Thursday, February 29, 2024

A Political and Economic History of China, Part 11: The Early Qing Dynasty's Pacification of China

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6 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff resumes his history of China with the first of several entries on the last imperial dynasty: the Qing.

Qing Dynasty: The Politics of Hair
In our last entry we told the turbulent story of the Ming dynasty’s fall to a Chinese peasant rebellion. 

No sooner had the weakened but victorious rebels taken Beijing did invading Manchu armies from the northeast move in to take advantage of the chaos, easily defeating the Chinese rebel army and marching into Beijing’s Forbidden City to assume power they would hold from 1644 until the early 20th century.

The six-year old boy emperor Shunzi was installed on the throne with Prince Regent Dorgon declaring the Qing dynasty (pronounced “ching,” meaning “clear” or “pure”) rulers of China while assuming authority to govern the empire.

Like the invading Mongols of centuries past the Manchus were greatly outnumbered by ethnic Han Chinese, and although they controlled Beijing and territories to the northeast, most of China was still inhabited by Ming loyalists and otherwise non-aligned Chinese who disliked being ruled by alien invaders.

Thus Dorgon began the process of pacification, sinicizing the Qing to strengthen its appeal among Chinese subjects while simultaneously stamping out armed resistance.

While pacification of an occupied country can take place very quickly in the modern age, in 1644 it was a long and arduous process. 

After World War II allied forces were able to bring Germany and Japan under control quickly due to modern transportation methods such as troop transports, supply trucks, and airplanes as well as instant communication over radio or leaflet drops. Even in 1949 the new Chinese communist regime was able to move quickly throughout the country and establish control within one year.

But in 1644 everything—armies, communications and news, supplies—moved much more slowly and it ultimately took the Qing several decades to bring China under full control.

Dorgon’s first step was an olive branch. The Ming emperor Chongzhen, who had hanged himself from a tree when rebel forces entered the Forbidden City, was given a proper funeral with Confucian rites and his remains were buried in the Ming Tombs alongside his ancestors. This smoothed things over with many formerly Ming Chinese.

Social interaction between ethnic Han and Manchurians was encouraged although the imperial family’s bloodline was kept 100% pure. In preparation for the 1644 invasion of China most Manchu officials had already learned to speak and write in Chinese.

The Ming bureaucratic system was largely preserved and just as Kublai Khan had done in the 14th century, Han Chinese were retained in most government positions except the highest echelons. The policy became known as “yi han zhi han,” meaning “let the Han govern the Han” although supreme leadership would remain Manchu.

In other words, just as foreign invaders had done in the past, the Manchus “became more Chinese” in order to maintain control over a much larger population.


Not all the Qing’s pacification policies were so gentle.

Dorgon mandated all Han Chinese males adopt the Qing shaved head and queue hairstyle (see picture) as a symbol of loyalty to the regime. Failure to comply meant execution or, as the common saying at the time was, “lose your hair or lose you head.”

Ming Chinese males had grown their hair long, sometimes braided in a top bun so not only was the Qing queue ugly, it also became a hated symbol of Manchu domination. 

Fortunately the women fared better (also see picture).

Over the next 268 years, whenever rebellions erupted, male insurgents would cut off the queue and grow out their hair as an act of defiance. But just in case the rebellion failed, many males kept a skullcap with attached fake queue handy.

(This reminds the Correspondent of eastern Europeans who in 1990 publicly burned their [expired] communist party membership cards while safekeeping their active card at home, just in case the communists came back to power…)

In 1650 Dorgon died in a horseback hunting accident although rumors swirled for years that he had been killed by political opponents. As the process of pacification continued, the Shunzi emperor came of age and assumed leadership. However he contracted smallpox at 23, a disease that was endemic to Chinese society but which ethnic Manchus had little immunity to.

Shunzi died in 1661 leaving the throne to his son, the boy emperor Kangxi (pronounced “kahng-shee”) who had also contracted smallpox but survived—considered a good omen and sign of strength. Kangxi would go on to become the longest reigning emperor in all of Chinese history (r. 1661-1722), the greatest of all Qing emperors, and one of the handful of greatest Chinese emperors.

Not all of Kangxi’s tactics for pacification involved the proverbial carrot either. He frequently employed the stick against uprisings.

Going back to the Manchu conquest of 1644, several Ming generals had thrown in their lot with the Qing and fought alongside them to remove the Chinese rebels who they considered worse.

