The Chaos of Conflicts
Bombs bursting in air, economic joy everywhere! What more do you want?
The chaos of conflicts has become so great that I found it hard to organize the headlines today. I normally try to put headlines of a like theme together, such as all those about the Ukraine war, then all those about the Hamas war. I’m now up to six sub-sections under “War”—Russia’s invasion of Ukraine, NATO’s return to Cold-War-scale exercises v Russia, Iran’s proxy attack on US troops in Jordan, the Israel-Hamas war, the Red Sea Houthi war, and the Texas border war. 75% of those situations of growing conflict/risk are black swans that swooped in during the last month! (Headlines covering all this stories are available for all readers today.)
The world is becoming increasingly unstable.
But, hey, be happy now! Because …
The economy is beautiful!
In the face of such instability, it might be nice to know that the US is experiencing “the world’s best economic recovery” with a landing “so soft” there may, according to one economist, be no need of ever landing at all! We will just comfortably cruise along with GDP above 3% and inflation above 2%. We just have to get used to the new inflation number.
“In many ways, we already have a soft landing,” said Columbia Business School economics professor Brett House. “The Fed has threaded the needle of the economy very artfully with a kind of ’Goldilocks’ scenario.”
Perfect! (Sigh of comfort.)
Gross domestic product grew at a much faster-than-expected 3.3% pace in the fourth quarter, fueled by a solid job market and strong consumer spending. However, inflation is still above the central bank’s 2% target, and that also opens the door to a “no-landing scenario….”
“No landing means above-trend growth, and also above-trend inflation….”
“That looks like the soft landing has been more or less achieved and is likely to be sustained….”
So wonderful! If only people could just change their negative attitudes and shake off their bad vibes about the economy, we could all be happy cruising the clear, blue skies at about 30,000 feet and just pay a little more for our plane ticket.
The flight is even better cruising in Air Force One
President Biden is resting easier about all of this now. The White House, we are told in today’s news, feels comfortable that the high-altitude Bidenomics cruiser is just going to keep getting better until its benefits work their way deep into our psyches before the November election.
Senior administration officials say a surprisingly solid run of economic data is finally catching up to their messaging, months after “Bidenomics” slipped from the president’s lexicon.
After a year of recession doomsaying, an unexpectedly resilient economy is boosting the White House as it ramps up selling its record to Americans who’ve just started shaking off their “vibecession.”
Some of us, apparently, are getting used to this comfortable cruising in Pilot Powell’s 747.
At the same time, senior administration officials say they’re increasingly confident the situation on the ground can largely speak for itself. The economy grew at a strong 3.1% pace between the fourth quarter of 2022 and the same period last year, every inflation measure is cooling, the job market remains strong and the stock market has hit record highs.
What could be better? Join the high-flyers club and sit back and enjoy this no-landing trip around the world and stop grumbling about nothing. Grab a magazine, hit the recline button on your first-class seat, and sip a mai tai or whatever your favorite expression of spirits is, maybe a smoky Manhattan.
Lael Brainard, Biden’s director of the National Economic Council, described the economy as “extraordinary!”
“We looked historically — we’ve never had a year where inflation has declined this fast while the economy has grown above trend and unemployment has remained stable at a low rate,” she said….
Jared Bernstein, chair of the White House Council of Economic Advisers, said in an interview Friday that the economy is “a growth machine that keeps on delivering….”
And in a speech Thursday at the Economic Club of Chicago, Treasury Secretary Janet Yellen boasted that the United States “now produces far more goods and services than it did before the pandemic,” on the heels of a recovery she called the most equitable on record.
So, there you have it. Everything is equitably better for everyone! Just sit back and relax.
Then there is this nattering old nabob:
“The risks of allowing inflation to persist still far outweighs the risk of triggering a recession,” he said. “Their failure to do this in the late 1960s is one of the major factors that allowed inflation to become entrenched in the 1970s.”
According to Higgins, history suggests there could likely still be a recession before this is over.
But, hey …
76% of economists said they believe the chances of a recession in the next 12 months is 50% or less, according to a December survey from the National Association for Business Economics.
So, how bad can it be? Don’t listen to these minority mongers of negativity.
Well, central banks are being kind of nattering about this, too. We’ve had four central banks put out December manufacturing reports that are solidly negative—the New York Fed, the Philly Fed, the Richmond Fed, the Chicago Fed—and now a fifth joins the chorus today as the Dallas Fed just came in with manufacturing in its region plunging deeper into the ground, too. So, there is no question that we’re in a manufacturing recession that has been going on for months—that is just holding in some regions while sliding deeper in others.
That doesn’t seem very goldilocks. How, then is everything perking along so nicely … as we are told it is?
That’s why I wrote this weekend’s Deeper Dive (Is GDP Real?) to delve into what is really behind all this wonderful GDP. Are there any weak spots? Are there any fake spots? Is there any reason to think it might all go up in smoke in the next three months?
Nah, you don’t need that, and never mind those weapons banging against each other all around the world either. We’re cruisin’ with the president!
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