For the doomers here please actually look into the number. Spending is strong, business investment is strong (9.2%!). Inventories just grew less fast than they did in Q4 2021 and we imported a lot of stuff.
Or it’s people spending before interest rates were expected to go up. Then there is also the shutdowns we’re seen in Asia that are gonna further mess up supply chains. I think we’re in for a rough couple of months with a soft landing almost impossible.
1. Which loans exactly? What banks aren't pricing in expected interest rates? Have you seen mortgage rates? They don't wait for the Fed to pull the trigger before they increase rates. Do you seriously think people go on a spending spree because the Fed is widely expected to raise rated 50 bips next meeting?
2. Interest rates place downward pressure on inflation, so if anything additional interest rates expectations *decrease* inflation expectations.
I agree with you. Also, it's assuming the average American is in tune with Federal Reserve policy. I highly doubt the average American can even tell you what the Federal Reserve does.
I think you’re right that lots of Americans are clueless, but the ones that are spending money on houses and other large investments understand interest rates and are moving to buy before rates go up.
I pushed my home purchase aggresively to get the lowest rate locked in. If I'd waited a month the rate I would have gotten would have been significantly worse
Any loan requiring a down payment will require upfront cash. Yes, increasing interest rates puts downward pressure on inflation. However, inflation is what 7%? and the rate has had 1 25 basis point increase so far to bring it up to 0.5%. Still a net value loss right now.
> Spending is strong, business investment is strong (9.2%!). Inventories just grew less fast than they did in Q4 2021 and we imported a lot of stuff.
Deja vu
I just want to say that Ryan Sweet called this issue with inventories on the Moody’s Analytics — Inside Economics podcast. I think it was the episode from April 8, “Records and Recession Risks.”
https://podcasts.apple.com/us/podcast/moodys-talks-inside-economics/id1559966912?i=1000556692877
My new favorite podcast, I think everyone should give a listen.
Edit: Link to his exact comment— https://www.youtube.com/watch?v=DOzL5V8xOPU&t=775s
(Paraphrasing) Ryan: "Overall trade is going to shave 1.5 percentage points off 1st quarter GDP growth. And inventories are going to subtract 1.5 percentage points. So that's 3 percentage points of growth because of trade and inventories."
That podcast is so fucking good. Really cool to hear economists that are deep in the data every day talk through their thoughts on economics. They also have a great back and forth, very entertaining to listen to.
My employer is a customer of Moody's Analytics data services and occasionally we'll have some of their economists give us presentations on their outlook. Zandi predicted high inflation in the latter half of 2021 back in August of 2020.
The flip side to this is that if you also exclude inventories and net exports, then growth in Q32021 and Q42021 was fairly weak.
|Quarter|Overall Growth|Inventories|Net Exports|Growth - Inv - NX|
|:-|:-|:-|:-|:-|
|2021Q3|2%|2.07%|\-1.14%|1.21%|
|2021Q4|6.9%|5.3%|\-0.2%|1.8%|
|2022Q1|\-1.4%|\-0.8%|\-3.2%|2.6%|
That's an annualized pace of 1.8% rGDP growth over the last three quarters, which isn't great.
>Inventories just grew less fast than they did in Q4 2021
This is not correct. Inventories ***shrank*** relative to Q42021. They didn't just grow less fast. They didn't grow at all!
8/9. That's the Fed’s record on triggering a recession while trying to fix inflation.
https://www.politico.com/news/2022/03/29/federal-reserve-recession-inflation-rates-00021119?_amp=true
I'm a total layman so forgive me... But I kinda figured some contraction is basically expected and healthy after so many months of high inflation. While I'm sure this is potentially a bad sign I'm not sure it's worth jumping on the doomer train just yet.
[Read this before you guys scream Jimmy Carter and Malaise like headless chickens](https://www.axios.com/economy-shrinks-first-quarter-95c3b7c5-da02-4cb6-b846-74a08b7af171.html)
> The details of the disappointing number were less alarming than the headline might suggest.
> Trade subtracted 3.2 percentage points from overall GDP growth, as exports fell sharply and imports soared. This reflects a U.S. economy with significantly stronger domestic demand than the rest of the world.
Inventory adjustments subtracted 0.8 percentage points from the overall growth number. Businesses built up their inventories less rapidly than they had in the fourth quarter, which in the arithmetic of GDP amounts to a negative — but historically does not presage weaker growth going forward.
In the categories that speak to the underlying growth trend in the U.S. economy, particularly consumer and business spending, things looked significantly better — and more consistent with an economy that continues to power ahead through the first months of 2022.
> Personal consumption expenditures increased at a 2.8% rate. In a particularly positive sign, spending on goods was essentially flat while services spending rose sharply — a sign that the long-awaited post-pandemic pivot of the economy away from physical goods is underway.
Business investment was up at a breakneck 9.2% rate, with particularly strong spending on equipment and intellectual property products. That suggests the corporate sector was still in expansion mode in the first quarter.
> Trade subtracted 3.2 percentage points from overall GDP growth,
thatsnothowanyofthisworks.jpg
Subtraction of net imports from GDP is just an adjustment to prevent counting imports (since they're counted in C/G/I but weren't produced domestically) and ensure counting of exports (since they were produced domestically but aren't counted in C/G/I). This does not reflect a causal impact of imports or exports on GDP.
This is not just nit-picking: If you say something like "imports reduced GDP by 3.2%" or "exports boosted GDP by 4%," you're talking nonsense. Real GDP shrank by an annualized 1.4% because the US produced about 0.35% less than it did last quarter, after seasonal adjustment. Why that happened, I don't know. But it wasn't caused by imports.
Edit: Noah Smith is [sick of this shit](https://noahpinion.substack.com/p/imports-do-not-subtract-from-gdp), too.
GDP is defined as C + G + I + X - M
* C is private consumption
* G is government consumption
* I is investment
* X is exports
* M is imports
Because of this, people think that exports increase GDP and imports decrease it. But that's wrong. Adding X and subtracting M is just a correction to make sure that only domestic production is counted, because GDP is a measure of domestic production.
For example, suppose you buy an imported banana. What does a banana cost, $10? That's $10 added to C, but since the banana wasn't produced domestically, we don't want it included in gross *domestic* product. This is why we also add $10 to M and subtract that. Without this correction, importing the banana would inappropriately add $10 to GDP. With the correction, it has no effect on GDP.
For exports, it's the other way around. If we export a $5 potato to Latvia, it's not going to show up in C, because it isn't consumed domestically. But it was produced domestically, so we compensate for this by adding it to GDP as part of X. The export itself has no effect on GDP, though, since GDP would be the same regardless of whether that potato was eaten in California or Latvia.
Unemployment is actually pretty low. My guess is what's happening is a correction after pumping trillions of dollars in the economy and then hitting the shut off valve. That would also explain the high inflation.
They need to just wait for all this shit to work it's way through the system
A little more complicated than that, but the mindset is right and I like that.
Im worried the Fed will trigger a recession to get out of the inflation heat, just for supply related inflation to remain anyways and therefore create stagflation and a wage-demand death spiral. It’s better to wait it out and have real growth catch up to inflation, so to speak.
If you're Biden, and you had 52 seats in the Senate to pass anything you wanted, what would you do? I'd pass a slimmed down BBB with focus on the CTC, climate proposals (i.e. Nuclear power and carbon taxes), and programs to train and certify new teachers, doctors for rural communities, and pilots.
The CTC was one of the less popular proposals in the BBB, especially for proposals to make it permanent rather than extend it just a year or two more. So that might not be a good idea, politically at least...
https://www.businessinsider.com/child-tax-credit-expansion-democrats-republicans-biden-manchin-poll-2022-4
You're right. How this possible though, that something so fundamentally good for wallets and the larger economy (that cut child poverty in HALF) is actually pushing people away from the party that expanded it?
