3 ways to join the MemberVenue:

$25/month Annual Membership  or  $35/month Quarterly  Membership or  $50 Project Access-fee

password reminder

About    Contact

Media Access

Speaking Engagements

Let's keep the site ad free ... please consider subscribing to the MemberVenue or a donation to assist my research!

FreeVenue:   PeakOil   Economics   ClimateChange   Elections

Beware ... the Lunatic Fringe

MemberVenue:   PeakOil   Economics   ClimateChange   Elections

  Canada Flag
Trendlines Research  ...  Providing macro-economic charts & guidance for Legislators, Policymakers, Investors & Stakeholders
long-term multi-disciplinary perspectives by Freddy Hutter since 1989

FreeVenue Home • Peak Oil • Economics • Climate Change • Elections

 Economics  @  FreeVenue

FreeVenue Economics-Home • Realty Bubbles Monitor • G-20 Recessions Monitor • TRI Canada • TRI China • TRI USA • Real Unemployment Rate USA • Debt Wall USA

  TRENDLines Recession Indicator - USA TRI venue

|

FreeVenue charts are posted 90-days after the guidance release @ the MemberVenue

Google TRANSLATOR

United States Flag United Kingdom Flag Australia Flag France Flag Germany Flag Spain Flag Italy Flag Japan Flag India Flag Singapore Flag  I'm pleased to tell TRENDLiners this past Summer 85% of visitors were International (120 nations:  most from USA, UK, Australia, France, Germany, Spain, Italy, Japan, India & Singapore)

My status

clik to follow @TrendlinesDotCa for new chart alerts

Members & Media with query/comments are welcome to email or  skype   me (freddyhutter) for chats, phone & video-cam

Please Donate & let's keep the site ad free...

 

 

    USA long-term outlook ~ TRI-2030  (link)

    monthly update of USA TRENDLines Recession Indicator  (TRI USA)

 
see also:   USA REAL Unemployment Rate  (14.4%)
see also:   TRI Canada
see also:   TRI China
see also:  G-20 Recessions Monitor
 

Below ~ blast from the past:    in Dec-2008, TRI-USA was only GDP model warning in real-time GDP had plunged to -9.7%

 

Visit the MemberVenue for the archive of 2013-2012-2011-2010-2009-2008 TRI charts...

(blast-from-the-past:  scroll to the bottom of this page to view TRI chart guidance of one year ago, back in Sept/2011 & Dec/2008

 

clik to view Trendlines USA Debt Wall chart of 2024 Austerity Crisis

 

 

TRI USA GDP Targets  (2013/5/30)

TRI & TRIX methodology ~ the TRENDLines Recession Indicator uses proprietary heuristic algorithms to transform 18 economic data sets into an insightful Real GDP baseline thru 2030 filtered of reporting period noise.  Layered over the animal-spirits-plus results are the nuances derived from the TRENDLines Realty Bubbles Monitor, Barrel Meter, Gas Pump & Debt Wall model projectionsThe uniqueness of its methodology minimizes false-positive & false-negative Recession signals.  When TRI Real GDP output is corrected for Congressional fiscal policy Deficits/Surpluses via fiscal multipliers, TRIX reveals the economy's underlying Structural GDP.

In July of each year, BEA issues a major release amending the last thirteen quarters of GDP.  Their revision variances were as much as 1.6% in July 2012, 2.1% in 2011 & 1.5% in 2010.  While TRI is recalibrated regularly, I have mostly avoided benchmarking to recent GDP since BEA revisions generally serve to re-confirm original TRI Real GDP output.  Economic data releases often include updates of past years & decades and these serve to recalibrate past TRI.  And TRI is dynamic:  long-term forward looking economic data & animal-spirits-plus are eventually amended by the medium-term data which in turn is revised by short-term indicators.

TRI:  timely and accurate guidance & research notes ~ See the archives to view original output since mid-2008.  Observation of the incremental revisions in sequential charts can be as insightful as actual figures by noting the pattern of the changes over time.  Back on Dec23 2008, the TRENDLines Recession Indicator warned in real-time of monthly GDP approaching -9.7% whilst BEA was still estimating a mere -0.5% GDP.  Not `til July29 2011 did BEA finally admit a -8.9% bottom ... 31 months after TRI guidance!  Stay tuned to TRENDLines for the very best in timely, accurate & dynamic outlooks...

