:
[several criteria]
Over the years, some commentators dropped most of Shiskin’s “recession-spotting” criteria for the simplistic rule-of-thumb of a decline in real GNP for two consecutive quarters.
It mentions it but gives it context. It then goes on to say
In the United States, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER, a private economic research organization, defines an economic recession as: “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”.[12] The NBER is considered the official arbiter of recession start and end dates for the United States.
The NBER seems to have no fixed criteria for what a recession is. Not sure how reliably that reflects the economic reality of the majority of people then. Obviously criteria need to be adjusted over time, given changes in how economies work and what they even consist of.
Good thing I’m not an economist, because it sure feels like lower and middle class income households are being fleeced and destroyed with inflation and increased profit margins disguised as being part of inflation. I’d call the current economic situation a recession, but it isn’t up to me after all.
Your take is correct and fair. Periods of high inflation are very damaging to everyday people if that inflation isn’t uniformly applied, which it rarely is. “Recession” doesn’t really accurately describe that situation and we don’t have a good term for it.
Basically right now banks are making money, but both wall street and (most of) main street is losing out.
The problem is when there’s inflation, prices are very elastic (they go up fast) but wages are more inelastic (they go up much more slowly). While ideally wages and prices should be equal, it doesn’t work out that way in reality.
The subsection of main street that’s in in-demand industries captures most of the wealth in this scenario. So extremely low wage earners are actually seeing some real wage growth, and so are some sectors of skilled workers, but most of the middle class is seeing their wealth go down.
Most of the wealthy who have all their money in stocks are also seeing their wealth stagnate.
The good news is, we’re starting to see cracks in the dam. Since unemployment remains low, employers are being forced to raise wages now, especially given all the union action lately. I tentatively predict that as long as we’re not pushed into an actual recession, living conditions will start to get better over the next few years for main street. That’s why I’m saying go Powell go. Keep fucking wall street over. Put the screws to em. It will get better for us as long as unemployment stays low. Corporations have been using all the tricks they can to keep their profit margins despite the pressures on them, but they’re running out of tricks. They’ll have to eat into those margins soon.
I am an inflationary economist, and while BLS is working on income quintile inflation rates (and I think they’re awesome and should be fully funded by Congress and published - but I digress), I don’t know of any similar analysis for like…income quintile recession analysis. You’d be better off looking at the individual factors like unemployment and employment by quintile, inflation, and maybe income inequality measures. Recessions are defined after the fact and mostly for whole economy analysis, and like any higher level measure, often are very wrong when looking at an individual, but very correct in the aggregate.
Shrug Statistics.
Besides what others have mentioned, there was no drop in gdp.
It was never defined as that. That’s been a colloquial marker for one but never a real definition.
And Yellen doesn’t have anything to do with defining a recession either. The NBER (national bureau of economic research) is the authority that declares recessions, and they only ever do it retroactively
The Covid 19 recession was declared despite only lasting 2 months.
Shit like this is why we had the layoffs we say at the beginning of the year. It was all hysteria made up by a bunch of idiots who want a recession for…. Reasons.
The economy is strong, inflation is down overall (though still high), and unemployment has been below 4% for nearly 2 years, something we haven’t seen for more than 20 years.
The recession we’ve seen this year is fake.
Not so much fake, as manufactured.
The jobs market was doing well, unemployment was low. Many middle-class people had been working remotely for two years, and saved thousands in commuting costs. The housing market was leveling out, prices were reasonable, and interest rates were low.
People were finally starting to feel an inkling of security and independence. They could afford to buy a house, change jobs, sell the second car, and put some money away for a rainy day.
Which is a nightmare scenario for corporations that feed on a financially desperate populace.
So corporations jacked up prices, blaming supply-chain issues, forced workers back into the office, and laid off thousands despite record profits.
The Fed pitched in, hiking interest rates, and locking millions of Americans out of the housing market, and with it, their best path to financial independence, and vowed to keep those rates high until the unemployment rate was back at a level that the Corporate masters determined sufficiently punitive, and the working class had exhausted their savings.
When the workers are acceptably cowed, and the wealthy are satisfied that they will no longer resist subjugation, they will declare the economy ‘back to normal’
Just remember that low unemployment often means severe “underemployment” as people with degrees and other qualifications are forced to take jobs that pay significantly less.
That can be true at any time
Yes, but it still is important to consider when “low unemployment” is touted as the sign of “good times.”
lol that rag will take any chance to attack anyone left of center
And Biden, too.
Which is crazy to me. He’s a huge neolib. He may be more progressive than anticipated, but he certainly isn’t on the left.
Neoliberal doesn’t even have a definition anymore. People just say it to disparage anyone they want to.