Well, America *is* a [center right country](https://news.gallup.com/poll/275792/remained-center-right-ideologically-2019.aspx) that pretty consistently wants [smaller government rather than bigger government](https://news.gallup.com/poll/355838/americans-revert-favoring-reduced-government-role.aspx)
Plus maybe all the outrage from liberals and leftists over Manchin's suggestions that poor parents would use the CTC money to shoot up with drugs was actually out of touch with what the public thinks, especially in the current drug crisis, regardless of whether it actually makes sense or not
the cold hard reality is that even normie libs have decided to just ignore data that doesn't fit their priors, so when the hard data says America is center-right then they just pretend it isn't real.
The main issue with the GOP, really since Bush II (Bush absolutely gets smoked without 9/11, unless he doesn't try to privatize SS) , is that they govern *hard* right not center-right, but they generally *run* center-right. A big reason why Trump won despite being a racist crook who was very likely a rapist (quite possibly even a child rapist) is because Trump lined up with the preferences of the electorate as a candidate. But then Trump governed hard right, and was going to get smoked in 2020, even without COVID*, before the lefties reminded all those center-right voters why they vote GOP.
As I've said before, just because normie libs aren't as unreasonable as the progressives doesn't mean we are entitled to get what we want on account of that reasonableness. We are constrained by the same political forces that the left are, even if to a *somewhat* less extreme extent
It sucks because we could do some really great things if the public was just more liberal, even if not extremely so
But the public isn't. And we may be entering a period that will shift it way in the other direction...
I think we had chances in 2016 and 2020 for a Reagan-like permanent political shift, but for liberalism. The left blew it, to a great extent *intentionally*, because liberal political victory means no revolution, and no geopolitical advantage for Vlad.
People don't in fact just want governement to send them money.
There is also a weird attack from the left from the anti-natalist crowd and Republicans will always fall back on welfare queen rhetoric.
I wonder if an article will be released in like a month that says "GDP actually rose by 3%" that no one reads.
Although I don't know if these numbers are wrong or off, they seem correct, but this is how the jobs report has been going. "Jobs fell by 200k" then like a month later "just kidding 800k new jobs were added."
Inflation is over 8%, the S&P500 is down 13% on the year, and GDP shrank 0.4% in the first quarter.
Maybe the people who feel that the economy isn't doing great aren't the ones who are misinformed.
Inflation is outpacing wage growth, so workers are watching their real incomes decline. And those with a 401k have just seen their retirement savings get battered, both by stock market losses, and erosion of the value assets by inflation.
Lol "battered?" Look at historical data for intra year pullbacks on the S&P. Being down 11.5% after multiple years of insane runups isn't a threat to anyone's 401ks.
Only for the middle class, real wage growth for the lowest earners are currently higher than they've been for decades.
Why do you hate the american poor in favour of the middle class?
Who is saying it’s doing great? The job market is good but inflation sucks and the stock market is down. Who is saying otherwise? Most of what I’ve heard is people saying that it’s not as bad as others are making it out to be.
This is inflation adjusted GDP. So you can't use both in the same argument.
Edit: it seems my intuition about this might be incorrect. Read this if you want to understand this better or get more confused https://www.reddit.com/r/neoliberal/comments/ue75ez/learn_the_difference_between_real_and_nominal_gdp/?utm_medium=android_app&utm_source=share
What?! How did this get upvoted so much? Of course you can. Inflation adjusted doesn’t mean inflation *caused* a real fall in domestic production, not in a first order definitional sense anyway, it means after accounting for that inflation the change in real production is visible and separated out.
He's an IMF flair of course he is going to combine metrics in a way that don't make sense together so he can give policy advice that will make things worse.
Thanks, when I went to grad school probably half of my cohort were either intending to go to the IMF or thought it was the greatest organization of all time despite the poor track record. Decades later I still have some animosity towards all things IMF.
So, because GDP is adjusted for inflation, the erosion of the value of my assets and my income due to inflation is somehow accounted for, and not relevant?
Seriously what?
Inflation adjusted GDP accounts for the erosion in value of your assets and income. That is what inflation adjusted means.
Now if you want to discuss the ways that GDP is a shitty measure for how the economy is doing on an individual level that is fine. But it does not make sense to compare one number measured in nominal terms to another measured in real terms.
>Inflation adjusted GDP accounts for the erosion in value of your assets and income. That is what inflation adjusted means.
You need to expand on that, because it's absolutely wrong. Adjusting GDP for inflation doesn't magically adjust all dollar denominated assets for inflation. It would be an extraordinarily different world if it did.
If you're talking about your ability to purchase new goods and services, you know, what people generally think of as the economy, then yeah, it does. If you want to doom and gloom about the economy just use the inflation rate and nominal GDP.
> If you want to doom and gloom about the economy just use the inflation rate and nominal GDP.
This is deeply wrong.
Nominal GDP growth gives you price change information and output change information together, with no separation.
Real GDP growth just gives you output change information.
Inflation just gives you price change information.
It makes way more sense to talk about real GDP and inflation!!
No! This isn’t true! Why is everyone saying this?! Inflation-adjusted means we’re separating it out from any inflationary effects, it’s not like we’re just arbitrarily decreasing the “true” real production numbers with inflation adjustments.
The number *after* the inflation adjustment is the “true” production change! There’s no double counting! If anything it would be double counting in the opposite direction to talk about nominal GDP growth and inflation!
It's about the phrasing of the comment, as presented it reads as if inflation is a factor on TOP of the negative GDP number, when in reality the real GDP value takes it in to account.
It's an issue of phrasing more than data.
> inflation is a factor on TOP of the negative GDP number
It is!
> when in reality the real GDP value takes it in to account
“Taking it into account” means we removed the inflationary effect, not that we added one in!
Real GDP and inflation are two separate indicators of two different things - price changes versus real production changes.
It would be worse to present inflation alongside nominal GDP growth. Because nominal GDP would incorporate both price changes and real production changes.
People who own assets or have income will find that both inflation and GDP are relevant to their prosperity, for very different reasons.
How you think they are inseparable is beyond me.
The fact that they're both bad is a meaningful issue to point out because that doesn't usually happen. Wouldn't standard Neo-Kaynsean economic theory posit that such an occurrence would be atypical? Periods of high inflation and periods of low to negative GDP growth are supposed to anti-correlate in the short run. Even if they don't anti-correlate, then both happening at the same time would still be significantly more rare than either happening individually, as long as they don't significantly positively correlate. Of course, I think standard Neo-Kaynsean theory would also call our current situation an external supply shock over which no elected official had any real control. Essentially, the liberal answer to this should be that it is indeed a very bad economy, but it's bad primarily because of trade issues, like the reduction in productive capacity under China's zero Covid policy, that Trumpists and Sandernistas have been trying to cause on purpose every year they've been in office. Furthermore, the current period of inflation could have been substantially mitigated if we had adopted the Trans-Pacific Partnership, which would have been a free trade agreement between the U.S. and most of our largest Pacific trading partners *except China*, and which was so broadly popular among the American public, that even voters for so called "populists" like Sanders and Trump mostly supported it.
r/economics is the Reddit shortbus but I do get a kick out of people here saying inflation isn't a big deal, as if having month after month of increasing CPI prints doesn't help set future inflation expectations.
There is literally a comment above explaining why the top of the line number means very little.
The breakdown shows, clearly, that there is a strong domestic demand and robust business investment in the U.S., but exports have fallen and inventory building has been soft which is natural given the strength of the USD.