TRI caveats ~ Projections are subject to and guided by geopolitical issues, disasters, weather events & future mitigation activity by the Federal Reserve's FOMC monetary policy & Congressional fiscal policy.

2012Q1 1.1 %
2012Q2 1.7 %
2012Q3 1.2 %
2012Q4 1.5 %
2012 1.3%  
2013Q1 1.9 %
2013Q2 2.2 %
2013Q3 1.7 %
2013Q4 2.4 %
2013 1.9%  
2014Q1 2.8 %  (high)
2014Q2 2.0 %
2014Q3 1.9 %
2014Q4 1.8 %
2014 2.2%  
2015 2.0%  
2016 1.7%  
2017 1.5%  
2018 1.2%  
2019 1.0%  
2020 0.8%  
Severe Recession     indicated:  2024-2027
~

90-days too long to wait?  View our current guidance charts via:  (a) Annual-membership special of $25/month or (b) $35/month Quarterly access or (c) $50 project access-fee

   GDP would be -3.4% w/o the massive deficit

Aug 30 2013 delayed FreeVenue public release of May 30th MemberVenue guidance ~ Stripped of reporting period noise, baseline Real GDP has been climbing 26 months, much in thanx to dissipation of a petroleum headwind which was a record -1.6% during the April 2011 Libya crisis.  On the short-term outlook, the TRENDLines Recession Indicator's measure of animal-spirits-plus suggests GDP growth will continue it upward trek, reaching 3.1% in January, but from that juncture it's all downhill.

Analysis by the Trendlines Debt Wall model attributes much of the decline to the (2Q15) combination of rising Treasury yields and a secular uptrend of the federal Deficit which together cause debt service on the national debt to crowd out Federal discretionary and program spending.  Longer term, the model continues to develop its discovery (Sept/2012) of a fiscal tipping point which leads to a  potential 2024 austerity crisis and ultimate multi-year Severe Recession.

The Trendlines Recession Indicator monitors and projects two macro metrics:  (a) TRI - a gauge of baseline Real GDP filtered of reporting period noise;  & (b) TRIX - a measure of the health of the underlying economy via a filtering out the influence of Congress's fiscal policy Deficits.  The latter suggests the USA has been mired in a Structural Greater Depression since late 2006.

 TRI   This month's guidance is in general agreement with today's announcement by BEA its second estimate for March (1Q13) Real GDP is 2.4% - compared to the 1.9% pace gauged by TRI.  May GDP is assessed @ 2.1%, up from 2.0% in April.  The ongoing general decline in petroleum prices provided a 0.1% tailwind to GDP growth this month.  TRI's analysis of the federal Deficits and its measure of animal-spirits-plus indicates an upcoming 2.2% 2Q13, 1.7% 3Q13 & 2.4% 4Q13.  It appears the growth rate of the current business cycle faces a crest (3.1%) in Jan/2014.

Because the Debt Wall projects Federal Deficits will rise to a record $1.4 trillion over the next ten years, it is virtually impossible for the American economy to suffer a prolonged contraction.  Unfortunately, the price of Keynesian economic activity as presently framed results in deteriorating Deficit & Debt to GDP ratios.  Employing empirical observations, the model foresees a series of incremental sovereign debt rating downgrades and ultimately an exponential surge in 10-yr Treasuries yields.

Starting in late 2015, increasing debt service manifests in the crowding out of federal program spending.  TRI forecasts annual GDP growth rates will suffer decline over the next ten years.  This scenario conflicts with my original Sept/2009 analysis of USA economic activity over the past four decades and its conclusion of the existence of an 8.5-yr business cycle with probable troughs in 2017, 2026 & 2034.  It appears the magnitude of the Great Recession and its significance as a once-in-a-lifetime "balance sheet recession" event has temporarily blown out the harmonics of the natural behavioural rhythms.

