And another indicator (Real Gross Domestic Income) points to recession

Gaius · 2024-02-23T02:18:56.241Z

Periodically the Bureau of Economic Analysis (BEA.gov) counts both the
Gross Domestic Product (GDP) and the
Gross Domestic Income (GDI).

In theory they are supposed to be equal, but they never quite are, (and in recent months the difference between them ahs gotten largish, causing pocket-protector type econ nerds to whisper and talk among themselves.

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So, if this is just nerd stuff, why bother mentioning it, (normally the path of the planets and Japanese moon landings are about as nerdy as we get in Hannityland),
wel,l because GDI just turned negative on a Y-oY basis.

image1363×487 92.4 KB

This is not just a recession indicator since normally GDI = GDP then normally this is a (partial) definition of recession.

Anyway. if we just call it an “indicator,” we reduce the importance.

Nonetheless, when this “indicator” becomes negative, it has correctly predicted every single recession since WW2 and has never given a false positive. It just turned negative.

Gaius · 2024-02-23T02:26:59.001Z

Here is a “zoomed-in” look at the last 10 years of that chart.
As you can see the difference between GDP and GDI has grown quite large, (and they are supposed to be equal.)

image1365×487 40.8 KB

The econ nerds I sometimes hang out with think it has something to do with people spending out of savings and spending out of money market accounts (instead of spending out of income earned from work, from investments etc.), but no one seems to know for sure why they are suddenly so different.

Eagle-Keeper · 2024-02-23T02:45:14.755Z

Can we also conclude that as long as government can run trillion dollar deficits that inflation is pretty much going to stay about where it’s at?

Gaius · 2024-02-23T02:54:03.243Z

Eagle-Keeper:

Can we also conclude that as long as government can run trillion dollar deficits that inflation is pretty much going to stay about where it’s at?

Inflation is determined primarily (some arch conservatives say “exclusively,”) by what the Fed does in response to the deficit.

In both of those views
Congressional borrow-and-spend can have a number of different impacts.
The primary (some would say “exclusive”), determinant of inflation is how the Fed responds.

Eagle-Keeper · 2024-02-23T12:10:10.288Z

Gaius:

Nonetheless, when this “indicator” becomes negative, it has correctly predicted every single recession since WW2 and has never given a false positive. It just turned negative.

The recession talk is still out there:

https://www.msn.com/en-us/money/markets/recession-is-coming-and-it-could-send-stocks-plummeting-26-as-dwindling-savings-rates-spark-a-vicious-cycle-in-the-economy-strategist-says/ar-BB1iIHVV?ocid=msedgntp&pc=LCTS&cvid=47288cb05de84022b31c8ac5aa624d9d&ei=45

*That outlook is based on the Federal Reserve’s “aggressive” monetary tightening since March 2022, Ibrahim said. Interest rates are now the highest they’ve been since 2001, a level economists have long-warned could overtighten financial conditions and push the US into a recession. *

Economists have also said that the full effects of Fed rate hikes are still working their way through the economy, though signs of damage of already beginning to bubble to the surface. Auto loan delinquencies are rising, Ibrahim noted, a signal that consumers are falling behind their debt payments as inflation bites and borrowing costs rise.

thinkingman · 2024-02-23T12:16:27.706Z

with the media how it is, there will never be a “recession” under a democrat pres. despite all indicators. we saw proof of that with the previous Biden recession

Gaius · 2024-09-04T02:59:08.019Z

Gaius:

Here is a “zoomed-in” look at the last 10 years of that chart.
As you can see the difference between GDP and GDI has grown quite large, (and they are supposed to be equal.)

image1365×487 40.8 KB

The econ nerds I sometimes hang out with think it has something to do with people spending out of savings and spending out of money market accounts (instead of spending out of income earned from work, from investments etc.), but no one seems to know for sure why they are suddenly so different.

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.
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Well, whatever was causing the problem, it’s getting worse, not better.

image1082×617 44.2 KB

For a very very very long time GDI would equal GDP.
In theory they are supposed to equal each other exactly, and the difference was just a statistical hiccup.

One counts the money spent, the other counts the money received.
They are supposed to be equal.

But

Since approx. Sept 2022 the two have not been the same.
There is now a $600/b a year discrepancy .

If the GDI is correct, (and it always has been,) then roughly half of all GDP growth since that time didn’t really happen.
But if GDP is correct (and it always has been) then GDI is grossly understated for no apparent reason.

Chart below measures the difference between the two (and should always be at or near zero.)

image1085×623 43.3 KB

Safiel · 2024-09-04T04:37:36.538Z

We really are in dire need of a recession. Recession is the cure for inflation caused malinvestment, it is not a disease. While painful, we direly need recession to wipe out malinvestment.

Gaius · 2024-09-04T10:50:44.332Z

Safiel:

We really are in dire need of a recession. Recession is the cure for inflation caused malinvestment, it is not a disease. While painful, we direly need recession to wipe out malinvestment.

Well,

Coingecko says that 17 new crypto currencies have been released in the past 24 hours, and 11 the day before. so yeah that’s a sign that there is still too much helicopter money sloshing around.
“Investors” traded $85b worth of the top 3 cryptocurrencies in the past 24 hours, and the next ten had $203b worth of trading so yeah, there is lots of extra cash sitting around being traded.
As of March, 41% of Russell 2000 companies existed despite having negative earnings. (Why put your money into crypto when you can invest in a profitless app or profitless kava kava shop? Yeah, there is lots of extra cash sitting around being traded.

image900×654 68 KB
Even S&P companies are trading at twice their normal values compared to their (meager, lackluster) earnings. Yup, there is lots of extra cash sitting around being traded.