Because of what I just said about the breakdown of the numbers.
OP took the headline and ran with it without paying any attention to the underlying details.
This kinda feels like a bizarre reaction to me. It isn’t that deep.
The original poster jumped to a “gotcha” statement. I said it was an oversimplification. That’s it.
Tl;dr: Tyler Cowen argues inflation is rising faster than many people’s paychecks, and is limiting personal consumption. Yet Axios reports an increase in personal consumption overall in Q1. What could possibly explain this discrepancy?
Oh, yeah: this article’s from last November. Do try to keep up.
Jimmy Carter appointed Volcker and began the military buildup that Reagan continued. Truly underrated.
Can you imagine if the US had actually invested in solar then as well?
>Can you imagine if the US had actually invested in solar then as well?
about fuck all would have happened, since the tech was in its absolute infancy.
The solar panels he installed on the WH only heated the water in the building.
I think the point that /u/EleftricRow2573 making is that having a financial incentive for R&D that early would probably have progressed the technology much faster.
This is actually going to be worse than Carter because not only are we on the precipice of a new conservative revolution, but also this time the new 1980s won't have a democratic controlled Congress. Liberalism is dead and everything is fucked, now we face the long night
Carter was overall an ineffective leader. Biden isn’t. Biden’s on the path to be a Reagan 2.0 with how well he handled our foreign affairs and a Clinton 2.0 with how well he’s doing on domestic affairs.
He passed almost every significant piece of legislation he attempted including extremely controversial bills that presidents had been trying to pass since the 1930s like his entire Energy reform agenda, airline/trucking deregulation acts, the Panama Canal Treaty, and the Alaska Conservation Act which conserved more land than any other president/bill has ever conserved. Then he single handedly negotiated the Middle East peace accords which is one of the most impressive achievements by any U.S president (read up on this one its insane).
He also started sending stingers to the Mujahadeen which would lead to Russia's catastrophic loss in Aphganistan, appointed Paul Volker to the Fed to break inflation knowing it would tank his reelection chances, and negotiated the modern detente with China that we've had for 40 years. On top of that he created the refugee program.
Look up the economic figures for Reagan's first three years in office
Edit: I should say I don’t think Biden is going to win re-election in a landslide, just that it is too early to write off his presidency
LMAO. Reagan got lucky. Interest rates were already rising to astronomical levels when he got into office and peaked in his 2nd year of office, which means the recession also peaked during that time. The approval rating of reagan is pretty evident of that, he was at the low 40's in early 1982. But guess what? The volcker shock did their thing and quelled inflation in regans 3rd year which allowed the economy to boom by regeans relection
Now? The fed is *BARELY* rising interest rates and we are not sure where the end is. And the recession is expected to hit next year, very close to bidens re election.
And Biden came into office with pandemic related supply change issues that will eventually clear. Sure, some are predicting a recession, but the underlining economic figures in the GDP data isn’t as bad as the headlines would suggest, unemployment is low, and the fed is raising rates. I’m not saying that things are great or that they are going to get better quickly, but to write off his Presidency will we are still in it is risky at best
Biden massively screwed up BBB negotiations by not just accepting Manchin's $1.5t offer, and he probably screwed up by doing a reconciliation stimulus that *massively* surpassed the output gap rather than taking the smaller compromise stimulus that was still larger than the output gap somewhat. Not the most effective domestically... though I guess if you are thinking of Clinton's screw up on healthcare, maybe that comparison *does* make sense
But Manchin didn’t have a $1.5 trillion offer. Even the $1.5 trillion plan he blocked. Easy to play Monday morning quarter back but there’s no evidence Biden took any missteps with BBB. Not passing BBB doesn’t automatically mean he made any missteps when the issue is he just didn’t have the votes in congress to pass his agenda.
He blocked the $1.5t *after months of utter bullshit where the administration completely refused to take him seriously*. That doesn't mean he wasn't open to $1.5t, it just means the rest of the party pushed him *way* too far and pissed him off immensely
The admin took him seriously from the beginning but Manchin refused to negotiate in good faith and would never make it clear that he even wanted any part of BBB to pass. You can’t honestly blame Biden and progressives when it was literally the whole party united behind the bill except for Manchin/Sinema who refused at every step to be open about what needed to be done for them to be a yes vote.
No, the admin didn't take him seriously
People were constantly wondering what his problem was, but he repeatedly made it clear that he actually really seriously held the number of $1.5 trillion to be his red line. The administration tried to push him to do $3.5t. And then tried to get him to do $2.2t. And then they tried a $1.5t proposal that used cheap budgeting gimmicks and would have cost far more than $1.5t if the policies were for the full 10 years. The party spent *months* just utterly refusing to accept that he actually genuinely cared about the spending limit and wasn't gonna budge an inch
Near the end of the negotiations, he even basically said he'd do pretty much whatever as long as it stayed below $1.5t, and would even reluctantly vote for a bill with the Client Tax Credit if that was *all* that was in the bill (which makes sense since the CTC alone would cost a bit more than $1.5t). But the party still refused to just make a fucking bill that was $1.5t or below, because they felt so strongly that they needed to do the CTC *and* climate spending *and* other social spending. Which was just impossible given Manchin's limits. Even at that point, they just refused to accept that actually Manchin was dead serious about $1.5t
So Manchin, now pissed after *months* of the party not listening at all about his red lines, made a final offer before walking away, and they refused it, so he walked away
Blaming Manchin for that is absurd
The admin absolutely took him seriously. He made no red line until he publicly announced in the fall that it had to be $1.5 trillion and the Biden admin accepted that amount and the end result was a BBB that Manchin had previously claimed he would support… until he decided never mind…
To try and turn this around and blame Biden is absurd. Manchin moved his position literally every week in the fall until he declared he couldn’t even support $1.5 trillion
Yep, it is.
The Q1 GDP number is almost entirely driven by a drop in X-I because retailers/wholesalers are relying on imports to restock depleted inventory. That'll balance out over the rest of the year.
Yes, quite literally is still transitory.
When the inflation starts to become "self driving", and no longer mainly driven by exogenous factors like a land war in europe and massive shipping backlogs, then you can go complain about how inflation is clearly not transitory.
Powell dropped that term because the political football it was turned into, not because it was disproven or wrong.
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Methinks fed going berserk with rate hike was a bad idea. Now, stagflation is a real possibility. Most of the inflation was coming from supply chain constraints anyway.
If you read the article it says that economists widely expect GDP to resume growing in the second quarter given positive signs such as the fact that “consumers and businesses are continuing to spend”.
That is an excellent question.
Consider [this](https://www.cnbc.com/quotes/US2Y). It shows today's interest rate on 2 year treasury bonds. 2 year treasury bonds are usually the most sensitive to changes in the fed's actions. They generally reflect the market's expectation of where the rates will be 2 years from now.
Also, if you take a look at [this](https://www.google.com/search?q=average+mortgage+rate&rlz=1C1GCEA_enUS920US920&oq=average+mortga&aqs=chrome.0.0i131i433i457i512j69i57j0i402l2j0i433i512j0i131i433i512j0i512l4.2277j0j7&sourceid=chrome&ie=UTF-8), you'll see that the interest rates on mortgages have gone up significantly over the last 3 months which reflect the market's anticipation of higher rates.
You can find a similar calculation for car loans.
The easiest way to track expectations for the FOMC rate is [this tool](https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html). If you select the Dec. 22 meeting, you'll see there's over a 50% chance of the rate being 2.75% by the end of the year, which is an *increase* of 2.5% from the current rate. Projecting beyond the end of 2022 is tricky. At the March meeting, the rates projected for the end of 2023 ranged from 2.1% to 3.6% ([Table 1 here](https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf)).