Albeit many say the post Great Recession softness is solely associated with ongoing deleveraging related to balance sheet recessions, my analysis suggests there is also a larger decadal secular downtrend of GDP growth rates in play.  This decline trend is typical of maturing economies and also results from activism among G-20 central bankers aimed at damping business cycle amplitudes.  The timing of eventual hard or soft landings changes as inflation and inventory factors come into play.  Layered over those natural cycles are the mitigation efforts:  Monetary Policy actions by the Federal Reserve's FOMC & the Treasury Secretary's guidance to Congress with respect to Fiscal Policy.

The long-term prognosis for the American economy is simply horrific.  The aforementioned ever-rising Federal Deficits & Debt are plainly not sustainable.  The models conclude the Federal Gov't will pass thru a critical tipping point in 2024 ... a year in which another projected record Federal Deficit approaches 7% of GDP; the Federal Debt ($26 trillion) exceeds 120% of GDP; today's annual Debt service of $235 billion will have grown to $1.0 trillion; and the dagger thru the heart:  trajectories revealing more of the same.

Empirically, this perfect storm of economic circumstances induces 10-yr Treasuries above 7% and gives rise to a backing off on federal borrowing.  Congress will have no option but to implement the harshest of austerity measures which then leads to rocketing unemployment and ultimately collapsing economic activity.  The model suggests this Austerity Crisis results in Real GDP plunging to -8.0% in 3Q24 in the worst stage of what will become a multi-year Severe Recession.

A clue that the model's scenario is truly unfolding will manifest upon seemingly mysterious incremental rising yields on Treasuries yields which are strikingly in excess of those of its G-8 peers.  Enhancements to the Debt Wall earlier this year predict tipping points for the major bond rating downgrades from "AAA" to "C" along with associated projected 10-yr yields ... and the subsequent post-intervention recovery.

The model concludes 10-yr yields will rise exponentially and the upon surpassing 7% (2024) will signal the international investment community has resigned itself to the fact the trajectory for structural Deficits will only worsen without intervention.  Realizing its house-of-cards is caving, Congress will mitigate its future borrowing needs by resolving to slash its Deficit over a four year period.  The TRENDLines Recession Indicator calculates this historic austerity measure ($346 billion x's 4) will induce a 14-Qtr Severe Recession with Real GDP plunging to -8.0% in 3Q24.

TRI's gauge of GDP over the whole event will avg -2.9%, compared to -4.5% in the Great Recession (-3.1% BEA).  Elimination of the Deficit does not mean an easy ride thereafter.  After rising to a record 134%, the Debt/GDP ratio improves to only 125% by 2030.  As such, the bond rating is still a crummy "CCC" with 10-yr yields of 4.8%.  It is the USA's turn to find how long is the road back to "AAA" ... number crunching says the ride thru the 21 series upgrades takes 'til 2048!

But frankly, these discussions concerning GDP activity over the past six years are somewhat shallow albeit typical of conventional economic narrative.  It is indeed a trivial pursuit, one dealing with the patient's surface symptoms ... not the underlying disease.

 TRIX   The true extent of the malaise of the American economy is best comprehended when economic activity is viewed thru a prism which unveils the influence of the Federal Gov't Deficits.  This is accomplished via the filter of fiscal multipliers.  Trendlines Research has been publishing since Sept/2012 the resulting metric (Structural GDP) depicted as TRIX (red line) in the chart above and retroactive to 1970.

Analysis of long-term Structural GDP confirms the same 8.5 year (102.5 month) natural business cycle I found in my 2009 study using Real GDP.  The 1974-'76 event was a Structural Severe Recession (-2.7% avg SGDP over 11 Qtrs).  This was followed by the deeper 1979-'86 Structural Severe Recession (-3.0% avg SGDP over 8 years).  On its heels was the 1988-'93 Structural Severe Recession (-2.4% avg SGDP over five years).  At that juncture, one can't help but notice the outstanding prosperity of the 1994-Y2k era.  The May/2001 to Aug/2006 event was a Structural Technical Recession (-0.8% avg SGDP over five years).