For their loyalty Dorgon gave the generals three provinces in the south and appointed them “kings.” One of the three was Wu Sangui who readers may remember was the key Ming general who helped defeat the 1644 peasant armies at the Battle of Shanhai Pass.

When Kangxi became a young adult, the three southern “kings” presided over their own local armies and decided their loyalty had come to an end. In 1673 the three generals united to overthrow the Qing in what’s known as the “Revolt of the Three Feudatories” and overran most of southern China.

Incidentally southern China has historically been a hotbed of rebellion, even moreso in recent centuries. In a future column we’ll cover the mother of all southern rebellions which also ranks as the third deadliest conflict in human history: the Taiping Rebellion.

In 1676 Ming loyalists who had retreated to Taiwan heard of the revolt and landed on southern Chinese shores to join in. Chahar Mongols who were conquered by the Qing in 1635 rebelled as well.

The 22-year old Kangxi found himself at war with five different enemies, four in the south and one in the north. He would rise to the occasion and his management of the rebellions would begin the story of his long and fabled reign.

First Kangxi focused on the nearest and most isolated enemy, the northern Mongols. Leading the Qing’s small but elite “Eight Banner Army” he marched into modern-day Mongolia and in less than two months crushed the uprising. 

With his rear flank cleared Kangxi then focused all his forces on the south. It took four years but he defeated two of the three feudatories plus the Ming rebels who were forced to retreat back to Taiwan.

During the fighting general Wu Sangui had become senile and proclaimed himself emperor, dying shortly after in 1678. It was left to his grandson Wu Shifan to carry out the rebellion with the sole remaining feudatory, but his forces were cornered in modern day Yunnan province bordering Laos, Burma, and extreme eastern Tibet.

In 1681 Wu’s armies were beaten at Kunming and he committed suicide, his remaining forces surrendering the next day.

Kangxi had pacified the mainland and now stood unopposed from the Sea of Okhotsk through Mongolia and down to the Vietnamese border. But the landing of Ming loyalists from Taiwan still concerned him and two years later he set his sights on the coastal island.

Kangxi didn’t consider Taiwan part of China and he had no desire to govern it, once calling the island “a ball of mud beyond the pale of civilization,” but the remaining Ming loyalists forced his hand.

In 1683 Kangxi sent a naval fleet commanded by Admiral Shi Lang, a defector whose family had been executed by Ming loyalists. Shi Lang, highly motivated to exact revenge, knew Ming naval tactics and soundly defeated his opponent at the Battle of Penghu. By October Taiwan was in Qing hands and the last vestiges of Ming rebels were wiped out.

(May that chapter of Taiwan’s history not repeat itself in the 21st century)

Thus 1683 marks the first instance in nearly two-thousand years of imperial history where China has ever ruled Taiwan.

Kangxi wanted to quickly rid himself of that responsibility, declaring “Taiwan is outside our empire and of no great consequence” as he tried to sell the island off to the Dutch who refused. So the Qing found itself stuck with Taiwan for another two hundred years.

In the next chapter we’ll talk about the remainder of the great Kangxi emperor’s reign.

Thursday, February 22, 2024

Now That the Fed is Technically Insolvent...

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The Atlanta Fed

The attached Law & Liberty article on the Fed’s financials is a bit wonkish, but in a nutshell the Fed has run such huge operating losses over the last 18 months that it has burned through its capital reserves and now has negative capital.

Fed watchers have published suggestions that the Fed recapitalize by calling on member banks for a new capital infusion and even proposing the U.S. Treasury buy new shares in the Fed (i.e. a partial nationalization).

And just what would happen to a normal private bank that burned through its entire capital base?

For one, no bank would ever be allowed to lose so much money that its capital position reaches zero to begin with, let alone turns negative.

If any commercial bank’s capital reserves fall below 6% of its risk-weighted assets (known commonly as its Tier 1 Risk-Based Capital Ratio) then regulators—such as the FDIC, OCC, and ironically the Fed itself—will typically order its management to take “corrective actions,” meaning raise more capital by selling new shares to investors or selling off assets for cash such as branch offices, a nonbanking division like wealth management or insurance, or its investment stake(s) in other companies.

If a commercial bank’s capital falls further to below 4% of risk-weighted assets the regulators will usually move in and shut it down or more commonly take it over and search for a stronger firm to buy it. They don’t want the bank’s sudden failure, particularly a larger bank’s failure, to present a risk to the financial system.

Yet the Fed, being the adult in the room that supposedly keeps all the irresponsible children banks in line, doesn’t have to abide by the same rules.

