One searches in vain for a modicum of intelligence & insight among those who tell the Official Story of where we stand in the United States. In an Empire in Decline, maintaining the appearance of normality is paramount. Otherwise, you might get panic in the streets.
Last week the NBER decided the "Great" recession ended in June, 2009. Thus they called the end of the latest downturn phase of what is called the Business Cycle. The cycle tells us there are two and only two possible states of the economy: recession or recovery. Since we are no longer in recession, we must be in recovery. Thus we get graphs like this one:
President Obama echoes the official line, and did so even before the NBER made its call. He will tell you that we are recovering, but growth in the economy is slower than he would like. Since this story is so weak, he then assumes his fallback position: his policies, including the massive fiscal stimulus, saved us from a Great Depression.
This being the Official Story, the New York Times must report on it. Thus we get Floyd Norris' Recessions and recoveries are not all the same—
In the old days — before 1990 — American recessions tended to be fairly sharp. But the recoveries, when they came, were also rapid. Laid-off workers were recalled and consumers who had deferred purchases out of fear they might lose their jobs were willing again to buy cars and homes.
The newer version of recessions — in 1990-91 and 2001 — provided shallower downturns. But the aftermath was also slow and painful. They came to be known as jobless recoveries.
The National Bureau of Economic Research determined this week that the recession that began in December 2007 ended in June 2009. That made it the longest downturn since World War II, and data had already shown it was the deepest in terms of decline in gross domestic product.
And now that we know the recovery is more than a year old, it appears that this cycle is combining the worst of both worlds: deep fall followed by slow recovery.
The level of mindlessness displayed here is stunning. Now that we know the recovery is more than a year old? Is that what we know? Yes it is, because the NBER tells us what we know. Of course, that will come as something of a surprise to the large majority of you struggling to make ends meet.
I explained how the Official Story works in Explaining Mindless Economic Optimism—
Positive bias [in the Official Story] stems from their belief system, which includes the following tenets & consequences—
- Progress is inevitable, irreversible and endless
- Progress is expressed through the Business Cycle, which assures an ever-upward path of economic growth (measured by GDP) punctuated by brief setbacks (recessions)
- Thus the Business Cycle is timeless (ahistorical, i.e. it exists outside history)
- And therefore recessions are always followed by recoveries, and vice versa.
Thus for economists, we were in recession, but now we're in recovery—that's the way it is and it can't be any other way. See my post Economists — The High Priests of Progress. And that explains why 42 out of 42 of economists underestimated jobless claims this week. And it explains why we must be patient and not get too depressed during the current "lull" in our inevitable recovery.
Let me flesh this out a little. First and foremost, the Business Cycle story tells you that there is nothing special, there is nothing exceptional, about the times we're living in. At its most extreme, the cycle view tells you that the exceptional economic growth America enjoyed after World War II is possible again. That is, the Business Cycle is ahistorical & eternal as described above. It follows that none of the factors listed below will hinder future economic growth, though they may partially determine its pace—
- the growth of enormous wealth & income inequality over the last 30 years
- chronic, large trade deficits
- the fact that the U.S. imports approximately 60% of its oil, which raises the trade deficits
- the huge, growing U.S. public debt
- the huge household debt left behind by the collapse of the Housing Bubble
- the clear & present danger of chronic, very high unemployment (8%+) over the next decade
- the chronic dysfunction and corruption in American politics
- the inordinate power of Finance in the economy & government
- the lack of investment in America's decaying infrastructure
- globalization, and the concomitant loss of manufacturing and jobs
- downward pressure on wages and the weakness of labor following from globalization
I could go on, but you get the point. The Business Cycle is impervious to historical and structural developments affecting the health of American economy and its future direction.
Americans are being sold down the river while the self-appointed arbiters of Reality prattle on about where we stand in the Business Cycle. What you do with this knowledge is your own business. However, you must first understand the propaganda being serving up before you can do anything at all. You must make your own assessment of where we stand and what your prospects are.
For your amusement, I have included this video from my older post Understanding The Business Cycle. In the clip, Peter Sellers explains the Business Cycle to the President. It's taken from the great film Being There.
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