Econ Red Flag
But 2020 Dems shouldn’t count on a recession
AS the expert who looks like a pencil in the movie “Monsters Inc.” says on a chatshow panel, “It is my professional opinion that now is the time to panic!”
Why? Well, the yield curve inverted. What is the inverted yield curve, you ask? Listen, when I began writing this Post column nearly 22 years ago, I was told there would not be any math.
From what I understand, it means investors think it is a better bet to loan the US government money for two years rather than for 10 years — and this is very, very bad news. The market fell precipitously on Wednesday due to the inverted yield curve, with the Dow Jones Industrial Average shedding 800 points. Ouch. Why is it bad news? If I could answer that, I would have a house in the Hamptons.
What I do know is that the last five recessions have all been preceded by an inversion in the yield curve.
Our goose is cooked, people. A recession is inevitable, they tell me. It’s the law. Even if we revert the inversion — is that a thing? How the hell should I know? — the cat’s in the bag, as the crooked cop says in “Sweet Smell of Success,” and the bag’s in the river.
Now the question is: When will the recession hit? This is important to know because it could determine when to take advantage of the sales at Dick’s and REI on survivalist equipment and at Sam’s Club on canned goods.
That, I’m afraid, we can’t know for sure. In those five cases, the country fell into recession anywhere from 12 to 24 months from the moment at which the yield curve inverted itself. So it could be next summer. Or it could be in 2021.
Which, of course, raises the next question: What is this going to mean politically? Democrats and liberals now find themselves in the uncomfortable position of secretly wishing the recession would come as quickly as possible so that the American public might blame
President Trump for it and kick him out of office.
They know the economy’s relative strength will be the key reason Trump is reelected, if he is reelected. Since the beginning of his presidency, GDP growth has averaged 2.9 percent and the unemployment rate has been at or below 4 percent for 17 straight months. The jobless rate now hovers at a 50-year low. Average wages have grown 3.2 percent from July 2018 to July 2019.
Now Democrats could do what Walter Mondale did in 1984 and run a campaign telling people the economy isn’t better when people know the economy is better. The thing is, Mondale lost 49 states. Probably not the best idea.
That’s why Democratic complaints about the economy have focused on fairness questions — that the benefits of the Trump economy have been unequally distributed. The rich have gotten richer at a faster and greater rate than the average person has seen his wages increase.
That’s a better argument, and has the advantage of being true, but it doesn’t vitiate the fact that things are better for the working American than they have been for a long time.
But let’s face it, if Democrats can say Trump’s policies led to a recession, they will have something real, something concrete, to talk about in the run-up to the election.
And if the recession doesn’t come about until 2021?
Two years is a long time in the economic life of a nation, and the dogged determinism that says a recession is inevitable at any time because of the inverted yield curve is something we should resist.
The past 20 years have made a mockery of economic forecasting based on past experience. That’s why I am writing about this in a mocking tone.
This is not to say that we should ignore the lessons of history, merely that we shouldn’t presume they provide a linear map to the future.
If I had a nickel for every wrong-headed economic prediction made in the years following the meltdown of 2008 and the Great Recession, from economists both on the left and on the right — about how the stimulus would create an economic boom and about how the Fed’s policy of quantitative easing would lead to a Weimar-like inflationary spiral — I might have enough for a down payment on a Hamptons house.
Of course, I could really use a recession to make that down payment go a little farther. . . .