The current episode began Nov/2006 and is truly massive.  SGDP improved to -3.4% this month after plunging to a low of -15.4% in Jan/2009.  With SGDP averaging -8.0% over the last 26 Quarters, this event is a defined Structural Greater Depression with no sign of resurrection pending a sea change in political leadership or some extraordinary intervention.

To give this epic event some historical context, SGDP avg'd -9.7% during the four worst years of the Great Depression (1930-1933).  The current event is approaching a full seven year span (2007-2013).  SGDP was -17.1% in the worst year of the Great Depression (1932).  It was -13.0% in 2009.  So this structural contraction may be slightly less deep but it is far broader.

Congress implemented Keynesian Deficit measures (2.1% of GDP) in the Great Depression which proved insufficient.  The result was avg Real GDP of -7.4% over those four years.  Conversely, the unprecedented fiscal policy actions in this event have virtually masked the -8.0% negative SGDP.  In fact, had Congress agreed to the extra $400 billion in stimulus requested by Paulson/Bernanke/Geithner, the only negative year for Real GDP (2009) would have come in positive ... not -3.1%.

Purists may argue about the merits of long-term healing in a Keynesian environment vs a laissez-faires approach and whether the funds were allocated properly, but clearly this event would have been extremely worse from a socio-economic standpoint had not the proper amount of fiscal stimulus been implemented.  The measures to hoist the -8.0% SGDP "almost" worked perfectly.  Congress did the heavy lifting via its massive deficits (6.7% of GDP) and the FOMC assisted with accommodative liquidity actions and communications aimed at restoring Confidence levels.  Rather than the expected -1.3% avg Real GDP, favourable fiscal multipliers and innovative FOMC accommodation resulted in 0.8% growth over these past seven years.

It appears the improvements to SGDP are near an end.  The normalization of interest rates will adversely affect servicing of the national Debt, resulting in ever-diminishing gov't discretionary spending from mid 2015 onward.  SGDP will deteriorate to -6% over the next ten years.  Note that in the absence of federal Deficits post-2027, SGDP and RGDP are again aligned.

May 30 2013 Recession Alert:  The American economy continues its struggle to recover from the Structural Greater Depression it entered in Nov/2006.  The underlying Structural GDP (TRIX) improved to -3.4% this month, having avg'd -8.0% over the past 26 quarters.  The Congressional fiscal policy measure of five massive trillion dollar Deficits continued to lift Real GDP (TRI) into positive territory:  2.1% in May.  This practice will prevent contractions & business cycle soft-landings for several years but the measure is not sustainable.

The Trendlines Recession Indicator's visible 2030 horizon reveals TRIX will deteriorate after April 2015 as overwhelming federal debt service commences to crowd out federal program spending.  Barring a sea change in political leadership, findings via the TRENDLines Debt Wall model suggest the USA is en route to a record $1.4 trillion Deficit & $26 trillion Federal Debt by 2023.  Deficit & Debt to GDP ratios of 6% & 117% mirror economic metrics which empirically lead to 7% sovereign bond yields, borrowing constraints, harsh austerity measures and in the USA's case ... induces a 14-Qtr Severe Recession (2024-2027).

 Headwinds   Factors contributing to short/medium/long term weakness of the RGDP & SGDP outlooks continue to be:  (a) political dysfunction;  (b) stubbornly high unemployment;  (c) rising international inflation & interest rates;  (d) structural deficits and sovereign debt rating downgrades;  & (e) by contrast and in an ironic twist, the $15/barrel decline in USA Refiner Acquisition Crude and related petroleum costs since the Libya crisis are in turn providing the economy with a quantifiable tailwind!

    (a) Political Dysfunction   Progress in renewing the nation's infrastructure, enacting new free trade agreements and resolving systemic inefficiencies has slowed to a snail's pace in Washington DC.  Cynicism among voters with respect to ethics and integrity in Washington gave rise to the Tea Party movement.  One of the world's most corrupt electoral systems has led to utter dysfunction in the halls of Congress.  Many Congressmen appear beholden to donors.  Their fundraising activities (and those of the President) occupy far too much of their weekly tasks.  Crucial legislation always seems too close to the next election.  The lobby sector is worth billions.