Biden doesn’t fit many of any of the metrics of a neoliberal.
He’s not huge on privatization, he opposes austerity measures, he has been a proponent of much greater regulation, and he sure as shit isn’t a proponent on cutting government spending.
Lol, gottem!
Took me a second. Good one.
If only he weren’t quite right to he called left…
Edit: Sorry, Feel the need to elaborate.
In 1980s, he was not liberal. Held him back.
In 2020s, we was not liberal, he was progressive. Pushed him forward.
That shit got him locked in by all the clandestined powers that be.
According to the progressives: “at least it wasn’t Bernie.”
Two elections running…
“Anyone left or center”. Lol.
Never trust financial institutions opinions
Especially when they are political wishes masquerading as economic predictions. It is pretty clear that some powerful interests really want a recession because they think that will help their fascist clown win against.
The GDP fell for two quarters though. They just changed the definition of recession.
No they did not. The NBER is always the office that declares a recession and they did not do so because employment numbers did not match recession like conditions.
I mean, that’s just a semantic dispute. The NBER is not the dictator of economic reality, it’s not even a government organization. The truth is that capitalism is a theory put into practice, and that embodied theory is going to be interpreted differently by different observers.
To claim that “the NBER is always the office that declared a recession”, negates the fact that there have been recessions before the NBER, and in countries that are not observed by the NBER.
I thought it would be clear that the National Board of Economic advisors wouldn’t be working fir all nations.
The NBER declares recessions for the USA and they did not do so due to employment stats. The literature regarding this has been very clear about this point.
I thought it would be clear that the National Board of Economic advisors wouldn’t be working fir all nations.
And I thought that it would be clear that if other nations have different ways to define a recession, then it would be obvious that your dispute is semantic in nature.
The NBER declares recessions for the USA
Right… they declare when they believe the country has entered a recession. However, that self determination may not always be correct.
If the general population experiences the effects of a recession and the NBER doesn’t agree, that doesn’t mean we didn’t experience a recession. It justeans that are economy has changed and things like employment numbers aren’t as important as they used to be.
The literature regarding this has been very clear about this point.
Yes, but the literature and theory surrounding economic policy is wrong more often than not. I mean the entire premise of capitalism is built upon the fallacious assumption that it’s possible to maintain perpetual growth.
I think people like to imagine that economics is more of a hard science, when in reality it is based on unreliable and enigmatic variables like public opinion.
Except it isn’t because in context it is clear we are talking about the USA and the current day so NBER is the appropriate source and Im not being pedantic you just seem to be having troubles following the conversation and/or want to get involved in tangents.
As we cannot in any meaningful way determine when a recession is happening based on anecdotal experience it doesn’t mean anything what individuals experience.
Recessions are specific instances and when you can easily get not just a job but one that pays more we are not in the conditions of a recession.
The original claim was that “they” changed the definition of recession. You are the one who is insisting that “they”= “we are talking about the USA and the current day”
They could imply the capitalist, the ruling class, the government, or even an organization like the NBER. Unless you are claiming that how we determine if a recession has occurred has remained unchanged throughout the history of capitalism, then your claim was a semantic dispute. If you are claiming that then you are just incorrect.
The article this whole thread is about discusses the chances for a recession in AMERICA, so Im not the only one saying they=American.
This isn’t semantics. You have not been paying any attention to the subject at hand. Might I suggest you look at the title of the linked article?
Where are you getting that?
This isn’t real GDP. Real GDP was slightly below flat in the first two quarters of 2022, but due to employment numbers it wasn’t declared a recession.
What’s the definition now?
It wasn’t redefined. They just never fully understood the definition. It isn’t just two quarters of negative growth though that’s the common definition. The NBER, who declare recessions, look at other aspects such as employment numbers before making the call. The employment numbers were too good to justify calling it a recession.
If a Democrat is in office, it’s a recession.
The two quarters thing was always a rule of thumb. The real definition is more subjective.
True, but that most likely means that the Finance houses found a new bubble or regulation capture that will allow them to buy mega yachts for a few more years until it blows up and governments bail them out with public money again.
“The report of my death was an exaggeration.” -Mark Twain
You know who else has a recession? ( going by public definition of recession of 2 quarters of negative gdp growth)
Don’t get your panties in a bunch - they said 100% likely but they didn’t talk about the 80% margin of error, that’s all!
Just keep changing the way you calculate inflation every 2 years, problem solved.
There’s a 50% chance things will happen 100% of the time. Guaranteed.
It either happens or it doesn’t. 50/50
It’s not a prediction if it already happened.
Well you were fucking wrong josh wingrove. Get bent wanker .
