What’s the key item that’s wrong in the following table of GDP, inflation, unemployment, and interest rate projections?
Where’s a Recession?
Has the Fed, the nonpartisan Congressional Budget Office (CBO), or the White House Office of Management & Budget (OMB) ever forecast a recession?
The answers are no, no, and no.
Yet, for the next ten years, real GDP and the unemployment rate reflect the no recession idea without any discussion of recession by any of the above parties.
What About Inflation?
Since the Fed has a mandate on price stability, and the Fed ridiculously defines stability as 2.0 percent, the Fed predicts 2.0 percent.
What About Budget Deficits?
Without exception, budget deficits soar in recessions.
The Fed never predicts deficits but miraculously and arrogantly thinks no matter what they are, it can achieve a steady unemployment rate of 4.1 percent and inflation of 2.0 percent for a decade.
CBO Budget Deficit Projections
Please consider CBO Projections at a Glance
- The deficit totals $1.6 trillion in fiscal year 2024, grows to $1.8 trillion in 2025, and then returns to $1.6 trillion by 2027. Thereafter, deficits steadily mount, reaching $2.6 trillion in 2034.
- Debt held by the public increases from 99 percent of GDP at the end of 2024 to 116 percent of GDP—the highest level ever recorded—by the end of 2034. After 2034, debt would continue to grow if current laws generally remained unchanged.
- Outlays in 2024 amount to 23.1 percent of GDP and stay close to that level through 2028. After 2028, growth in spending on programs for elderly people and rising net interest costs drive up outlays, which reach 24.1 percent of GDP by 2034.
- Revenues amount to 17.5 percent of GDP in 2024, decline to 17.1 percent in 2025, and then climb to 17.9 percent of GDP by 2027 after certain provisions of the 2017 tax act expire. Revenues remain near that level through 2034.
Every one of those projections counts on there being no recession.
Federal Debt Held by the Public OMB
The only way to explain the above chart is the OMB projects no recession all the way to 2050.
Federal Debt Held By the Public 2023 Q4
Industrial Production Takes a Huge Revised Dive
Industrial production rose in February from huge negative revisions in January.
For discussion of the above chart, please see Industrial Production Takes a Huge Revised Dive, the Fed Blames the Weather
Has Industrial Production peaked this cycle? Many charts suggest the answer is yes.
Has the US Consumer Finally Waved the White Flag on Spending?
The answer to the question appears to be yes, starting October of 2023.
For discussion, please see Has the US Consumer Finally Waved the White Flag on Spending?
Six pictures of real vs nominal advance retail sales tell the story.
More Fantasyland Projections on Wednesday
OK, I get it that it’s impossible to pencil in a recession date. But there has to be a better approach that forecast no recession until 2050.
Someone asked “What about GDP beating expectations like 2023?”
OK what about it? What did that do for deficits or debt, or interest on the debt?
With every recession, fiscal prudence goes further and further out the window.
The Fed will update its dot plot of expected economic conditions on Wednesday.
I can hardly wait.
OK, I get it that it’s impossible to pencil in a recession date. But there has to be a better approach that forecast no recession until 2050.
And with every recession, fiscal prudence goes further and further out the window.
Someone asked “What about GDP beating expectations like 2023?”
OK what about it? What did that do for deficits or debt, or interest on the debt?
Banking system has some serious problems, again some more.
“So, what could go wrong when some unnumbered bunch of banks do fail as Powell manages the known problem after his regulators failed to force corrective action?” (In the 08 crisis bailout the FED sent $19 TRILLION around the world!)
link to thedailydoom.com?
SPX [1M] escaped recession for 15 years. The Fed extended it to 25 years. If on Fri Mar 29 QQQ [1M] close < Feb high bad things can happen. It might start a correction, before rising higher, an opportunity to invest, or the beginning of recession.
Kunstlers latest on the Blob inside the District of Corruption.
link to kunstler.com?
Inflation causes depression. Their solution is to inflate even faster as if to outrun the depression it causes.
What about the years that GDP will be well above projections? Like the last 3 for example.
Nobody ever said every projection is wrong and overstated. His point if you bother to pay attention is a projection that assumes no recession over an extended time frame is laughably wrong out of the gate. As a result any estimate that assumes no recessions over a decade or longer time frame will overstate gdp and understate deficits with near 100% certainty.
Your comment is a non-sequiter.
What about it?
What did it do to the national debt or deficit?
Not much. Although one thing it did do was keep the debt to gdp ratio essentially the same, slightly lower in fact.
The point is, the average for 10 years could very well be 2% a year. Some years higher, some lower.
Premise of your question is false. Real GDP has NOT been above projections for the past 4 years (Q3 2019 to Q3 2023: average compounded gain of 2.15%/year).
Nominal GDP is only above expectations due to inflation.
Like the last 3 that had government overspending at a minimum of 25% of GDP?
The fact that govt overspending the last 4 years is the DRIVING factor in the flawed GDP equation should be alarming and not celebrated.
Sadly, there are lots of fantasy budgets these days. I hear “billionaire” trump can’t come up with a mere $454 million. That’s chump change for a real billionaire.
link to cnbc.com
I guess he’s about to get liquidated.
I would guess that a billionaire doesn’t have 450 million sitting in a vault in their home. Neither does the average bank vault have that kind of money. A billionaire’s worth is based on their investments value, not their cash in the bank.