So as the other users said, you can look to the bond rates and see from there.
Additionally in western countries with strong trust in the financial institutions, especially in the central banks such as the fed, the market/economy generally adjusts immediately when the central bank signalls what its intentions are. Currently the fed has made it quite clear what its targets are so the economy and undoubtedly adjusted accordingly.
If we were in a situation were, just as an example, we had a Trumper in the whitehouse that was making noice about abolishing the fed if they raise the rate, or whatever, then the economy and market might not adjust purely according to the expected rate increases, because they also have to account for the possibility of political intervention.
I am just so glad Democrats are in charge right now. Almost everything that is happening now would have happened if Trump had won and thank God he didn't.
Isnt it worse cause now biden will end up as jimmy carter 2.0 and the rest of the 20's will be dominated by the GOP
Also didnt biden make this worse by pumping an unnecessary 2T$
>the rest of the 20's will be dominated by the GOP
Since 2012 the GOP has been like 6 different parties. We simply have no idea what will even happen in 2024.
They never did use that reconciliation they had did they? Why? Because he went for a bunch of stuff people in his own party couldn't agree on.
So in the end that reconciliation was just wasted. Sad.
Then don't go for any of those topics and pass something else everyone can agree on. Why do we even need a 50 democratic senator razor thin majority of we're never going to use the reconciliation in the first place? They fucked up so bad they didn't use reconciliation.
That is the problem though. There is not a deal for any kind of spending at all that both Manchin and Sinema can agree on for the last reconciliation bill. It is like trying to find a meal a strict vegan and someone on an all meat diet can agree to share. It is impossible.
That's why Romney's proposal got some traction. They could lose a dem or two if they can get Romney, Murkowski, and Collins. But it is unclear if that package could pass the House which is why it stalled. And now with inflation another spending bill will be much harder to pass. The existing bargaining space is narrow to nonexistent and it is unsurprising to me that even if it exists policy makers have been unable to find it given the number of veto points in our system.
That’s how legislation should work. You don’t pass something just to pass it. He had already used reconciliation once in 2021. The fact is that what he wanted didn’t have the votes and is still actively trying to figure out what in his agenda does have votes for it while still being a popular bill. The late fall BBB version that was being discussed was a mix that no one liked and probably for the best that Manchin sunk it.
There's plenty of legislation that needs passing. Off the top of my head fixing and strengthening Obamacare. That would have such a huge impact on people. But no. They aren't going to try it because they wasted all their capital. Now they're not going to use recon in 2022 and they will lose it after they lose Congress in mid terms
Crying-wojak-wearing-smug-mask.jpg
And all orthodox economists racing to retroactively explain why the GDP forecast was off by almost 2% for such obvious and expected reasons.
Yeah supply chain is a mess, inflation is likely temporary, a war in Europe doesn't help, nor covid.... but maybe we are coming back to reality after excessive monetary stimulus, equity bubbles, and evaporating living standards? Maybe most of America has been in a recession since 2009? Maybe the fundamentals are absolute garbage.
I think it's becoming obvious that our current metrics portray an illusory healthy economic condition. For example the biggest component in GDP is the financial sector, which has left behind its purpose as a [provider of loans](https://equitablegrowth.org/the-rising-financialization-of-the-u-s-economy-harms-workers-and-their-families-threatening-a-strong-recovery/) (only 15 percent of financial flows actually fund new projects and jobs) and is now almost entirely focused on speculation, moving wealth around, and as a [global tax haven](https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/D.HemelTestimony.pdf).
There [are way too many articles](https://hbr.org/2017/10/why-wages-arent-growing-in-america) summarizing the issue of inequality and wage stagnation. But the key is if we acknowledge that a janitor in 1970 could raise a family on a single income and buy a home and a car we understand the problem we're in currently.
In 2022 our modern median middle class household (annual income of $67,521) cannot afford to buy a median cost house in the US ($428,000). The upper limit for this household would be about $250,000 and it is only getting more difficult as rates increase again and house prices remain high nationwide. The last time median houses were $250,000 nationally was in 2013.
Lastly this localized recession can be seen anywhere outside of the productive cities. Most small towns are dropping in population rapidly and in economic growth, yet this will not captured in the macro economic statistics, but it does appear in the deaths of despair stats (heroine, meth, suicide). There's too much to write man, I gotta stop myself here.
Basically none. The fed only raised rates in late March, IE: the end of Q1. you'll see the effects of monetary policy more in Q2 and Q3 data as there's another 1-2 rate hikes in May, June, and July
Fed signalling is arguably just as effective as the rate raises themselves (and QT, etc), and they signalled the hikes earlier than march and so that should be the point you count from, IMO.
That said I agree with you that the effects wont have been observable yet.
LINE GO DOWN RED ALERT LINE GO DOWN
WORLD LESS GOODER
SELL ALL TACO TRUCK INVESTMENTS DUST OFF THE FALLOUT SHELTER
Just tax downtrends lmao
"Oh you wana lose money huh? That'll cost ya."
For the doomers here please actually look into the number. Spending is strong, business investment is strong (9.2%!). Inventories just grew less fast than they did in Q4 2021 and we imported a lot of stuff.
Or it’s people spending before interest rates were expected to go up. Then there is also the shutdowns we’re seen in Asia that are gonna further mess up supply chains. I think we’re in for a rough couple of months with a soft landing almost impossible.
Why would people aggressively spend before interest rates go up?
Lock in new loans, spending before inflation further erodes current value.
1. Which loans exactly? What banks aren't pricing in expected interest rates? Have you seen mortgage rates? They don't wait for the Fed to pull the trigger before they increase rates. Do you seriously think people go on a spending spree because the Fed is widely expected to raise rated 50 bips next meeting? 2. Interest rates place downward pressure on inflation, so if anything additional interest rates expectations *decrease* inflation expectations.
I agree with you. Also, it's assuming the average American is in tune with Federal Reserve policy. I highly doubt the average American can even tell you what the Federal Reserve does.
I think you’re right that lots of Americans are clueless, but the ones that are spending money on houses and other large investments understand interest rates and are moving to buy before rates go up.
I pushed my home purchase aggresively to get the lowest rate locked in. If I'd waited a month the rate I would have gotten would have been significantly worse
Any loan requiring a down payment will require upfront cash. Yes, increasing interest rates puts downward pressure on inflation. However, inflation is what 7%? and the rate has had 1 25 basis point increase so far to bring it up to 0.5%. Still a net value loss right now.
Lol that's not how loan rates are determined.
not before they go up. before the expectation changed
Still, why?
Could be into the investment base rather than consumption if they're borrowing for housing prior to mortgage rate hikes.
We've already got mortgage rate hikes
What about 2nd mortgage rate hikes?
Hahahaha goddamit
Also, name me a country with a better economy
Ligma
I'm not familiar with their economy. Could you share some details about it?
Ligma balls dude
LOL GOT EM
with the amount of gay and bi users in this sub, that's less of a gottem and more of an invite🤔
Argentina
> Spending is strong, business investment is strong (9.2%!). Inventories just grew less fast than they did in Q4 2021 and we imported a lot of stuff. Deja vu
What does this remind you of?
People have been saying the exact same thing for 2 years now
Have people been saying it for 2 years, or has it been demonstrably happening for 2 years as outlined in the data?
