Friday, July 8, 2016

This IS What a Recession Looks Like

I regularly point out that we are in the boom phase of the Federal Reserve created boom-bust cycle. It is, after all, a BOOM-bust cycle.

To think we are always in a Fed created bust cycle makes no sense. 

The bust period is the period that occurs after the Fed stops or significantly slows money printing. The economy must readjust. Thus, unemployment soars as workers must find new jobs in the restructured economy. This is at the core of Austrian School Business Cycle theory.

To be sure, there can be other impediments to "full employment" such as high minimum wage laws. Obamacare payment regulations etc. but the bust phase of the business cycle brings about a massive and genreally temproary explosion in unemployment.

This chart updated through  June data that was released today shows the difference between what we are experiencing now and what the bust phase looked like, The circle areas are what a recession looks like. 

We are not currently in a recession.


(chart via MarketWatch)


  1. Why isn't a July rate hike on the table? S&P 500 is on track to make an all time closing high on a weekly basis today if it can hold these gains. Yet they are talking about September, not July.

  2. Wow. From my perspective, you're going way out on a limb here. Unemployment metrics are lagging indicators and the household survey has been weak these past few months. Nearly every other economic indicator is trending weak to terrible.

    You haven't got much to hang your hat on outside the establishment employment survey and asset prices.

  3. Could you take 2 seconds out of your time, Wenzel and explain why the M2 in Venezuela is through the roof and is not in a boom? And don't copout by just passing it off as, "Well, they are a socialist country". How do you explain the lost decade and continued sluggish growth of japan that also has M2 that has never been slowed. How do you reconcile YOUR theory of M2 with these harsh realities?

  4. Employment will not be an indicator in the near future (if not currently)