Recession?

The news isn't ALL bad, but A LOT of it is. I did some cut-and-pasting:

 

The pot calling the kettle black

Dunno if it's okay to use that phrase anymore, but if ever it applied to anyone, it applies to Trump for saying “We have a Federal Reserve chairman that is playing politics.”

Not yet, and maybe never

The bottom line text today on the Google Search page is

Applying AI towards science and the environment

Based on my experience with Google's AI Overview, I am not convinced that AI can come up with new ideas. It does a wonderful job of gathering and understanding existing ideas, right or wrong -- and it writes better than I do -- but this is not the same as developing useful new ideas.

Fire Powell? We need to fire Trump instead

At Forbes, 21 April 2025, via Google News - Business:

Trump Issues Huge Fed Challenge—Sparking Stock Market Plunge As Gold And Bitcoin Price Soar

04/21 update below. This post was originally published on April 20

Bitcoin and crypto prices are treading water after U.S. president Donald Trump’s trade war sparked market chaos that’s threatening to spiral into a full-blown “U.S. dollar confidence crisis.”

The bitcoin price has plummeted from its January peak of almost $110,000 per bitcoin, dropping along with the stock market, as crypto hurtles toward a $19 trillion “tipping point.”

Now, as billionaire Ray Dalio warns the U.S. is teetering on the verge of a financial crisis and recession that could be worse than 2008, the White House has confirmed Trump is exploring whether he can fire Federal Reserve chair Jerome Powell—something that could trigger an “apocalyptic scenario" for markets.

 ...

1. Ray Dalio warns of financial crisis and recession that could be worse than 2008.

I say again: Trump wants to create a depression. 

And evidently, the White House is still exploring its options in regard to firing Powell, no matter the risk of "a full-blown 'U.S. dollar confidence crisis'" and "an 'apocalyptic scenario' for markets." 

And it is the reputable Forbes reporting this.

2. RE: “U.S. dollar confidence crisis”

On 8 April  when I was still trying to figure out what Trump is trying to do with his economic policies, Oilfield Trash left a comment:

Give this a read...This is what they are trying to do but because of time issues are not doing it well because they are not being surgical...

The link is to "A User’s Guide to Restructuring the Global Trading System", a 41-page PDF dated November 2024. Here are the first two paragraphs from the "Executive Summary":

The desire to reform the global trading system and put American industry on fairer ground vis-à-vis the rest of the world has been a consistent theme for President Trump for decades. We may be on the cusp of generational change in the international trade and financial systems.

The root of the economic imbalances lies in persistent dollar overvaluation that prevents the balancing of international trade, and this overvaluation is driven by inelastic demand for reserve assets. As global GDP grows, it becomes increasingly burdensome for the United States to finance the provision of reserve assets and the defense umbrella, as the manufacturing and tradeable sectors bear the brunt of the costs.

The clarity of the statement and the significance of its focus left me awestruck. I don't know if the guy is right or wrong or even what he says, as  I only read about a page of it all told. (I have been working myself up to read more of it.)

And then I read the note about the author at the bottom of the page:

Stephen Miran was Senior Strategist at Hudson Bay Capital. He currently serves as Chairman of the Council of Economic Advisers.

Holy shit.

One-Letter Words

20 April 2025

Checking the Google News before dawn this morning, hoping to be entertained by Trump's latest idiotics. Nothing new. Then I found "Trump's tariffs roiled markets but data shows a solid economy. Here's why." by Max Zahn, at ABC News, dated 17 April 2025.

The article quotes Fed Chair Powell saying "the U.S. economy is still in a solid position". Reminds me, when we first moved into our house we had a plumber in to do some work. The wife showed him around the place, and told him she likes this house, "It's solid".

The plumber told her "all houses are solid".

//

The contradiction in the article title between a "solid" (presumably good) economy and "roiled" markets is worked out in the opening paragraphs:

"Measures" of (monthly) economic data are not reported until the following month...

"Barometers" of market sentiment offer "an up-to-date snapshot" of the economy...

"Due to the lag in economic data, the gap between solid readings and dire warnings" can be "overstating or underplaying" the actual situation. That is a good observation. But the article is three days old now -- why it is still in the Google News I don't know -- and I have been suckered in by that title three times. The article is definitely not worth reading three times.

//

The article says "uneasiness" is "manifested in shopper surveys, one of which last week showed worse attitudes about the economy than at any point during the Great Recession." 

That would be a powerful statement, if it wasn't just one survey. Their statement leaves me with the impression that they lend support to my view that Trump is doing serious damage to the economy. In fact, they add no support. Maybe it's good I read it three times, so I noticed the one survey thing.

//

The article is disappointing. It gains more strength from the gaps than from the facts it presents. They present two paragraphs separated by a photo of Powell. This photo:

Vincent Alban/Getty Images

I really like that photo. It shows the weight of the world on Powell's shoulders.

You know, it still makes sense to me that it was Trump's idea to delay increasing interest rates for a year (from March of 2021 to March of 2022) to create "the Biden inflation". But I no longer think Powell had any part in it. There are (no doubt) Trump supporters on the Federal Open Market Committee who would have been willing to vote for that delay for that reason. Off-topic, but it has to be said.