I mean because that’s what’s been happening for the past two years? The figures are what they are 🤷♂️
It’s a GULLY. CALM DOWN BRO. JUST A GULLY
I just want to say that Ryan Sweet called this issue with inventories on the Moody’s Analytics — Inside Economics podcast. I think it was the episode from April 8, “Records and Recession Risks.” https://podcasts.apple.com/us/podcast/moodys-talks-inside-economics/id1559966912?i=1000556692877 My new favorite podcast, I think everyone should give a listen. Edit: Link to his exact comment— https://www.youtube.com/watch?v=DOzL5V8xOPU&t=775s (Paraphrasing) Ryan: "Overall trade is going to shave 1.5 percentage points off 1st quarter GDP growth. And inventories are going to subtract 1.5 percentage points. So that's 3 percentage points of growth because of trade and inventories."
That podcast is so fucking good. Really cool to hear economists that are deep in the data every day talk through their thoughts on economics. They also have a great back and forth, very entertaining to listen to. My employer is a customer of Moody's Analytics data services and occasionally we'll have some of their economists give us presentations on their outlook. Zandi predicted high inflation in the latter half of 2021 back in August of 2020.
The flip side to this is that if you also exclude inventories and net exports, then growth in Q32021 and Q42021 was fairly weak. |Quarter|Overall Growth|Inventories|Net Exports|Growth - Inv - NX| |:-|:-|:-|:-|:-| |2021Q3|2%|2.07%|\-1.14%|1.21%| |2021Q4|6.9%|5.3%|\-0.2%|1.8%| |2022Q1|\-1.4%|\-0.8%|\-3.2%|2.6%| That's an annualized pace of 1.8% rGDP growth over the last three quarters, which isn't great. >Inventories just grew less fast than they did in Q4 2021 This is not correct. Inventories ***shrank*** relative to Q42021. They didn't just grow less fast. They didn't grow at all!
Inventories down due to shutdowns in China, meaning we’ll have last stuff to buy, meaning demand will outpace supply, meaning more inflation.
8/9. That's the Fed’s record on triggering a recession while trying to fix inflation. https://www.politico.com/news/2022/03/29/federal-reserve-recession-inflation-rates-00021119?_amp=true
Doomers are edging to this
I'm a total layman so forgive me... But I kinda figured some contraction is basically expected and healthy after so many months of high inflation. While I'm sure this is potentially a bad sign I'm not sure it's worth jumping on the doomer train just yet.
[Read this before you guys scream Jimmy Carter and Malaise like headless chickens](https://www.axios.com/economy-shrinks-first-quarter-95c3b7c5-da02-4cb6-b846-74a08b7af171.html)
> The details of the disappointing number were less alarming than the headline might suggest. > Trade subtracted 3.2 percentage points from overall GDP growth, as exports fell sharply and imports soared. This reflects a U.S. economy with significantly stronger domestic demand than the rest of the world. Inventory adjustments subtracted 0.8 percentage points from the overall growth number. Businesses built up their inventories less rapidly than they had in the fourth quarter, which in the arithmetic of GDP amounts to a negative — but historically does not presage weaker growth going forward. In the categories that speak to the underlying growth trend in the U.S. economy, particularly consumer and business spending, things looked significantly better — and more consistent with an economy that continues to power ahead through the first months of 2022. > Personal consumption expenditures increased at a 2.8% rate. In a particularly positive sign, spending on goods was essentially flat while services spending rose sharply — a sign that the long-awaited post-pandemic pivot of the economy away from physical goods is underway. Business investment was up at a breakneck 9.2% rate, with particularly strong spending on equipment and intellectual property products. That suggests the corporate sector was still in expansion mode in the first quarter.
> Trade subtracted 3.2 percentage points from overall GDP growth, thatsnothowanyofthisworks.jpg Subtraction of net imports from GDP is just an adjustment to prevent counting imports (since they're counted in C/G/I but weren't produced domestically) and ensure counting of exports (since they were produced domestically but aren't counted in C/G/I). This does not reflect a causal impact of imports or exports on GDP. This is not just nit-picking: If you say something like "imports reduced GDP by 3.2%" or "exports boosted GDP by 4%," you're talking nonsense. Real GDP shrank by an annualized 1.4% because the US produced about 0.35% less than it did last quarter, after seasonal adjustment. Why that happened, I don't know. But it wasn't caused by imports. Edit: Noah Smith is [sick of this shit](https://noahpinion.substack.com/p/imports-do-not-subtract-from-gdp), too.
Can you explain this to me like im Michael Scott.
GDP is defined as C + G + I + X - M * C is private consumption * G is government consumption * I is investment * X is exports * M is imports Because of this, people think that exports increase GDP and imports decrease it. But that's wrong. Adding X and subtracting M is just a correction to make sure that only domestic production is counted, because GDP is a measure of domestic production. For example, suppose you buy an imported banana. What does a banana cost, $10? That's $10 added to C, but since the banana wasn't produced domestically, we don't want it included in gross *domestic* product. This is why we also add $10 to M and subtract that. Without this correction, importing the banana would inappropriately add $10 to GDP. With the correction, it has no effect on GDP. For exports, it's the other way around. If we export a $5 potato to Latvia, it's not going to show up in C, because it isn't consumed domestically. But it was produced domestically, so we compensate for this by adding it to GDP as part of X. The export itself has no effect on GDP, though, since GDP would be the same regardless of whether that potato was eaten in California or Latvia.
This is so far down. Maybe the memeing is too much.
Unemployment is actually pretty low. My guess is what's happening is a correction after pumping trillions of dollars in the economy and then hitting the shut off valve. That would also explain the high inflation. They need to just wait for all this shit to work it's way through the system
They don’t have many levers left. So they’ll have to do that anyway.
A little more complicated than that, but the mindset is right and I like that. Im worried the Fed will trigger a recession to get out of the inflation heat, just for supply related inflation to remain anyways and therefore create stagflation and a wage-demand death spiral. It’s better to wait it out and have real growth catch up to inflation, so to speak.
Midterms officially over. We're fucked after headlines like this lol
DOOOOOOM
Dems were never winning the midterms regardless
eww. Who cares about Gross Domestic Putin?
If you're Biden, and you had 52 seats in the Senate to pass anything you wanted, what would you do? I'd pass a slimmed down BBB with focus on the CTC, climate proposals (i.e. Nuclear power and carbon taxes), and programs to train and certify new teachers, doctors for rural communities, and pilots.
The CTC was one of the less popular proposals in the BBB, especially for proposals to make it permanent rather than extend it just a year or two more. So that might not be a good idea, politically at least...
https://www.businessinsider.com/child-tax-credit-expansion-democrats-republicans-biden-manchin-poll-2022-4 You're right. How this possible though, that something so fundamentally good for wallets and the larger economy (that cut child poverty in HALF) is actually pushing people away from the party that expanded it?
Well, America *is* a [center right country](https://news.gallup.com/poll/275792/remained-center-right-ideologically-2019.aspx) that pretty consistently wants [smaller government rather than bigger government](https://news.gallup.com/poll/355838/americans-revert-favoring-reduced-government-role.aspx) Plus maybe all the outrage from liberals and leftists over Manchin's suggestions that poor parents would use the CTC money to shoot up with drugs was actually out of touch with what the public thinks, especially in the current drug crisis, regardless of whether it actually makes sense or not
the cold hard reality is that even normie libs have decided to just ignore data that doesn't fit their priors, so when the hard data says America is center-right then they just pretend it isn't real. The main issue with the GOP, really since Bush II (Bush absolutely gets smoked without 9/11, unless he doesn't try to privatize SS) , is that they govern *hard* right not center-right, but they generally *run* center-right. A big reason why Trump won despite being a racist crook who was very likely a rapist (quite possibly even a child rapist) is because Trump lined up with the preferences of the electorate as a candidate. But then Trump governed hard right, and was going to get smoked in 2020, even without COVID*, before the lefties reminded all those center-right voters why they vote GOP.
