Follow me down a $200 billion rabbit hole
It’s August 3, 2022. Here’s the rundown:
The recession is here. Right?
Follow me down a $200 billion rabbit hole…
Numbers, links, and more
Bah gawd that’s recession’s music! Or is it?
GDP numbers are in, and it shows we’re in a recession. Or does it?
The second quarter GDP numbers were released last week, and they showed that the U.S. economy contracted 0.9%. During the first quarter, GDP tallied -1.6%. That’s two-straight quarters of economic contraction. Bah gawd, that’s a recession!
The White House tried to get out ahead of the GDP numbers before they were released, in what some people were calling an effort to “redefine” recession. That had many people upset. Again, we generally think of a recession as being defined as two-straight quarters of negative GDP growth, so why would this time be any different? Because Biden says so?
It’s obvious that the White House wanted to soften the blow a bit here. It’s natural that they’d want to do that, and it’s also natural that people who are opposed to the current administration would cry foul.
But the truth is that recessions are “officially" called” by the National Bureau of Economic Research (NBER). It’s a group of economists who take a look at what’s going on, and then decide to call it a recession. The group includes Robert Hall of Stanford, Robert Gordon of Northwestern, James Poterba of Massachusetts Institute of Technology, Valerie Ramey of the University of California-San Diego, Christina Romer of UC-Berkeley, David Romer of UC-Berkeley, James Stock of Harvard, and Mark Watson of Princeton.
Smarter people than us.
Even so, we may be in a recession, and they just haven’t said so, yet — likewise, maybe we’re not. We simply don’t know (and, on another point, if everybody thinks we’re in one, what’s the difference?).
As for why we don’t know? It’s because, on top of the two quarters of economic contraction, there are numerous other variables at play. And many of those factors aren’t screaming “recession.” The GDP numbers are a big indication — there’s no doubt about that. But they’re only a piece of the puzzle.
Another big piece is the unemployment rate, which is still at 3.6%. It may be higher now, but the numbers are lagging — again, we just don’t know yet.
Another key variable is consumer spending, which rose 1.1% during June. Other factors to take into account are how severe the economic contraction is, and whether economic activity on a broad scale is on the decline.
Basically, it boils down to this: People still have jobs, and they’re still spending money, and the economy contracted less than 1%…so, is this actually a recession?
That’s the question for the NBER board. Again, we could be in a recession right now, and they may not declare so for three months. We just don’t know. But the above factors are playing into why no one is saying for sure. Companies are laying people off, and inflation is taking a toll on Americans across the board — we may see those impacts show up in the coming months’ data.
Suffice it all to say, though, that if we are in a recession, it’s a damned weird one. It’s been a few months since we’ve all lived through some crazy historic event, right? Why not add “weird recession” to the pile?
Follow me down a $200 billion rabbit hole…
It’s easy it is to get sucked into a conspiracy-laden black hole.
This is something of a thought experiment, so bear with me. But first, a short story:
“Operation Ottercat” had commenced. I was sitting in a tattoo shop in Sacramento, wearing, if my memory serves correctly, nothing but a floral swimsuit I had purchased at Walmart earlier that day. I was editing the Wikipedia page for otters — I changed the first sentence on the page to a simple sentence: “Otters are cats.”
This was all a part of a game my friends and I had come up with: Make something up, and convince someone that it was true. I decided that I was going to convince my buddy — let’s call him “Floopy Mark” — that otters were cats.
As soon as I told him that otters were cats, he immediately Googled “otters,” and walked right into my trap. He pulled up the Wikipedia page, which read “Otters are cats,” and had his mind blown. He spent several years telling anyone who would listen that otters were cats — it’s an interesting trivia nugget, after all.
Now, to win this game, you had to be sure that your target had bought the lie. Then, you’d simply say in a deadpan voice: “Idiot.” Then, their heart would break, and you’d dance around and laugh for hours.
Well, eventually (years later), someone told Floopy that I had duped him. His name popped up on my phone one day, and I, having been tipped off that he knew otters were, in fact, not cats, answered: “What’s up, idiot?”
Operation Ottercat was effective for a very simple reason: It’s kind of sort of plausible that otters could be cats. I mean, red pandas aren’t actually pandas…who knows? Animals are weird.
But there was juuuuuusssstttt enough room in the “otters are cats” lie to make Floopy buy it.
And it’s that little tiny amount of space between the door and the doorjamb— the little kernel of truth in many lies — that allows people to get their foot in the door, and fall down a rabbit hole.
Let’s try one out:
I recently saw this study from researchers at Yale and Vassar, which finds that the U.S. spends $200 billion per year on cancer care, or $600 per person. That’s twice as much as 21 other, similar countries, and that additional spending doesn’t lead to better results or outcomes.
Now, that’s a lot of money, all going directly to big pharma and the healthcare system. It’s kind of a nice racket, actually…sit back, and collect hundreds of billions per year. It almost makes you wonder if there’s an incentive to actually cure cancer, right?
Wait…you don’t think that we’re purposefully not curing cancer so that big pharma can line their pockets, do you? No, no…that would be a massive conspiracy. People would have been murdered to keep it a secret. It makes sense, though, with the vaccines and all that.
But you know, maybe I’ll look around. I could ask if anyone on Facebook knows anything? Actually, I’ll just start with a quick Google search.
Here’s a book that a lady wrote called “Mass Murdering Doctors: The Truth About Oncologists, Chemotherapy And Cancer: How Corrupt, Greedy ‘Doctors’ the MHRA/FDA and Big Pharma tried to Murder Me with the Lie that is Chemotherapy.” Oh wow, and a documentary!
Maybe I’m on to something?
I guess I’m not the only one who had this thought, too…seems like a lot of people are geniuses just like me! Oh man, this doctor even says it’s all a money-making racket! A doctor! No, I’m not going to read the whole article to make sure I’m accurately synthesizing what he said…I got the gist!
It does make sense though. Why would they want to cure this when they make so much money? I should tell my Facebook friends.
So, we started with a kernel of truth: We have a for-profit healthcare system in which some companies and people make piles of money. That’s enough to get your foot in the door. And with some selective reading and Googling, it’s easy to find sources that will confirm what we’re looking for. Given the low rates of media literacy in this country, it’s easy to see how you can fall into a rabbit hole, and fast.
Of course, this little “cancer cure” experiment ignores one big thing: That you could sell a cure for cancer for a hell of a lot more than you sell the treatments.
The other issue is that it’s easy to mistrust the media and the government. They do and have, at times, lied, covered things up, and more. This makes it even easier to fall into the rabbit hole. To believe the ottercat.
But remember: We live in a sophisticated world, and we all need to be on guard and smarter. Otherwise, you end up in Dallas waiting for JFK Jr. to emerge and give a speech. If you try hard enough, you can convince yourself of almost anything.
Like otters are cats.
*Sorry, Floopy — love you, buddy
Numbers, links, and more
9.3%: The total return of U.S. stocks during July — but still down 14% year-to-date, and up 12% over three years. (The Capital Spectator)
5.13%: The average rate for a 30-year mortgage as of July 31, down from 6.28% on June 14th. (CalculatedRisk)
-90%: The total return on Mike Tyson’s NFT collection since their debut. (Bloomberg)
Mulligan: Financial professionals discuss their biggest mistakes over the years. (Bloomberg)
Limits reached?: “America’s technology titans are suddenly having to contend with forces that have long plagued old-economy CEOs…it’s bosses had better get used to them.” (The Economist)
Facts don’t work: If you want to garner interest, facts won’t do the job on their own — you need to explain how they benefit society, too. (The Psychologist)