Furthermore, the Fed doesn’t even recognize its accumulated losses as losses but instead as an asset(!) As of 3Q2023 the Fed’s $100+ billion in accumulated losses are recorded on its balance sheet as “Deferred asset—remittances to the Treasury.” 

(see link at bottom of article to view this "asset" in the Fed’s financial statements)

If any private banker attempted to record huge losses, or any losses at all for that matter, in this manner he would first face independent auditors who refuse to sanction his financial statements and report a failing grade to his shareholders. 

Then regulators such as the Fed would move in and literally remove that banker from the CEO’s office and Board of Directors.

He would then be banned for life from working at any other bank, after which he would likely face criminal fraud charges and prison time.

But as the privileged exclusive steward of the Treasury's deposits, Congressionally-bestowed monopoly issuer of paper currency and bank reserves, and strangely enough commercial bank regulator the Fed is held to a different standard.

To see the Fed’s $105 billion in accumulated losses reported as an “asset”go to the below URL, then page 2. Near the bottom of the “assets” section see “Deferred asset-remittances to the Treasury.”

Wednesday, February 21, 2024

Newsom's FY24-25 Budget Deficit Widens to $73 Billion

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From the Cautious Optimism Economics Correspondent:

January 2023: Projected California deficit for FY23-24 = $22 billion.

May 2023: Projected deficit raised to $32 billion.

December 2023: California Legislative Accounting Office (LAO) projects FY24-25 deficit of $68 billion.

January 10, 2024: Newsom projects FY24-25 deficit of $38 billion.

Yesterday: California LAO raises projected deficit to $73 billion.

All of these projections assume full employment and no recession in 2024 or 2025.

And all with the highest income tax rates and highest overall tax burden of any state in the country.

More details available at:

Tuesday, February 20, 2024

Two Years Later: The Ruble was Never "Gold-Backed" and Hasn't Replaced the Dollar

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The ruble: still nowhere to be found

The Cautious Optimism Economics Correspondent doesn't frequently post "I told you so," but he does recall many stories from early 2022 predicting the new "gold-backed" Russian ruble was on the precipice of replacing the U.S. dollar as the world's leading reserve currency. 

The Economics Correspondent is a longtime student of history's variations of national and international gold, silver, and bimetallic standards and saw right from the beginning that the ruble was not "gold-backed." The Kremlin’s announcement that the Russian central bank would buy gold at a fixed ruble-price per ounce from March to June of 2022 immediately sent end-of-the-dollar journalists declaring Russia was “going on the gold standard” and “the ruble will quickly dethrone the dollar.”

At least two glaring problems with this narrative that doomsayers should have first understood were:

1) A policy to buy gold at a fixed price alone does not constitute a gold standard—period. It only indicates that a central bank is accumulating gold reserves.

For a currency to truly claim gold-backing the central bank must pledge not only to buy, but more importantly sell gold at a fixed ruble-price and pledge to always sell it on demand—no waiting or delays, something the CBR (unsurprisingly) never did.

2) No gold standard with an expiration date of June 30, 2022, or in three months, or in six months, etc... is credible either.

Even if the Russian central bank actually began selling its gold reserves at a fixed ruble-price, which it never did, a termination date of June 30, 2022 would serve as announcement that Russia was terminating its gold standard in three months and confidence in the stable purchasing power of the ruble would have been undermined before it ever started, very possibly leading to a run on Russia's gold reserves.

The Correspondent has plenty of complaints about the fiat U.S. dollar and especially the multiple failings of the Federal Reserve System, but the dollar is still the least dirty shirt in the laundry basket—especially when compared to any currency that alleges to offer a suitable global reserve alternative.

To learn more about the poorly understood subject of global reserve currency alternatives see the Correspondent’s two 2019 articles at:

Thursday, February 15, 2024

When Was History's First Monetary Inflation?

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4 MIN READ - As inflation tries but fails to fade away from news headlines, the Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff discusses its ancient beginnings.

Despot: Dionysius I of Syracuse

Last year the Economics Correspondent posted entries on two important inflations from the past: debasement of the Roman empire’s silver denarius coin (100-268 AD) and the overissuance of unbacked paper money by the Chinese Song Dynasty (around 1100 AD).

But what’s the oldest known story of inflating a money supply and setting off rapid price increases?

Rome in 100 AD is pretty darn old, but could there actually be a government or sovereign who inflated even earlier? As it turns out the answer is yes, and by nearly five more centuries.

