Thursday assorted links


5. The word "regional" does not appear in this piece.

My intuition would be that mini-recessions do occur in the United States, but they are just called "regional downturns" until they break out and affect national statistics.

There was a rule of thumb -- America never has housing prices go down nationally, just regionally -- that proved disastrous in 2008.

That's right. Look at Texas/Oklahoma in the mid-'80s or Michigan from 2001-2011.

Clarification: L'actualite is a French-Canadian publication.

Big step down.

5. Same issue but Sumner's blog comment: "My hunch is that it (the absence of mini-recessions) has something to do with interest rate targeting, procyclical monetary policy, and policy lags, but I can’t quite figure out exactly how." Is Sumner trying to apply business cycle theory to the global economy? Does the business cycle even apply to the global economy?

In today's low employment environment, why does the Fed have a procyclical monetary policy (augmented by Trump’s procyclical fiscal policy)? Is it to increase investment in productive capital, thereby increasing productivity and economic growth? Robert Samuelson: "A discouraging aspect of the current economic expansion is the weakness in corporate investment in factories, buildings, computers and other machinery. It has declined for the past six months, despite the generous treatment of profits in Trump’s 2017 tax cut. To remind: The top rate on corporate profits dropped from 35 percent to 21 percent. The inability of such a large tax cut to raise corporate investments raises questions about how much lower tax rates actually stimulate new investment, absent strong demand."

If it's not to increase investment (it doesn't), then why the procycical monetary and fiscal policy? To keep asset prices rising. We have traded mini-recessions for financial and economic crisis.

As "appalling" as TC found the Saez-Zucman episode, the complete silence from economists (that banged the drum for the Trump corporate rate cut) on the total absence of an effect on corporate "investment" is a thousand times more appalling, and consequential.

Exactly what is appalling about people getting to keep more of their money? Starve the beast!

Very few people in this country consider medicare and social security as more "beastly" than Halliburton, Exxon-Mobil, AIG, or Goldman Sachs. So...starve the beasts indeed.

You mean the "beasts" that actually create wealth as opposed to the quarrelsome and contentious who need such "beasts" for their latest Ponzi schemes.

Yeah, nobody has ever created wealth quite like AIG and Lehman

"To keep asset prices rising. We have traded mini-recessions for financial and economic crisis"


It seemed that with its eight, 25 basis point rate increases from December 2016 to December 2018, The Fed was attempting to build up "insurance" for the next recession, which it would have caused by raising rates too much . . . I'm not one that believes The Fed tried to torpedo the Trump economy . . .

I'm going to start slapping you in the face, so that in case you come down with the flu, I can stop slapping you in the face and you'll feel relatively better.

Luxury KitKats aren't new. Japan has been into higher end versions (above and beyond their array of seasonal/one off wacky normal-line kitkats) for quite a while and even had a store in Tokyo at one point selling them.

The problem is, Nestle's are widely considered superior to the Hersey versions we get here in the States, and we won't likely see any of the 'better' versions.

'Chocolatory' reminds me too much of the word 'lavatory.' anyway.

Well then it would go well with the toilet themed restaurants in Taiwan and Japan.

Re #1: I guess Lenin was correct about this, in spirit: "The Capitalists will sell us the rope with which we will hang them."


Oscar: Your Majesty, you're like a big jam doughnut with cream on the top.

Prince: I beg your pardon?

Oscar: Um... It was one of Whistler's.

Whistler: I didn't say that.

Oscar: You did James, you did.

Prince: Well Mr. Whistler? (The Prince of Wales stares expectantly at Whistler.)

Whistler: I meant, Your Majesty, that uh, like a doughnut your arrival gives us pleasure and your departure merely makes us hungry for more. (laughter) Right, Your Majesty is like a stream of bat's piss.

Prince: What?

Whistler: It was one of Wilde's.

Oscar: It sodding was not! It was Shaw!

All Monty Python skits automatically get you 10 internet points, well played.


On the absence of micro-recessions: My theory is that U.S. workers, particularly in the middle-middle class and below, are treated as more fungible than their international peers. However, they can’t be disposed willy nilly every 2 years. Executives must harvest wool from their sheep as long as MR>MC, and pull their ears over their eyes so they don’t see the impending slaughter. On occasion, culling time arrives, and they call in the management consultants to help with the execution (big recession). Being a shepherd is hard thankless work, so it’s nice to get recognition from Tyler Cowen that you’re literally Jesus.

Be thankful for your sustenance, dirty prole.
- Tyler, Big Business, 1:1 - 17.

And Tyler, I am actually not as cynical about your book as the above may imply. I was half-joking. I do however believe that this is the worst time to be praising big business. If anything, it is the markets that deserve praise, as do the many underemployed Americans slogging through tough times.

He had to put his name to it [the Minions of Mercatur wrote it]

It was a 2019 KPI of David Koch's.

There is an obvious explanation for the disappearance of mini-recessions not mentioned by anybody so far: the spread of advanced inventory management systems. Why this should be obvious is that in the past most mini-recessions were tied to inventory fluctuations, as in the old Kitchin cycles. They are now gone with better inventory management.


Very insightful there, CG, as you usually are.

Very inciteful there, CG, as you usually are.
I know inciteful isn't a word, but it should be.

