This Is Not a Recession!

Financial FAQs



There is no ‘looming’ recession about to happen, in spite of the warnings from pundits; none of whom are reputable economists to date. For instance, Trump’s new pick for the Federal Reserve Board is not a practicing economist, but a TV pundit handpicked by Trump to browbeat the Fed Governors to lower interest rates even lower than they are today, so that the economy (read stock market) doesn’t sputter prior to the 2020 election.

Yet interest rates are already at rock-bottom, which is also why the reverse yield curve debate is happening. It’s supposed to be a sign of a looming recession. Yet today’s 2-year Treasury bond yield is 2.21 percent, vs. the 10-year (higher) yielding 2.38 percent at this writing. The comparison to the 3-month yield which is fluctuating between 2.21 to 2.45 percent—depending on the time of day—is not a realistic reversing of the yield curve that some pundits seem to be fearing.

The major reason long term rates are at historic lows, as I’ve been saying (the last time 10-year Treasury yield was this low for any extended period of time was in the 1950s, as the FRED graph shows), is because of the various austerity programs Europeans and the US put into place after the Great Recession that limited public spending, which would have boosted both productivity and economic growth past the current anemic two percent rate—and taken some of the excess profits from the private sector that didn’t place their money where it would increase productivity and growth, but instead chose to in effect hoard it.

And is anyone yet noticing the incoming cuts to Medicare, environmental protection, and very little infrastructure spending, so that Trump Republicans can spend the money on a Mexican wall that does nothing for the economy? This also diminishes the incomes of many consumers that drive two-thirds of economic growth.

In other words, while corporations have been making record profits, they haven’t spent it on either boosting their employees’ wages, or investing enough to elevate their labor productivity. Instead, most of the profits of US corporations, and surpluses of foreign central banks have remained liquid assets that boost US stocks and CEO salaries, or invest in US Treasuries, which is why long term interest rates are still this low.

When does an actual recession begin? When economic growth slows for an extended period of time—two consecutive quarters of shrinking GDP is the common indicator. But four major sectors would have to begin a sustained decrease—employment, real GDP growth, Personal Income less Transfer Payments (i.e., that include interest on the debt, social security, medicare payments and welfare.), and Industrial Production. All are still above pre-recession highs, and all would have to begin a sustained downward trend.

On the other hand, it takes time to even call the beginning of a recession, since much of the data comes in after the fact and many revisions to initial data. For instance, the Great Recession was called some nine months after it was deemed ‘official’ by the NBER’s Business Cycle Dating Committee, an economic think tank that doesn’t even meet regularly. The US economy began to recover in June 2009, and is now in its tenth year of expansion.

I can quote UC Berkeley Econ Professor Brad Delong on this uncertainty in his most recent blog post. “The next global downturn may well not be yet at hand: odds that the North Atlantic as a whole will be in recession in a year are now down to about one-fourth. German growth may well be positive this quarter. China might be rebounding this quarter. The U.S. is definitely slowing to 1% growth or so this quarter, but it is not yet clear that this slowdown will be more than a blip.”

Does that mean we really won’t know if a recession has begun until it’s too late? Not really, because we should always be planning for such exigencies, just as we plan for illness, loss of a job, even old age! Since we must plan for those, why not plan for the next downturn, whenever it happens.

That is the capitalist beast we must all live with, if we want to live in a democracy.

Harlan Green © 2019

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About populareconomicsblog

Harlan Green is editor/publisher of, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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