Most every bill is filibustered.  60 votes is the new definition of majority in the Senate.  Because a Budget has not been passed since 2009, Continuing Appropriation Resolutions and the federal Debt Limit extensions essentially have become a proxy for the nation's annual Budget debate.

It is a malaise that does not distinguish Parties, has infiltrated several White House administrations and apparently has spread to many State legislatures and municipal councils.  Polarization and adversarial politics has unseated the spirit of compromise.  The gridlock stymies good and critical legislation and is at the root of the breakdown in consumer/commerce confidence levels.

Mismanagement of the fiscal affairs stymied Keynesian options during and in the aftermath of the Great Recession.  Whilst Canada, Japan & other G-20 nations are engaged in deficit-enabled infrastructure spending, the US Gov't finds its 105% Debt/GDP ratio prevents such endeavours.  Instead, Congress borrows a trillion a year just to keep the phone & lights on...

    (b) Unemployment   Many of the macro stats have been tainted over the past three years 'cuz so many folks are still victims of  the Great Recession.  Clearly the 11.7 unemployed (U-3) and 10.3 million under-employed & marginally attached souls on the sidelines are a drag on the economy.  At 13.9% in April, the Real Unemployment Rate (U-6) is not yet even half way back to its pre-recession Dec/2006 low of 7.9% after rocketing to a 17.2% peak in Oct/2009.

The TRI model projects headline U-3 UR is on a glide path which won't see equilibrium (6.0% natural unemployment rate) 'til mid 2015.  The wide-spread malaise persists.  This level of progress does not reflect so much a marginally improving economy as it does the realities of an aging society.  From Jan/2011 and thru the following 19 years, 10,000 boomers a day are turning 65 years of age.

Boomers are the 77 million Americans born 1946 through '64.  The number of people eligible for SS will nearly double from 46 million to 80 million by the time all the boomers reach 65.  So the big question is of the 150,000/month potential, how many are retiring?  The 63.3% participation rate has been in secular decline since Y2k (67.3%) due to boomers leaving the labour force,  This is a long-term trend which won't see the rate level off (48.5%) 'til 2050.

So in short, with this many folks not working and so many graduating students and immigrants not able to get their first jobs, the economy remains in a rut.  If there is any good news out there, it would be the economy is finally surpassing the 106k new net job creations per month required to hold the unemployment rate static considering graduating students and immigration.  This progress would be jeopardized by any attempt to again raise the federal minimum wage.

When the US economy entered the present Structural Depression event in March 2007, the federal minimum wage was $5.15/hr.  Despite the fragile situation, Congress raised it 41% ($7.25) over the next 28 months thereby making millions of then employed and potential hires thoroughly uneconomic ... mostly affecting unskilled blacks and Hispanics.  Unintended consequences then put the next tier of wage earners ($6-$9) at risk as they demanded the usual premium compensation over the minimum wage earners.  In this light, Obama's SOTU demand of another 24% increase (to $9) borders on insanity...

    (c) Rising International Inflation & Interest Rates

TRI currently forecasts the normalization of US interest rates will commence in Dec/2014.  But regardless of FOMC targets & activity, rising commodity prices and general global inflation in the meantime means the housing sector may already be facing a 2% rise in 5-yr mortgage rates by that juncture ... long before the domestic economy can handle them and thus yet another potential medium-term headwind.

    (d) Structural Deficits & Sovereign Debt Rating Downgrades

The USA's AAA sovereign bond rating was rightfully cut in July/2011 by Egan-Jones (S&P a month later). Egan-Jones trimmed it again in Sept/2012. The remaining AAAs (Finland, Australia, Canada, Norway, Denmark, Germany, Luxembourg, Netherland, Singapore, Sweden & Switzerland) have long had better fundamentals.

