At my post, U.S. Single-Family Home Prices Soar in March, where I write:
Have I mentioned that the idea the 25 basis point hike by the Federal Reserve in December would crash the economy is appearing to be an increasingly absurd belief?Guy Noir leaves the below comment which is a perfect example of the confusion that is demonstrated by Austrian-lites and many others:
Ok. Today in the real economy: Dallas Fed 17 months of contraction, Consumer confidence 10 month low, Chicago PMI back in contraction 6 out of last 12 months.
I would request more of a balanced commentary and less reliance on the bubbles. For instance, you could address what's happening to the middle class as the economy slips into recession.
There is this incredible tendency by Austrian-lites to attribute every negative number in the economy to a business cycle downturn in the economy, that is, a recession. This is what Noir is doing. He is looking at specific data and going "Aha, the recession is here!"
You can't just look at data points and declare a recession because some numbers are down. You must understand what is driving changes in the numbers.
Let's take a look at what Noir writes:
Today in the real economy: Dallas Fed 17 months of contraction,Most of the downturn in the greater Dallas region is the result of the contraction in the oil sector, which is the result of supply and demand factors specific to the sector and not and overall collapse in the economy.
A business cycle downturn, as Murray Rothbard has noted, is a cluster of errors in the economy. It is not about a specific sector problem.
Noir goes on:
Chicago PMI back in contraction 6 out of last 12 months.The purchasing managers index, when it has declined, can be directly traced back to the oil sector and to export declines, which are directly related to US dollar strength on foreign exchange markets (which is now reversing). Again, not a general decline.
Noir then writes:
Consumer confidence 10 month low,Consumer confidence is a very complex number and, currently, there are mixed readings from different confidence indexes. Confidence indexes can decline for a variety of reasons. The indexes that are declining at present are doing so because the gasoline prices are climbing once again. Apparently, many consumers are very sensitive to gasoline prices, when prices are falling, like they were, they are confident about the economy, when they are climbing they are less confident.
There is absolutely no reason to believe that a downturn in this number has anything to do with a recession each and every time it declines (Though during some periods, it reflects the downturn in the economy).
Noir then provides us with this:
For instance, you could address what's happening to the middle class as the economy slips into recession.As I have written many times, the economy is a very complex place. There are many factors causing all kinds of movements in the economy. Part of what is driving the split between the middle class and elite is because of crony capitalism government regulations. As terrible as this may be, it has nothing to do with recessions and business cycles.
Most curious about this Noir statement is that it reflects a lack of understanding of economic history. During recessions, the gap between the middle class and the upper class closes, since the upper classes are ver dependent on the boom phase of the business cycle continuing. An increase in the split in wealth between the middle class and the elite is indicative of the boom phase of the buisness cycle.
Bottom line, Noir is in the dark on the fundamental nature of the business cycle. The business cycle is mostly about strength in the capital goods sector, e.g., real estate and the stock market.
Thus, when he writes that I should get my coverage of the "recession" correct tjis way:
I would request more of a balanced commentary and less reliance on the bubbles.He fails to understand that the bubbles are the boom in a Fed manipulated economy and it is the eventual collapse of the bubbles that is the recession.
I repeat, there can be many things wrong in an economy, mostly the result of government interference, but these non-monetary interferences have nothing to do with the Fed-created boon-bust business cycle, that is, a recession.
When the next bust phase of the business cycle is upon us, it will be readily evident with crashing real estate prices, a crashing stock market, and soaring unemployment. We are not in this phase now. The boom is on. It won't last, but to read a recession into down turning data that has nothing to do with the nature of a general bust phase is confusion typical of Austrian-lites and others.