First lets trace the start of coinage itself. There is evidence of limited bronze “shells” being produced in China around 1100 BC although the shape was more like a seashell and quantities/circulation were limited.

Around that same century iron ingots and rods named “obols” appeared in the eastern Mediterranean region. They too did not establish a significant monetary economy and were also not shaped as coins.

The first precious metal coins appear to have been struck in 7th century BC Lydia—a kingdom in what is today central and western Turkey. Made from electrum, a naturally occurring alloy of gold and silver, the world’s first standardized precious metal coinage is officially dated beginning in the 600’s BC.

The concept of standardized precious metal coinage spread from there to surrounding areas, taking hold in Ionian Greece (predominantly using silver by then) around the early 6th century BC.

Since conducting commerce using a standard medium of exchange is far more efficient than time-consuming direct or indirect barter, it should come as no surprise that Greece developed into a major civilization shortly afterwards as its economy now enjoyed a significant one-up in that part of the world.

The old name “obol” was applied to the novel Greek coins, but the word “drachma," from "to grasp," quickly came to denote six obols and the name stuck for centuries until the Roman conquest. Incidentally the modern drachma was reintroduced in the 19th century and remained Greece’s official currency until its transition to the euro in 2001.


With the introduction of the ancient drachma we are now on the cusp of history’s first known inflation which took place on the island of Sicily in the city-state of Syracuse.

From 405 BC to 367 BC the frontier Greek province of Syracuse was ruled by a tyrant named Dionysius the Elder. As despot he waged multiple wars, capturing other cities in Sicily and southern Italy. He also conducted pillaging expeditions on the Ionian coastline, all througout living in regal splendor.

So much war and luxury was quite costly, and to pay for his spending addiction Dionysius resorted to a combined strategy of plunder and heavy taxation. Soon however, each incremental hike in duties became self-defeating due to capital flight and economic activity moving underground. Technically speaking Dionysius had stumbled across the Laffer Curve principle 2,300 years before Arthur Laffer was born. 

Thus Dionysius added another revenue source: borrowing. Issuing written promises to repay borrowed drachmae to creditors, he accumulated so much debt that he soon found securing the necessary funds to repay difficult. Wealthy nobles and the public at large, aware of Dionysius’ growing credit problems, refused to lend him more.

So as the strain of an imminent debt repayment neared he enacted a novel idea based on a principle which governments have borrowed (forgive the pun) ever since.

Dionysius announced a recoinage, ordering the citizens of Syracuse, under penalty of death, to surrender their silver drachmae in exchange for newly reminted coins. He then ordered his mint to restamp every one drachma coin with a new denomination of two drachmae and voila! his fiscal problems were solved. All at once Dionysius returned to the people the same number of drachmae he had originally taken, repaid all his debts, and retained a windfall for himself.

Of course inflation immediately took hold and prices doubled throughout the province, but in the 380’s BC virtually no one understood the connection between Dionysius’ recoinage and the mysterious appearance of sharply higher prices. When it came to the subject of inflation the citizens of Syracuse possessed the same level of sophistication as, say... Elizabeth Warren and Alexandria Ocasio-Cortez.

Later Dionysius’ son, named Dionysius the Younger, is believed to have poisoned his father and took full control of Syracuse in 367 BC. He too ruled as a despot but was far less competent than the Elder and was exiled after an invasion.

However, as economist Max Winkler penned in 1933, Dionysius the Elder holds the distinction of forever being world history’s “father of currency devaluation.”


Today, modern governments effectively use Dionysius’ ancient methods albeit with greater subtlety and stealth. 

Citizens are no longer forced to submit their wealth for reminting under penalty of death. Rather governments decree the only form of money they will accept for tax payment is the crummy version issued by their central banks, and failure to comply will result in a less despotic seizure of your funds and property, or a paid vacation in prison. 

In contractual disputes their courts also refuse to rule in favor of any party not paying in government money (i.e. legal tender laws), thus guaranteeing their weakening currency's ubiquitous circulation.

Modern governments don’t debase as rapidly as Dionysius’ doubling of the coin, well... except for Argentina, Venezuela, Sudan, Zimbabwe (still) and many other countries on countless occasions going back through the 20th century.

By contrast advanced economies with more enlightened governments debase more slowly, the United States for example having whittled the dollar down to a more generous 13 cents since 1971.