Failing mitigation, the structural deficits and compound interest will see the Federal Debt rise to $26 trillion by 2023 before a borrowing wake-up call brings this fiscal madness to an end.  Having the ability to print currency, it is of course highly improbable the Federal Gov't could ever actually default so fear of redemption is not really an issue.  Rather, rising yields would reflect the prospect of inflation (from excess printing), currency debasement and the derogatory effects upon repatriation of foreign invested funds.  Further, the sale of bonds in a rising yield environment will require deep vendor discounting.

The TRENDLines Debt Wall model has determined by 2023 the federal govt's Structural Deficit will rise to $1.4 trillion (6% of GDP).  Servicing the $26 trillion Federal Debt (117% of GDP) will cost $1.0 trillion ($235 billion 2013).  Empirical observations reveal a probable scenario.  As Debt & Deficit to GDP ratios rise, bond rating agencies will incrementally downgrade long-term treasury bonds.  The model predicts the USA "A" series rating will fall to "B" (3.75% yield) in 2018 and to "C" series (5.0% yield) in 2022.  By 2024 yields will have exceeded 7.0% and long-term borrowing will almost certainly grind to a halt.  Congress will have no option but to eliminate the Deficit over the ensuing 48 months.

A solution has been elusive and for one to come to fruition the so-called grand bargain must be struck.  The loudest voices in DC come from the 62-member Tea Party faction on the right and the Progressives on the left.  The latter wish to protect long-term entitlements and the former desire a balanced budget.  A compromise lies in striving to work towards both ends concurrently so each feels similar gain (or loss).

Americans are finding themselves in the same ramifications of this Keynesian experiment as are the Eurozone peripheries and others before them (New Zealand, Canada, Argentina etc).  The federal gov't was lax in its fiscal management last decade and entered its Structural Greater Depression with a 72% Debt/GDP ratio.  It is 105% today.  Realization of the severity of the approaching wall may be quietly extinguishing entrepreneurship in America.  47% of its citizens are takers.  It is the Obama doctrine:  Ask not what you can do for your country.  Ask what the Gov't can do for you!

The future presents a truly ugly Catch-22 scenario.  Congress will find it must continue its trillion dollar Deficits to sustain positive Real GDP.  However this practice bloats the federal debt and hastens the day the bond vigilantes bring the Treasury auction yields to crisis proportions.

    (e) Wow, Oil Prices become a Tailwind!   Two years of declining residual crude oil prices have finally reversed this factor from an economic headwind to a tailwind.  The TRI model had calculated the effect of cumulative quarters of high oil, diesel & gasoline prices had at its peak during the Libya crisis shaved 1.60% off the April 2011 RGDP growth pace, nudging out the former record for this factor of 1.55% in June 2008.

With USA Refiner Acquisition Crude price plunging from $113/barrel to $97, the baked-in headwind effects finally exhausted in March 2013 and in turn provided instead a 0.2% tailwind to GDP this month.  The TRENDLines Barrel Meter model attributes the downward trend to a reduction of the Stress Premium price component ($24 to $10/barrel) as global geopolitical issues dissipated.  The record for tailwinds (-1.38%) was set in July 2010, reflecting ramifications of the 71% RAC collapse.

It should be stated the American economy is much too diversified and per capita disposable income too large for high petroleum costs to induce a Recession.  Just shy of the level where oil price would do significant harm, the more vulnerable G-20 nations are already entering Recessions and thus paring back their Demand.  The definitive Oil/GDP ratio where G-20 Recessions would again be induced is currently $130/barrel RAC ($124 WTI).

That said, high petroleum prices can certainly damage susceptible sectors of the American economy.  The TRENDLines Barrel Meter & Gas Pump models first discovered (Nov/2009) predictable oil & gasoline price thresholds which if surpassed harm auto sector growth.  Breach of these definitive petroleum/GDP ratios signaled setbacks for Light Vehicle Sales in 1980, 1990, 2008, 2011, 2012 as well as earlier this year, reflecting buyer resistance to excessive gasoline & diesel costs.

Although RACrude price has retreated below the LVS Barrier ($117/barrel), gasoline has been stubborn.  This current pump LVS Barrier is $3.58/gal, still a tad under today's national gasoline price ($3.64) and the reason new car sales have been stagnant at the 15 million unit/yr pace since Sept/2012.  The Gas Pump forecast for imminently lower prices should result in a surge of auto manufacturing and sales this Summer.