When MF Global went under, the clients found out that the money simply sitting in their segregated account, wasn’t theirs due to counter party claims, such as JP Morgan Chase. Apparently, Webb discusses this sort of thing on a larger scale in his book, The Great Taking. As South Park joked, “its just gone.”
You saying the ultimate deal maker couldn’t conjure up big beautiful loans from his vast network of business associates or supporters? Already sounds like a weak president. Won’t be surprised if the deep state starts negotiating for how he will behave if elected and throw him some crumbs but we’ll see.
And I’m pretty sure Jeff Bezos has billions laying around, he just sold 8.5 billion in stock. Lots of that happening lately too…
link to dailymail.co.uk
Liquidity matters more than assets, especially in recessions, when RE is not liquid. His name is the most liquid asset he has. If elected he might be saved, unless Obama starts a new insurrection against him. This country is too fractured and feeble. People cannot stand each other.
That’s why I focus on profits. Choo! Choo!
Gesundheit
MPO : they see your name : red vote ==> f* them !
M.E.: They f* themselves when they ignore my wise words….
TDS is like Herpes… two types and I can never keep them straight.
Mish which type has this guy got, Type 1 or Type 2?
The World’s Biggest PONZI Scheme continues . . . like the Snowball it gets Bigger and Bigger . . . it won’t stop until there is no one left to buy the DEBT . . .
The U.S elected and unelected govt criminals have become
BAGHDAD BOB
EVERYTHING, and I mean everything, that comes out of their lips or written for the public are complete lies
The entire world could be on FIRE RIGHT NOW, but the news would not report it so, even with SMOKE AND ASH falling around the deaf, dumb, blinded by Propaganda and they would sit glued to their TV’s.
Consider the Propaganda on COVID-19: NO ONE was sick around us. NO ONE, including us, got anything more than a normal Flu in 2020 to 2022.
BUT, they SCREAMED FROM THE HEAVENS: “COVID IS A PANDEMIC. REMAIN IN YOUR HOMES!”
Evidence was non-existent and yet I STILL see people wearing masks.
WE CANNOT SOLVE STUPID.
Having just come from the comics page I can state that these projections also belong there.
“What About Budget Deficits?”
World War 3 will be expensive. For reference, check out what WW2 did to the budget chart.
My point is that they simply use PROPAGANDA to NOT report problems. ROME COULD BE BURNING and they would simply NOT REPORT IT and thus the FIRE WOULD BE NON-EXISTENT.
We are completely blinded because people, the HERD, depend on what the MEDIA TELLS THEM, not what is right in front of their noses!
Look at the “TRANSITORY” bullshit.
Transitory refers to the R.O.C. of inflation.
INFLATION IS STICKY, but they do NOT report THAT which means that they are LYING right to our faces on CBS/NBC/PBS/ABC/CNN/MSNBC, etc.
Meanwhile, in the real world: a real man’s man wins re-election. So much for CIA and neocon fantasies about ousting Putin.
link to rt.com
“The US has become a global laughing stock by criticizing democratic processes in other nations while suppressing a presidential candidate in its own election, Russian leader Vladimir Putin has claimed.”
Let’s make a bet. I bet that he will always be re-elected and die in office.
@ Doug78 …Same thing would have happened with FDR.
Difference is that FDR was a shill for the Fabian Socialists and the Rothschilds.
Mish, please answer this question: IS IT POSSIBLE that the CBO and those parties named can simply NOT REPORT A RECESSION even if there IS ONE?
I believe, by the way, that THAT has already happened and guess when?
Why would one think that the incompetent boobs who created this mess would have realistic projections about the future? Put your rose colored glasses on and be happy! Nothing to see here, move along.
Mish, for your Chicago collection –
link to illinoispolicy.org
“What About Inflation?
Since the Fed has a mandate on price stability, and the Fed ridiculously defines stability as 2.0 percent, the Fed predicts 2.0 percent.”
According to ZH, “Hartnett suggests the Fed has tacitly accepted a higher inflation target” Whether that is true or not, i wouldn’t be surprised if it is true and we find out at a later date when it becomes obvious. When push came to shove, Nixon closed the gold window. The push of 34 trillion federal debt is coming to what shove?
They already moved the goalpost on inflation twice. Don’t let them do it again.
Their legal mandate is “price stability”. They moved that goalpost to a “0-2% target range”, implying a 1% average inflation.
Then they moved the goalpost to “Symmetric around 2%”. Going from 1% to 2% is a 100% increase in tolerated inflation, but it’s worse than that.
There have been two excursions of 4% from the new goalpost. Those did not resolve symmetrically. The “symmetric” policy is not actually being followed. If the Fed was serious about “symmetric”, the current policy goal should be inflation well below 2% for some years, to offset the recent spike to 8% and bring the average back to 2%.
The Fed’s legal mandate actually has 3 parts [emphasis and numbering added]:
“The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of [1] maximum employment, [2] stable prices, and [3] moderate long-term interest rates.”
The Fed has ignored the mandate for moderate long-term interest rates, to the great detriment of the nation, for a very long time.
More recently they have also begun to ignore the mandate regarding aggregate credit supply. The current practice raising interest rates without aggressively curtailing credit supply is a novel (and currently failing) approach to handling inflation. Based on this language it seems unlikely that the Federal Reserve actually has a proper mandate for managing interest rates separately from the aggregate credit supply.
Nor for paying interest on reserves (a fat subsidy from taxpayers to bankers), but that’s another story…