What Good Comes From Recession?
And Has it Already Started?
Whether it’s the price of gas, escalating inflation in general, or news of the blood bath that stocks took last week, it’s hard to avoid the feeling that the economy is not on the right track. This brings up the dreaded word: Recession!!
So are we in a recession? It certainly feel like it to me. And aparantly I’m not the only one.
The Atlanta branch of the Fed runs a model which uses the latest economic reports to predict what the upcoming Quarterly GDP print will be. Well that model now predicts zero GDP growth for Q2 and the model is trending down fast...
Recall that a technical recession is two consecutive quarters of negative GDP growth and quarterly GDP isn't reported until the end of the first month after the ending of each quarter. So we will never know if a recession has started until 7 months after it begins. During the first quarter of 2022 ( January through March) the US had negative GPD growth, and the current quarter ends at the end of this month.
So if you hear anyone stating that "Technically this isn't a recession…" you should answer, "No, it likely is, we just won't know it until the end of July…"
So if we are in a recession, what does it mean? and how will it effect our everyday lives?
On it’s surface, nothing good comes from recession. When the economy constracts we all get poorer, be that from the indirect effects of a downturn in the market or the much more direct effect of lost jobs and closed businesses. Recessons are a major disrupter to our lives, and many people will sees their lives turned upside down because if it.
If mortage rates go up many may loose their homes, and if home prices drop many may find themselve underwater on their current mortgage. Layoffs in some sectors reduce overall consumer demand which could cause a cascade of even more layouts and greater economic damage. It’s hard to predict, and somewhat frightening, and it’s reasonable to assume that nothing positive comes from the process. But that’s not entirely true.
One of the major silver linings of recessions is that they force companies to eliminate wasteful and useless jobs and replace them with more productive jobs as the economy starts to grow again. In the same way, recessions help to eliminate wasteful, unproductive companies to which capital has been misallocated. This then allows that capital to be better directed to more productive companies who grow the economy faster and make us all richer and better off!
As Elon Musk recently and so eloquently put it, a recession is an "Economic Enema":
"Eventually the Economic Enema does its job, the BS companies go bankrupt, and the ones that are doing useful products are prosperous."
This entire one minue clip from Elon, explaining the benefits of recessions, is worth a listen:
It's tough news to take as we all watch our stock accounts plummet day after day, but there are better and more prosperous days ahead if we make it though...
I believe a major problem our country faces today is that so many of the useless jobs in our society are in recession proof industries.
Positions like the Diversity Dean at a public university, or the Environmental Impact Statement reviewer at a regulatory agency or a contracts manager for homelessness assistance. The list goes on and on.
Of take this example from the Wall Street Journal:
Space X needs FAA clearance to launch their new Starship rocket from their Boca Chica lauch site in Texas, but the do it the FAA has issued an insane wish list of requests including:
• “Preparing a historical context report (i.e., historical narrative) of the historic events and activities of the Mexican War (1846-1848) and the Civil War (1861-1865) that took place in the geographic area.”
• “Funding the development and production of five interpretive signs (in English and Spanish) that describe the history and significance of the historic properties.”
When the FAA forces Space X to write what is basically a book report on the Mexican American War, do you think Space X does that in house! Of course not! They write a giant 7 figure check to some consultancy firm on an approved government list whose entire business is creating completely useless reports that benefit no one. Useless!!!
We have so many bloated government bureaucracies which are metastasized by private entities which do little to help society, yet they make massive incomes off the government teat and employ millions in completely useless work.
Much as recession acts to clear out unproductive work in the private sector, there needs to be a concerted effort to create the same mechanisms in the public sector, as well as the portion of the private sector directly dependent on the government for their salaries.
I'm at a loss for how to make that happen, as it feels like over my entire life every push to lower government spending or cut government regulations has failed. It might just take an economic predicament bad enough that the public has no other choice.
Anyway 0 and 2…