The environment for tailwinds and a rejuvenated auto sector should be lengthy.  The models currently forecast $68/barrel USA RAC & a $2.70 pump price by 1Q18.  The consequences of LVS Barrier incursions are dire.  During the Great Recession, volume declined 44% (16 million unit annual rate to 9 mu/yr).  The rate dropped by 1.2 mu/yr in the 2011 episode, 0.7 mu/yr in 2012 and 0.6 mu/yr again this year.

Both the Gas Pump & Barrel Meter models are predicting dire consequences next decade.  The Gas Pump is predicting its LVS Barrier will be breached when gasoline rises permanently above $4.11/gal in 4Q24, while the Barrel Meter suggests this happens upon RAC surpassing $144/barrel in 2026.  As both dates fall within TRI's projected Severe Recession, 4 mu/yr may be sheared off EIA's projected 17 mu/yr 2026 pace.  The adverse effects will be borne by the gasoline/diesel fuelled manufacturing sector.  At this late stage, there is too little time for mitigation efforts such as fleet changeover to natural gas, electric and fuel cell units.       

Should a black swan event make its presence, the Gas Pump & Barrel Meter models both conclude any extraordinary price spike would be constrained by the same Price Spike Ceiling which firmly arrested the 2008 price run @ $129/barrel USA RACrude ($4.11/gal pump).  That definitive petroleum/GDP ratio predicts an upper limit today of $157/barrel ($4.59/gal).

The PSC represents a threshold where certain demand destruction feedbacks attain critical mass.  As happened in the Summer of 2008, Demand and Price are reversed as alternative energies, substitution and conservation measures are pursued.  The negative effects of rising energy costs on the disposable income of consumers and the profits and viability of commerce and institutions inevitably takes a toll on the American economy.

Ironically, triple-digit crude prices have been for the most part the USA's own making.  In the realm of unintended consequences, a plethora of avoidable events has thoroughly disappointed the international investment community over the years.  There was the aforementioned refusal by successive Congresses to address the long-term structural deficits;  the Dec/2010 extension of the Bush-era Tax Cuts;  the Obama Administration's decision to unveil the record 2012 $1.5 trillion Deficit Budget;  and the inability to pass the 2011 Budget on a timely basis as well and the related threatened Gov't shutdown in April 2011.

If not enuf, the National Debt (see Debt Wall) was given widespread media scrutiny via the required debt limit increase.  The Debt Ceiling review by Congress forms part of the USA's checks & balances to deal with Budgets that fail to meet reality or Administrations that choose to operate via Continuing Appropriation Resolutions in lieu of the conventional Budget process.  This string of fiscal management episodes has caused a resumption of the secular decline of the USDollar ... by some measures down 10% in the last 36 months despite general EURO malaise.

The USDollar has been debased as much as 40% since January 2002.  The journey was truncated by safe haven activity in 2009, but the latest relapse is responsible for a $19/barrel component of today's $97 RAC price.  To give context to the volatility, this same factor was a record $30 in July 2008 and a mere $1/barrel on the day of Barack Hussein Obama's first inauguration.


 Animal-Spirits-Plus vs the ECRI Black Box Retrospect   TRENDLiners will remember in July 2011 (MemberVenue archive page) TRI conversion of medium-term leading data sets began warning of sub 1% GDP ahead in 2012.  A month later, it appeared the downturn could lead to a limited contraction.  But on Sept 26/2011, TRI gave the "all clear" upon finding the negative inference was a mere anomaly within the forward-looking data.  Every monthly release from that episode to late May upgraded Year 2012 GDP.

Such is not the case for the perma-bears.  As of Jan/2012, David Rosenberg remained stalwart in his 2010 position the USA entered an economic Depression in 2007 which will manifest itself in up to four more Recessions by the end of the decade.  In Aug/2011, John Hussmann proclaimed the USA was entering a double-dip Recession.  On March 27 2012, Robert Schiller forecast realty prices may plunge another 20% and would not see new highs for five decades.