However the principle of currency devaluation as a means to ease debt burden remains fundamentally unchanged. Just as Dionysius could claim to have repaid his debts with the same number of drachmae that he had borrowed, so too the U.S Treasury technically repays the same number of dollars it borrows. What’s unspoken is that they repay with dollars that, by design, are worth half their value when borrowed twenty-five years prior—all thanks to the magic of debasement, courtesy of the Federal Reserve, or the ECB, or the Bank of England, etc…

Finally the operating costs of debasement are far lower today than in Dionysius’ time or even ancient Rome or medieval Europe. No longer do governments need to operate huge mints solely for the purpose of restamping coin denominations or draining their silver content. Instead modern central banks run by PhD and DEI technocrats simply employ a few computer keystrokes to inflate the money supply, usually upping it two to three percentage points faster than the growth rate of real goods and services.

Monday, February 12, 2024

Why is Inflation Worst in "Greed Free" Places?

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Cautious Optimism Economics Correspondent:

If inflation is caused by "corporate greed," as Elizabeth Warren and AOC keep saying, why did inflation plummet from 15% to 3% during the Reagan years while it routinely exceeds 100,000% annually in "greed-free" socialist Venezuela?

Tuesday, February 6, 2024

Has Recession Been Officially Called Off?

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6 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff ventures into treacherous waters: attempting to call a recession.

(click to enlarge)

“In the postwar era, monetary policy tightening to contain inflation has been 𝘵𝘩𝘦 most common cause of recessions.”

-Claudio Borio, Monetary and Economic Department Head
  2017 Bank of International Settlements general meeting

CO Nation may recall that in late 2022 the Economics Correspondent wrote that history informs us the Federal Reserve’s recent series of aggressive interest rate hikes makes an impending recession extremely likely. Aside from charts showing the temporal relationship between rising rates and recession, the Correspondent detailed that in the Fed-era (1914 to present) no inflation of greater than 5%, when countered by higher interest rates, has ever failed to produce a recession shortly afterwards.

Yet here it is February of 2024 and there’s no recession. 

Moreover the economy looks mostly OK, unemployment is low, everyone on TV is now guaranteeing a “soft landing” and claiming “there is no recession on the horizon,” the stock market is hitting new highs (not inflation adjusted), and talk of future rate cuts has experts saying we have dodged a recession for good and happy days are here to stay.

So has the Correspondent changed his mind?

Nope, not yet at least. In fact, all the above media punditry, good economic indicators, and stock market records are perfectly consistent with past recessions going back to the 1980’s.

First let’s start with American recessions themselves.

No matter how bad America’s politicians have been, in the Federal Reserve era nearly none of the nation’s eighteen recessions have ever been started by a president or Congress. The most common cause, as Claudio Borio points out, has been tighter monetary policy by the central bank.

Rising interest rates have unquestionably been the cause of twelve of America’s eighteen recessions since the Fed opened its doors in 1914. As for the other six, The Depression of 1937-38 is one of two ambiguous slumps since it was preceded by a coincidence of Fed tightening plus Congress/President Franklin Roosevelt enacting both a major tax increase and far-reaching union wage floors in 1936—all in the middle of the Great Depression.

The other questionable one is 1973-75 when the Fed had raised interest rates 7.5 points right before OPEC launched its oil embargo against the United States.

Covid and lockdowns caused one more (2020), and the remaining three are minor, very old, and lightly studied events (1918, 1923, 1926) although all three were also preceded by interest rate hikes. 

Note: Although politicians have rarely started recessions in the last century, once a recession is underway elected officials have an enormous impact on how much worse and longer recessions last. For a good contrast look at the diametrically opposite policy responses during the Depression of 1920-21 and the Great Depression of 1929-1946. The first was over in nine months, the other became the worst economic cataclysm in U.S. history. Also compare the opposite responses to the 1982 and 2008 recessions, the former with massive deregulation and tax cuts, the latter with massive new regulations and a tax increase.

Now let’s look at today (see chart above).

In 2022-2024, the Fed’s rapid increase in interest rates looks a lot like all the others of the last forty years. So if it’s a carbon copy then why no recession yet?

Notice in the first chart that no recession (shaded area) has ever begun immediately when the Fed begins hiking. That’s because, as both Milton Friedman and recently Jerome Powell have said, monetary policy has “long and variable lags” before it's felt in the real economy.

Going back to 1985 the lags can be measured as follows:

Time from final rate hike to official start of recession.

1989: 15 months

2000: 9 months

2006: 17 months

The last rate hike of the recent Fed campaign was in July of 2023. Therefore the range of 9-17 months correlates—while not a perfect predictor—to a recession beginning anywhere from April 2024 to December 2024.