I reckon you're on to something, but better inventory management isn't new [since 2008]; this has been ongoing since the mid '90's.

My guess is that so much US manufacturing has been offshored since 2003, creating the same result [lack of build up of finished goods inventory].


Si vous aimez McDonald's, pourquoi McDonald's n'est pas dans votre Ethnic Dining Guide of Washington?

do not let the chickpeas flounder

I would also like some clarification on this please.

Maybe he considers McD's Scottish food...? (grin)

I'd rather corporations grovel to China than demented SJWs. In many ways I feel more comfortable speaking freely in China than in America.

Especially if by "speaking freely" this involves saying "all hail Xi Xinping and may the CCP forever lead China forward to its glorious rise!"
To me, China seems more repressed by thought control now than in the past 30 years.

I'm concerned that the relative political stability developed over the past 30 years is being undermined by Xi, but as practical matter, there is more free speech in China than the West. In China, there are a handful of taboos that are simple to understand. In the West, there is an ever growing list of unwritten rules which if unwittingly broken are punished by an economic death penalty. Ironically, in the West and not China one is frequently required to look at what is plainly a deer and call it a horse (or vice versa, as the case may be, heh heh).

He has a point. Dead people are not all that concerned about legacy, it is the worms they worry about.

There are a number of good anecdotes about Philip Glass doing blue collar part time work to support himself up into his early 40s, such as when he went to install a dishwasher in the Soho loft of Time's art critic Robert Hughes.

I'm not a huge fan of Glass's music, but I appreciate that he and a few other guys invented a new (and yet listenable) type of American classical music long after orchestral music seemed exhausted.

We've been blessed to live in an era are tremendous orchestral masterpieces, they're just playing at your local cinema, not a concert hall. We should greatly appreciate living in an era that has produced such titans as Miklós Rózsa, Ennio Morricone, and John Williams.

There's a band in Portland, Federale, that has opted to go all in on Morricone: their music, which is often purely instrumental, is almost entirely based on Morricone's music for Leone's spaghetti western movies.

It's like listening to the soundtrack of a Clint Eastwood movie that you haven't seen. They even created entire soundtrack albums for movies that haven't been created ... IIRC some filmmakers were interested in going ahead and writing a script and shooting a film that would go with the album.

5. The mystery of the absence of U.S. mini-recessions.
Read through and discover that Dudley is incredibly stupid and unqualified for cr*p.

We do not have frequent mini-recessions because it takes energy or wealth to rescale the economy so we do not do it until the imbalance is greater than market uncertainty. This quantum theory, applies to NBA standings, avalanches, electron charge and avalanches. It is universal.

This is straight out of quantum theory, theis is abstract tree, and Dudely and the central bankers are idiots who cause massive economic instability.

it is all result from MIT and the load of horse manure they inflicted on theory after the Nixon Shock. The current generation of MIT grads were paid by government for a nice 'This time is different' fraud after the shock, and we have suffered bogus theory ever since.

Economists grasp any model unless it has constant returns to scale, they are not educated enough.

Let me rant more.
Schiller is a numbskull, his herding theory was designed to simply the world for uneducated economists.
Instead of Schiller, take Fama, add market uncertainty and the energy of requantization in value added nets. That is the answer.
Dudley relies on Schiller because he is all about banking for dummies, clueless of the math.

The whole point of the new math is that information theory is really queueing theory over value added nets. It applies to the queuing of electrons, rocks in an avalanche, and banking.

The theory of everything is all about making the Walmart checkout counters have stable queues, and the universe is full of little Walmart checkout managers (pit bosses) who change the 'items per basket' to keep the queues stable. Quantum theory in a nutshell, all about the abstract tree.

#1. As they say in Japan, its all kuchibakari (口ばかり), just empty words. To maintain profitable relationships, it's well worth it to utter a few meaningless syllables from time to time. That's Japan for you. Of course, uncompromisingly moral Americans would never do that.

#5: Figuring out this phenomenon might give us guidance about why/how the Sahm Rule works. Unemployment usually doesn't rise much -- but when it does, it means a recession is coming.

Why no mini recessions? It seems pretty simple. The Fed is able and willing to use conventional instruments -- manipulation of the ST interest rate -- withing conventional bounds to respond to small shocks. But in the face of larger shocks that require larger or more prolonged use of its instruments or "unconventional" instruments like QE, it looses its nerve (abetted by hysterical "media macro" critics), and allows both its supposed maximum employment mandate and it average inflation trend targets to fly out the window.

There has been a major shift in the frequency of recessions since 1980. Prior to 1980 the four year cycle was the norm. But we have had only two recessions since 1980.

I go along with Barkley that new technology allows firms to react to imbalances much faster now so the adjustment is much smaller. Moreover, more of the adjustment to excess inventories now shows up as a cut in imports rather than a decline in domestic production.

Just look at the decline in the share of employment in the goods sector of the economy compared to before 1980 to see the impact of trade.

A correction to what you've said: there've been three recessions in the US since 1980. The early 1990s (a combination of reduced military spending post-Cold War plus the Iraq-Kuwait war and oil price spike); the dot-com bust of the early 2000s; and the 2008 Great Recession.

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