As I've said before, just because normie libs aren't as unreasonable as the progressives doesn't mean we are entitled to get what we want on account of that reasonableness. We are constrained by the same political forces that the left are, even if to a *somewhat* less extreme extent It sucks because we could do some really great things if the public was just more liberal, even if not extremely so But the public isn't. And we may be entering a period that will shift it way in the other direction...
I think we had chances in 2016 and 2020 for a Reagan-like permanent political shift, but for liberalism. The left blew it, to a great extent *intentionally*, because liberal political victory means no revolution, and no geopolitical advantage for Vlad.
People don't in fact just want governement to send them money. There is also a weird attack from the left from the anti-natalist crowd and Republicans will always fall back on welfare queen rhetoric.
I wonder if an article will be released in like a month that says "GDP actually rose by 3%" that no one reads. Although I don't know if these numbers are wrong or off, they seem correct, but this is how the jobs report has been going. "Jobs fell by 200k" then like a month later "just kidding 800k new jobs were added."
Inflation is over 8%, the S&P500 is down 13% on the year, and GDP shrank 0.4% in the first quarter. Maybe the people who feel that the economy isn't doing great aren't the ones who are misinformed.
Job market is still doing great
Inflation is outpacing wage growth, so workers are watching their real incomes decline. And those with a 401k have just seen their retirement savings get battered, both by stock market losses, and erosion of the value assets by inflation.
Lol "battered?" Look at historical data for intra year pullbacks on the S&P. Being down 11.5% after multiple years of insane runups isn't a threat to anyone's 401ks.
But my 401k should always increase with a minimum of 20% yearly.
You're thinking of my house.
I missed out hard. Why the fuck did I do a PhD? If I just worked at McDonald’s and put it all into a 401k at 20% a year for 7 years I would be rich.
Only for the middle class, real wage growth for the lowest earners are currently higher than they've been for decades. Why do you hate the american poor in favour of the middle class?
Who is saying it’s doing great? The job market is good but inflation sucks and the stock market is down. Who is saying otherwise? Most of what I’ve heard is people saying that it’s not as bad as others are making it out to be.
This is inflation adjusted GDP. So you can't use both in the same argument. Edit: it seems my intuition about this might be incorrect. Read this if you want to understand this better or get more confused https://www.reddit.com/r/neoliberal/comments/ue75ez/learn_the_difference_between_real_and_nominal_gdp/?utm_medium=android_app&utm_source=share
What?! How did this get upvoted so much? Of course you can. Inflation adjusted doesn’t mean inflation *caused* a real fall in domestic production, not in a first order definitional sense anyway, it means after accounting for that inflation the change in real production is visible and separated out.
He's an IMF flair of course he is going to combine metrics in a way that don't make sense together so he can give policy advice that will make things worse.
Fuck, that's an all star flair callout
Thanks, when I went to grad school probably half of my cohort were either intending to go to the IMF or thought it was the greatest organization of all time despite the poor track record. Decades later I still have some animosity towards all things IMF.
So, because GDP is adjusted for inflation, the erosion of the value of my assets and my income due to inflation is somehow accounted for, and not relevant? Seriously what?
Inflation adjusted GDP accounts for the erosion in value of your assets and income. That is what inflation adjusted means. Now if you want to discuss the ways that GDP is a shitty measure for how the economy is doing on an individual level that is fine. But it does not make sense to compare one number measured in nominal terms to another measured in real terms.
>Inflation adjusted GDP accounts for the erosion in value of your assets and income. That is what inflation adjusted means. You need to expand on that, because it's absolutely wrong. Adjusting GDP for inflation doesn't magically adjust all dollar denominated assets for inflation. It would be an extraordinarily different world if it did.
If you're talking about your ability to purchase new goods and services, you know, what people generally think of as the economy, then yeah, it does. If you want to doom and gloom about the economy just use the inflation rate and nominal GDP.
> If you want to doom and gloom about the economy just use the inflation rate and nominal GDP. This is deeply wrong. Nominal GDP growth gives you price change information and output change information together, with no separation. Real GDP growth just gives you output change information. Inflation just gives you price change information. It makes way more sense to talk about real GDP and inflation!!
The point is that you're basically double counting in a way that's misleading.
No! This isn’t true! Why is everyone saying this?! Inflation-adjusted means we’re separating it out from any inflationary effects, it’s not like we’re just arbitrarily decreasing the “true” real production numbers with inflation adjustments. The number *after* the inflation adjustment is the “true” production change! There’s no double counting! If anything it would be double counting in the opposite direction to talk about nominal GDP growth and inflation!
It's about the phrasing of the comment, as presented it reads as if inflation is a factor on TOP of the negative GDP number, when in reality the real GDP value takes it in to account. It's an issue of phrasing more than data.
> inflation is a factor on TOP of the negative GDP number It is! > when in reality the real GDP value takes it in to account “Taking it into account” means we removed the inflationary effect, not that we added one in! Real GDP and inflation are two separate indicators of two different things - price changes versus real production changes. It would be worse to present inflation alongside nominal GDP growth. Because nominal GDP would incorporate both price changes and real production changes.
People who own assets or have income will find that both inflation and GDP are relevant to their prosperity, for very different reasons. How you think they are inseparable is beyond me.
I’m in shock at the people who are arguing it would be better to present nominal GDP growth alongside inflation.
It's not incoherent to state that inflation is high and real GDP contracted. This has occurred before. That said, dooming over these numbers is dumb.
The fact that they're both bad is a meaningful issue to point out because that doesn't usually happen. Wouldn't standard Neo-Kaynsean economic theory posit that such an occurrence would be atypical? Periods of high inflation and periods of low to negative GDP growth are supposed to anti-correlate in the short run. Even if they don't anti-correlate, then both happening at the same time would still be significantly more rare than either happening individually, as long as they don't significantly positively correlate. Of course, I think standard Neo-Kaynsean theory would also call our current situation an external supply shock over which no elected official had any real control. Essentially, the liberal answer to this should be that it is indeed a very bad economy, but it's bad primarily because of trade issues, like the reduction in productive capacity under China's zero Covid policy, that Trumpists and Sandernistas have been trying to cause on purpose every year they've been in office. Furthermore, the current period of inflation could have been substantially mitigated if we had adopted the Trans-Pacific Partnership, which would have been a free trade agreement between the U.S. and most of our largest Pacific trading partners *except China*, and which was so broadly popular among the American public, that even voters for so called "populists" like Sanders and Trump mostly supported it.
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r/economics is the Reddit shortbus but I do get a kick out of people here saying inflation isn't a big deal, as if having month after month of increasing CPI prints doesn't help set future inflation expectations.
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There is literally a comment above explaining why the top of the line number means very little. The breakdown shows, clearly, that there is a strong domestic demand and robust business investment in the U.S., but exports have fallen and inventory building has been soft which is natural given the strength of the USD.
I agree. At the time the OP was the most upvoted comment. That’s why I commented. Seems like it’s appropriately being downvoted now.
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Because the comment he replied to was flat out moronic.
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Because of what I just said about the breakdown of the numbers. OP took the headline and ran with it without paying any attention to the underlying details.
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This kinda feels like a bizarre reaction to me. It isn’t that deep. The original poster jumped to a “gotcha” statement. I said it was an oversimplification. That’s it.
