The Boom Goes Boom?

There is nothing quite like the plethora of irrational expectations for the current baseless inflation hysteria.  Those holding such hopes, their explanations and arguments evade common sense, lack grounding in economic fundamentals, are based in anecdotal, non factual data and outright wishful thinking.

If indeed this inflation hysteria has passed, its peak was surely late January. Even the stock market liquidations that showed up at that time were classified under that narrative. The economy was so good, it was bad; the Fed would be forced by rapid economic acceleration to speed themselves up before that acceleration got out of hand in uncontrolled consumer price gains. - Jeffrey P. Snider

This is the hard part for most who have drank the recovery kool-aid to grasp, our zombie economy is enfeebled from decades of stagflation, viz. stagnant and declining real wages, low real output and pernicious inflation falsely advertised as tame. (Stagflation has not been under 10% annual since 2000, see links below.)

In short, without enormous debt supplement labor utilization and therefore incomes and wages are too low to support anything more than low level growth even at these “best” of times upturns (essentially a no-growth baseline when factoring the downturns).

Short list of recent events assisting this two legged dog of an economy over the last two years: inability to take advantage of a decline in oil from $125 to $25; to overcome the subsequent rise to $65; and the desperate hype feigning escape velocity grounded in post  Harvey and Irma blips, the latter now 6 months out. All of the above point to the obvious, a consistently weak economic condition, and the fact that there NEVER WAS any recovery to speak of, in the first place.

This hurricane cycle, for lack of a better term, is proving that fact once again. The economic problem is intractable, not something that will just disappear for whatever reasons one might wish to ascribe for tomorrow. This is the major problem with interpretation of these and other statistics; we have been conditioned to believe that economic growth just happens, and that if it is absent for any length of time it won't be for much longer.... This desperation forces the hype; to look to any small positive as if definitive on the matter even when it is otherwise easily explained as something like Harvey and Irma. 

Indeed, expectations have been anchored firmly, through repetitive narrative, with falsity in econometrics, and monetary policy vitiated and based in false doctrine.

"As always, the question needs to be asked every time - what has changed? Time is definitive on this matter, just not in the way it is taken in the mainstream. If the answer is tropical weather, or tax cuts, then the return to weakness is nowhere near "unexpected.""

To claim recovery with little to nothing underpinning an emasculated outsourced service based economy was a political and monetary canard. Pernicious weakness is exactly that, nothing more, nothing less. Yet in the upcoming months many will be caught off guard or surprised to hear the R word, recession.  Again, not new weakness, just an worsening of the existing long term condition "new norm" which never healed to start with.  Proving common sense is indeed a commodity.

"There is at least the small possibility Jerome Powell's Fed just might fool itself into the same economic mirage for lack of appreciating the more basic imbalances. Starting with money."

Speaking of money and common sense, as Salmo Trutta would say, 300 Phd's and they still don't know a debit from a credit, nor money from mud.  In the meantime, or at least for this last weeks FOMC meeting, cue The Fed and Rise. Below the slow burn extended HQ Version...

Recommended reading: 3 Months Now Of After-Harvey Retail Sales; Or, The Boom Narrative Goes Boom; Chapwood Index and Shadow Stats 1980 CPI method.