In other words, students of recent history know to be more patient than the headline-jockeying talking heads in the media.

Keep in mind as well that on the official start date of a recession few people notice or “feel” like they’re in a recession. It’s only six or nine months later, after unemployment has risen sharply, that the NBER releases its statement declaring “the recession officially began two quarters ago,” to which the public by then moans “tell me something we don’t already know.”


But what about low unemployment and the booming stock market?

The Correspondent has included three more St. Louis Federal Reserve charts comparing the Fed Funds policy interest rate against the broad Wilshire 5000 stock market index from 1988-1991, 1999-2002, and 2004-2009 (URL links at bottom of article).

Note in all three cases, all while interest rates were rising so was the stock market. During each of those events Wall Street pundits on TV were saying “Rising rates are a sign of a strong economy. Buy now.”

And once rates peaked or even started to come back down, the stock market was still setting new record highs (Exception: 2000 which was the greatest stock market bubble in American history, where the market peaked two months before the last rate hike).

What was happening in the news while the market was hitting new highs in 1990, 1999, and 2007?

The Correspondent personally remembers two of those three. Every day on the business news Wall Street strategists were saying:

”The rate hikes are over and the economy is doing fine. All the talk about recession has come to nothing."


“The Fed is now cutting rates. Recession fears are in the rear view mirror and with lower interest rates the economy and market will boom even more!"

In all three cases, within 2-10 months of notching the last stock market record high, recession began and the market dived into bear territory, giving new investors a rapid dose of heavy losses.

In 2023 and 2024 history is so far repeating itself. Today, just as in 1990, 1999, and 2007, we hear every day on the news: ”People have been talking about recession for a year and a half and it hasn’t happened. They’ve been proven wrong. It's time to go all in before the real economic boom.”

The mistake these people made in the past was they didn’t realize it would take 9-17 months after the last rate hike for the recession to begin. Or that it would take 2-3 years after the first rate hike, when recession talk started up, because raising rates from zero to 0.25% or 0.5% isn't going to cause a recession—raising them to 5.25% will, but that took the Fed over a year to get to.

But due to lack of patience and not studying history they tired of waiting and declared the coast was clear--just months before the economy slumped.

And low unemployment is the easiest of all to explain. Included in the final URL at this article’s end is the unemployment rate going back to the 1980’s. Note that at the official beginning of every recession unemployment is still very low and only starts to rise sharply once the recession is already underway. Just as we all hear in the news (correct this time for once), unemployment is the notorious “lagging indicator” and rarely warns the public that recession is around the corner.

Now does the Economics Correspondent guarantee a recession? That would be pretty dangerous, but he will say recent events in no way shake his convictions because everything is playing out exactly as it has in every recession going back to the mid-1980’s. That includes all those pundits declaring “the economy is great, there will be no recession” not to mention lots of journalists trying to run cover for Joe Biden’s re-election chances.

So sure, you never say never, there’s always a first time for everything, and there’s always a tiny sliver of a chance things will be completely different this time. But the odds are so small that he’s not changing his opinion, in part because as a student of economic history he hasn't yet seen any reason to.

And what will it take for the Correspondent to say “I was wrong?”

The window for the start of recession is roughly April-December 2024, and it could take a couple of extra months as a cushion. Plus people rarely know a recession has started when it actually starts. So if there’s still absolutely zero sign of a recession once we get into the summer or fall of 2025 (about 24 months after the last rate hike) the Correspondent will gladly admit he got this one wrong, although he wouldn’t have done it any differently were it all to happen again.

ps. If a recession pops up in 2030, seven years after the last rate hike, the Correspondent will definitely not say “See, I was right all along.” Two years later is historical cause-and-effect plus those “long and variable lags.” Seven years later is just a broken clock that was right twice a day.

Additional charts:

Fed Funds versus stock market 1988-1991.

Fed Funds versus stock market 1999-2002.

Fed Funds versus stock market 2004-2009.

Unemployment rate before recessions.

Thursday, February 1, 2024

1983: Nixon Prescient on the "Double Standard" Media

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Although the Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff views Richard Nixon’s presidential legacy as “mixed” to say the least, few would question his intelligence and grasp of issues. And in just the first three minutes of this interview he was 110% on target... in 1983.

Mercifully (for his sake) Nixon didn’t live long enough to see how much more right he would be proven in the Trump and post-Trump eras.