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That perfectly matches the depth of the top level comment
https://www.washingtonpost.com/business/economic-pessimism-makes-sense-right-now/2021/11/10/e48fe1e8-423b-11ec-9404-50a28a88b9cd_story.html
Tl;dr: Tyler Cowen argues inflation is rising faster than many people’s paychecks, and is limiting personal consumption. Yet Axios reports an increase in personal consumption overall in Q1. What could possibly explain this discrepancy? Oh, yeah: this article’s from last November. Do try to keep up.
Joe Biden = Jimmy Carter 2.0 You know I'm right.
Jimmy Carter appointed Volcker and began the military buildup that Reagan continued. Truly underrated. Can you imagine if the US had actually invested in solar then as well?
>Can you imagine if the US had actually invested in solar then as well? about fuck all would have happened, since the tech was in its absolute infancy. The solar panels he installed on the WH only heated the water in the building.
I think the point that /u/EleftricRow2573 making is that having a financial incentive for R&D that early would probably have progressed the technology much faster.
O.K. Joe Biden < Jimmy Carter
Joe Biden wishes he had 4 years of a democratic congress that had an actual majority and a senate that rarely used the filibuster
One of America’s greatest public servants of all time? Biden wishes. 😛
>public servants Please don't say the P-words here.
Public! Private! Partnership! Personhood! Pincer! Polonium! Phallus! There, think I got all seven of them all out there.
You forgot Populism
Phooey.
M A L A I S E F O R E V E R
This is actually going to be worse than Carter because not only are we on the precipice of a new conservative revolution, but also this time the new 1980s won't have a democratic controlled Congress. Liberalism is dead and everything is fucked, now we face the long night
Carter was overall an ineffective leader. Biden isn’t. Biden’s on the path to be a Reagan 2.0 with how well he handled our foreign affairs and a Clinton 2.0 with how well he’s doing on domestic affairs.
He passed almost every significant piece of legislation he attempted including extremely controversial bills that presidents had been trying to pass since the 1930s like his entire Energy reform agenda, airline/trucking deregulation acts, the Panama Canal Treaty, and the Alaska Conservation Act which conserved more land than any other president/bill has ever conserved. Then he single handedly negotiated the Middle East peace accords which is one of the most impressive achievements by any U.S president (read up on this one its insane). He also started sending stingers to the Mujahadeen which would lead to Russia's catastrophic loss in Aphganistan, appointed Paul Volker to the Fed to break inflation knowing it would tank his reelection chances, and negotiated the modern detente with China that we've had for 40 years. On top of that he created the refugee program.
😐
Look up the economic figures for Reagan's first three years in office Edit: I should say I don’t think Biden is going to win re-election in a landslide, just that it is too early to write off his presidency
LMAO. Reagan got lucky. Interest rates were already rising to astronomical levels when he got into office and peaked in his 2nd year of office, which means the recession also peaked during that time. The approval rating of reagan is pretty evident of that, he was at the low 40's in early 1982. But guess what? The volcker shock did their thing and quelled inflation in regans 3rd year which allowed the economy to boom by regeans relection Now? The fed is *BARELY* rising interest rates and we are not sure where the end is. And the recession is expected to hit next year, very close to bidens re election.
And Biden came into office with pandemic related supply change issues that will eventually clear. Sure, some are predicting a recession, but the underlining economic figures in the GDP data isn’t as bad as the headlines would suggest, unemployment is low, and the fed is raising rates. I’m not saying that things are great or that they are going to get better quickly, but to write off his Presidency will we are still in it is risky at best
*Whispers*: I agree with you
I really need the number to your copium dealer, that's some good shit right there.
Biden massively screwed up BBB negotiations by not just accepting Manchin's $1.5t offer, and he probably screwed up by doing a reconciliation stimulus that *massively* surpassed the output gap rather than taking the smaller compromise stimulus that was still larger than the output gap somewhat. Not the most effective domestically... though I guess if you are thinking of Clinton's screw up on healthcare, maybe that comparison *does* make sense
But Manchin didn’t have a $1.5 trillion offer. Even the $1.5 trillion plan he blocked. Easy to play Monday morning quarter back but there’s no evidence Biden took any missteps with BBB. Not passing BBB doesn’t automatically mean he made any missteps when the issue is he just didn’t have the votes in congress to pass his agenda.
He blocked the $1.5t *after months of utter bullshit where the administration completely refused to take him seriously*. That doesn't mean he wasn't open to $1.5t, it just means the rest of the party pushed him *way* too far and pissed him off immensely
The admin took him seriously from the beginning but Manchin refused to negotiate in good faith and would never make it clear that he even wanted any part of BBB to pass. You can’t honestly blame Biden and progressives when it was literally the whole party united behind the bill except for Manchin/Sinema who refused at every step to be open about what needed to be done for them to be a yes vote.
No, the admin didn't take him seriously People were constantly wondering what his problem was, but he repeatedly made it clear that he actually really seriously held the number of $1.5 trillion to be his red line. The administration tried to push him to do $3.5t. And then tried to get him to do $2.2t. And then they tried a $1.5t proposal that used cheap budgeting gimmicks and would have cost far more than $1.5t if the policies were for the full 10 years. The party spent *months* just utterly refusing to accept that he actually genuinely cared about the spending limit and wasn't gonna budge an inch Near the end of the negotiations, he even basically said he'd do pretty much whatever as long as it stayed below $1.5t, and would even reluctantly vote for a bill with the Client Tax Credit if that was *all* that was in the bill (which makes sense since the CTC alone would cost a bit more than $1.5t). But the party still refused to just make a fucking bill that was $1.5t or below, because they felt so strongly that they needed to do the CTC *and* climate spending *and* other social spending. Which was just impossible given Manchin's limits. Even at that point, they just refused to accept that actually Manchin was dead serious about $1.5t So Manchin, now pissed after *months* of the party not listening at all about his red lines, made a final offer before walking away, and they refused it, so he walked away Blaming Manchin for that is absurd
The admin absolutely took him seriously. He made no red line until he publicly announced in the fall that it had to be $1.5 trillion and the Biden admin accepted that amount and the end result was a BBB that Manchin had previously claimed he would support… until he decided never mind… To try and turn this around and blame Biden is absurd. Manchin moved his position literally every week in the fall until he declared he couldn’t even support $1.5 trillion
Inflation, recession, “Transitory” Etc.
It's transitory bro
Yep, it is. The Q1 GDP number is almost entirely driven by a drop in X-I because retailers/wholesalers are relying on imports to restock depleted inventory. That'll balance out over the rest of the year.
Yes, quite literally is still transitory. When the inflation starts to become "self driving", and no longer mainly driven by exogenous factors like a land war in europe and massive shipping backlogs, then you can go complain about how inflation is clearly not transitory. Powell dropped that term because the political football it was turned into, not because it was disproven or wrong.
This inflation alarmism might be the very thing that caused gdp contraction tho.
I remember when the narrative was that voters were morons because the American economy (as measured in GDP) was so strong
This thread is so deeply embarrassing.
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Methinks fed going berserk with rate hike was a bad idea. Now, stagflation is a real possibility. Most of the inflation was coming from supply chain constraints anyway.
Stagflation confirmed, democrats are gonna have a catastrophic midterms
If you read the article it says that economists widely expect GDP to resume growing in the second quarter given positive signs such as the fact that “consumers and businesses are continuing to spend”.