(What a scandal it would make, if people thought that to assure his own election victory, Trump created the Biden inflation.)

//

Anyway, two paragraphs in sequence. These two:

Many economists expect Trump’s tariffs to hike costs and slow growth, since importers burdened by the tax are expected to raise prices for consumers, who may opt to curtail spending and ratchet down the main engine of U.S. economic activity.

“Consumer sentiment is a leading economic indicator – it’s saying people are worried now and they’re going to stop buying,” Frederick Floss, an economics professor at Buffalo State University, told ABC News.

I am troubled by their logic. Seems to me the first sentence leaves a big gap between a tariff-related, cost-induced slowdown and a general retrenchment in consumer spending. The second has a gap between a worries-related slowdown and the resulting recession -- though they refuse to use the R-word. 

ABC News tried to fill the gaps with a photograph.

The logic of those two parags begins with higher import prices, takes us to consumers choosing to slow their spending growth, then jumps to worries that cause people to cut their spending enough to create the "tariff-induced recession" that the article finally puts into words 8 paragraphs later. 

Worse, the first parag misrepresents the economic problem: The tariffs increase costs but they don't increase consumers' incomes. If we can't spend any more money, then we have to buy less of the more expensive stuff. Or we could split the difference, reducing purchases of domestic goods so we can spend more on imports. This is the insidious method by which the tariffs cause the slowing of domestic economic growth.

//

The uncertainty created by Trump repeatedly imposing and pausing tariffs is a whole separate problem which could slow the economy all by itself, and is sure to deepen any slowdown arising from the costs of the tariffs and the resulting changes to our buying habits.

Don't forget massive layoffs of government workers; these are sure to increase unemployment. And, since unemployment checks are substantially smaller than paychecks, the layoffs will further reduce what the article calls "the main engine of U.S. economic activity," consumer spending.

And don't forget the one-or-two trillion-dollar reduction of government spending that has been promised; a lot of it comes with the layoffs, but there is more besides. And on that topic, you might want to read this short PDF by Frederick C. Thayer.

Last but not least, don't forget what Robert Kuttner said:

There are several distinct elements of the coming Trump depression, all cutting in the same direction, all interacting with each other, all needless.

 It's not the R-word we need to worry about. It's the D-word.

US Dollar Index

In my email:

It's all downhill since January, for sure.

Trump's record. Policy Uncertainty: up. Consumer Confidence: down. And the Dollar: down.

I never heard of the "U.S. dollar index" before. I find it at MarketWatch as U.S. Dollar Index (DXY). I grabbed the 10-year graph, and cropped it to show since just before Covid:

The last high point on the right,  above the 105 level, shows October 1, 2024. Find the tick mark for 2025 and from there go straight up to the blue line at the 104.21 level: That point shows January 1, 2025. Looks like that's where the other graph starts, the first graph. From that point both graphs show strong decline.

The second graph shows an October 2024 peak -- before the November election. But the next data point on the 10-year graph is for January 1, 2025. So the graph does not indicate when the peak was, relative to the election. It  looks like the downturn was an immediate response to the Novemper election, but it turns out that it was not.

Yes, I do look for things like that. All the time.

At MarketWatch the 6-month graph begins in October and shows weekday readings. Looks like the Dollar Index peaked on 13 January 2025 at 109.96 whatevers. The decline started in mid-January. Like Consumer Confidence, the Dollar Index waited a couple of months after the election before starting to fall. It did not make a severe change right after the November election, the way Uncertainty did. Sorry to disappoint.

Back to the 10-year graph. Covid created a comparably large drop from the January 1, 2020 high. And something -- oh, inflation, no doubt -- created a comparably large drop from the high point of July 1, 2022, with CPI inflation having reached 8.99930 percent in June. (Call it 9 percent. It couldn't get much closer.)

Kinda funny: the Dollar Index peaked moments after inflation peaked, and both came down together. Well, as I said, I never saw the Dollar Index before. I don't claim to know what it measures.

Yes, the "This Year" performance on the first graph is an eye-opener. But when eyes are open, the decline is not as overwhelming as that graph makes it look. That first graph only tells me I need to keep an eye on the Dollar Index data, too. I know, it would be more fun to say "Trump is crashing the economy" but I can't say that. Not yet. Yes, I still think he's trying to crash the economy. But that's not the same thing.

It's worse.

It has taken almost 50 years, but we're getting there

Paul Samuelson, writing in 1979:

Today’s inflation is chronic. Its roots are deep in the very nature of the welfare state. [Establishment of price stability through monetary policy would require] abolishing the humane society [and would] reimpose inequality and suffering not tolerated under democracy. A fascist political state would be required to impose such a regime and preserve it. Short of a military junta that imprisons trade union activists and terrorizes intellectuals, this solution to inflation is unrealistic—and, to most of us, undesirable.

From "The Evolution of U. S. Monetary Policy" by Robert L. Hetzel (2017). Hetzel's reference to Samuelson is:
Samuelson, Paul A. “Living with Stagflation” (1979) in Kate Crowley, ed., The Collected Scientific Papers of Paul A. Samuelson. vol. 5, no. 379, 1986, 972.