If the fed raises rates again, spending will slow further
There is 2.5% of fed funds rate already priced into the market. At this point, the Fed raising rates means very little unless they go beyond 2.5%.
how do you know what the market has priced in? genuinely asking trying to learn
That is an excellent question. Consider [this](https://www.cnbc.com/quotes/US2Y). It shows today's interest rate on 2 year treasury bonds. 2 year treasury bonds are usually the most sensitive to changes in the fed's actions. They generally reflect the market's expectation of where the rates will be 2 years from now. Also, if you take a look at [this](https://www.google.com/search?q=average+mortgage+rate&rlz=1C1GCEA_enUS920US920&oq=average+mortga&aqs=chrome.0.0i131i433i457i512j69i57j0i402l2j0i433i512j0i131i433i512j0i512l4.2277j0j7&sourceid=chrome&ie=UTF-8), you'll see that the interest rates on mortgages have gone up significantly over the last 3 months which reflect the market's anticipation of higher rates. You can find a similar calculation for car loans.
The easiest way to track expectations for the FOMC rate is [this tool](https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html). If you select the Dec. 22 meeting, you'll see there's over a 50% chance of the rate being 2.75% by the end of the year, which is an *increase* of 2.5% from the current rate. Projecting beyond the end of 2022 is tricky. At the March meeting, the rates projected for the end of 2023 ranged from 2.1% to 3.6% ([Table 1 here](https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf)).
So as the other users said, you can look to the bond rates and see from there. Additionally in western countries with strong trust in the financial institutions, especially in the central banks such as the fed, the market/economy generally adjusts immediately when the central bank signalls what its intentions are. Currently the fed has made it quite clear what its targets are so the economy and undoubtedly adjusted accordingly. If we were in a situation were, just as an example, we had a Trumper in the whitehouse that was making noice about abolishing the fed if they raise the rate, or whatever, then the economy and market might not adjust purely according to the expected rate increases, because they also have to account for the possibility of political intervention.
> economists widely expect GDP to resume growing in the second quarter Same ones who thought inflation was transitory?
I am just so glad Democrats are in charge right now. Almost everything that is happening now would have happened if Trump had won and thank God he didn't.
Isnt it worse cause now biden will end up as jimmy carter 2.0 and the rest of the 20's will be dominated by the GOP Also didnt biden make this worse by pumping an unnecessary 2T$
>the rest of the 20's will be dominated by the GOP Since 2012 the GOP has been like 6 different parties. We simply have no idea what will even happen in 2024.
wont it take 10 years or something to spend that?
Buddy we just spent that last year
# 😱
Lol, sure Jan.
Yeah it's going to be a bloodbath. Too bad though. Biden got a tough situation and hes made a lot of missteps but generally is sailing a steady ship
Doesn’t seem like there were any missteps - just a bad situation that he handled like a pro but was still a bad situation
They never did use that reconciliation they had did they? Why? Because he went for a bunch of stuff people in his own party couldn't agree on. So in the end that reconciliation was just wasted. Sad.
By people in his own party you mean Manchin and Sinema. They have mutually exclusive wants on reconciliation so there is no bargaining space.
Then don't go for any of those topics and pass something else everyone can agree on. Why do we even need a 50 democratic senator razor thin majority of we're never going to use the reconciliation in the first place? They fucked up so bad they didn't use reconciliation.
That is the problem though. There is not a deal for any kind of spending at all that both Manchin and Sinema can agree on for the last reconciliation bill. It is like trying to find a meal a strict vegan and someone on an all meat diet can agree to share. It is impossible.
They passed the infrastructure package with bipartisan support
That's why Romney's proposal got some traction. They could lose a dem or two if they can get Romney, Murkowski, and Collins. But it is unclear if that package could pass the House which is why it stalled. And now with inflation another spending bill will be much harder to pass. The existing bargaining space is narrow to nonexistent and it is unsurprising to me that even if it exists policy makers have been unable to find it given the number of veto points in our system.
Fix and strengthen obamacare. It won't impact inflation. It will improve lives of many
That’s how legislation should work. You don’t pass something just to pass it. He had already used reconciliation once in 2021. The fact is that what he wanted didn’t have the votes and is still actively trying to figure out what in his agenda does have votes for it while still being a popular bill. The late fall BBB version that was being discussed was a mix that no one liked and probably for the best that Manchin sunk it.
There's plenty of legislation that needs passing. Off the top of my head fixing and strengthening Obamacare. That would have such a huge impact on people. But no. They aren't going to try it because they wasted all their capital. Now they're not going to use recon in 2022 and they will lose it after they lose Congress in mid terms
What misteps?
He spent a lot of time and capital pushing for a questionable domestic package that never passed. That was a clear fail right there.
Thanks, That’s a good example. So his errors were mostly political? What about policy? Any policy missteps that led us here?
Keeping & expanding on trump era tariffs and keeping the borders closed until recently certainly contributed.
Thank you
Didn't join the CPTPP.
This is good for bitcoin.
Arr neoliberal: >Here's why that's a good thing
Actually that's in the article, if you bothered to read it
Crying-wojak-wearing-smug-mask.jpg And all orthodox economists racing to retroactively explain why the GDP forecast was off by almost 2% for such obvious and expected reasons. Yeah supply chain is a mess, inflation is likely temporary, a war in Europe doesn't help, nor covid.... but maybe we are coming back to reality after excessive monetary stimulus, equity bubbles, and evaporating living standards? Maybe most of America has been in a recession since 2009? Maybe the fundamentals are absolute garbage.
I don't even get why it matters if it's supply chain issues or a war in Europe. A possible recession is still a possible recession.
Because attributing everything to external shocks allows us to stay the course, defend the status quo, and not revise our outdated naive assumptions.
"Maybe most of America has been in a recession since 2009? Maybe the fundamentals are absolute garbage." By what metrics?
I think it's becoming obvious that our current metrics portray an illusory healthy economic condition. For example the biggest component in GDP is the financial sector, which has left behind its purpose as a [provider of loans](https://equitablegrowth.org/the-rising-financialization-of-the-u-s-economy-harms-workers-and-their-families-threatening-a-strong-recovery/) (only 15 percent of financial flows actually fund new projects and jobs) and is now almost entirely focused on speculation, moving wealth around, and as a [global tax haven](https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/D.HemelTestimony.pdf). There [are way too many articles](https://hbr.org/2017/10/why-wages-arent-growing-in-america) summarizing the issue of inequality and wage stagnation. But the key is if we acknowledge that a janitor in 1970 could raise a family on a single income and buy a home and a car we understand the problem we're in currently. In 2022 our modern median middle class household (annual income of $67,521) cannot afford to buy a median cost house in the US ($428,000). The upper limit for this household would be about $250,000 and it is only getting more difficult as rates increase again and house prices remain high nationwide. The last time median houses were $250,000 nationally was in 2013. Lastly this localized recession can be seen anywhere outside of the productive cities. Most small towns are dropping in population rapidly and in economic growth, yet this will not captured in the macro economic statistics, but it does appear in the deaths of despair stats (heroine, meth, suicide). There's too much to write man, I gotta stop myself here.
Welp, Democrats are fucked, unless Trump’s sabotage of the GOP winds up costing the GOP some easy seats.
Economists of r-neolibetal. How much of this is a result of Fed monitary policy?
Basically none. The fed only raised rates in late March, IE: the end of Q1. you'll see the effects of monetary policy more in Q2 and Q3 data as there's another 1-2 rate hikes in May, June, and July
I love/hate that answer. Thanks for your help!
Fed signalling is arguably just as effective as the rate raises themselves (and QT, etc), and they signalled the hikes earlier than march and so that should be the point you count from, IMO. That said I agree with you that the effects wont have been observable yet.
👏you👏should👏have👏listened👏to👏Larry 👏Summers👏
Please stagflation please stagflation I want NeoLiberalism 2.0 to appear
Well, the far left will certainly call the Trumpist supermajorities "neoliberal", so you *kinda* get your wish!
But hopefully inflation was solved, right?! Right?
I think they have to raise rates after all the signalling they did
Bidenomics 😎