But the boldest claims in the face of current realities come from what CNBC fondly call's the ECRI black box.  Lakshman Achuthan was adamant the Fed's FOMC would be impotent in efforts to halt an NBER defined Recession which had commenced Sept 23 2011.  In the face of an annoying 4.1% 2011Q4 GDP announcement and ECRI's first false positive signal, Achuthan again went to the airwaves on Feb 27 2012 to declare yet another new Recession would commence in 2012Q3.  In recent weeks Achuthan has reverted to the first call and mused often the BEA would downgrade 2011Q4 & 2012Q1 GDP by 3% in its scheduled July 2012 annual revisions ... thus revealing the USA was in Recession all along.  It did not happen and he earnestly awaits the July 2013 numbers...

Their clients must be pissed.  The S&P500 was 1055 when Rosenberg told 'em to hunker down.  1119 when Hussmann said the same.  1136 on ECRI's announcement.  Today the S&P500 is 1654 ... and housing is up over $19k from this time last year!  The gross miscalculation by these practitioners is traced to their failure to quantify the benefit (via fiscal multipliers) to Real GDP by the five massive trillion dollar Congressional Deficits.


 the Great Recession retrospect   The NBER declared this event commenced in Dec/2007 and came to an end in June 2009 (19 months).  The American economy finally surpassed the Nov/2007 $13.33 trillion Real GDP high water mark in Sept/2011.  This marked the transition from recovery mode to expansion of the new business cycle.  So with the advantage of this most recent revised economic data from BEA, it appears the contraction lasted from Dec/2007 to Mar/2009 (16 months) with an avg Real GDP of 3.1%.  Much deeper than originally calculated, each of BEA's annual revisions are bringing the tally closer to TRI's original output measure:  a Dec/2007 to Aug/2009 (21 months) downturn with an avg RGDP of 4.5%.

To add some context to the Great Recession historically, Structural GDP (Real GDP filtered of Keynesian influence) avg'd -9.7% in the Great Depression (1930-1933).  The current event has a much longer breadth (2007-2013) already and an avg SGDP of -8.0%.  SGDP was -17.1% in the Great Depression's worst year (1932) and -3.1% in 2009.  Thus it can be demonstrated modern era fiscal & monetary policy was relatively successful in mitigating socio-economic fallout this time around.

Aside from conventional inventory-related business cycle issues and special balance-sheet deleveraging in play, this epic event was assisted by three main factors:  (a) the 2005 Realty Bubble & the abrupt increases of Federal Minimum Wage.  Median home prices rose to 52% ($75k) above historic price to income ratio norms resulting in extremely high mortgage and rent payments, robbing many families of disposable income which normally would have been spent on goods and services.  It took four years for home prices to get back to historic norms;  (b) by June 2008 residual high petroleum costs were paring 1.55% off the Real GDP growth pace  & (c) when Structural GDP was teetering near stall speed in Feb/2007, Federal Minimum Wage was $5.15/hr.  But by a mere 29 months later, Congress had raised it a stunning 41% (to $7.25).  Many firms could not justify paying unskilled labour (present & potential) these new rates.  There was pressure from the tier above to have their remuneration increased to $6, $7, $8 & $9.  By Feb/2010 (36 months), the unemployment rate had shot from 4.4% to 8.3%.


 Class Warfare   The Progressives and their President continue to wage class warfare seemingly in an attempt to stretch the rhetoric into the 2014 & 2016 campaigns.  The introduction of "middle class" as their battle cry is odd.  Throughout the British empire and beyond, it is common knowledge the real middle class is doing just fine!  That's 'cuz most Americans are understandably unaware of the relevant definitions.  The upper class is a culture's wealthiest 1%, whilst middle class refers to a nation's highest 10% of earners.  Down the line comes the working class and lower class populations.  The celebrity President again caters to the wannabees.  (link)

Superb accuracy makes the TRENDLines Recession Indicator (TRI) the premiere composite economic leading indicator available in Canada, China & USA

blast from the past...

 

blast from the past:

<<<  May 26 2012  (one year ago)

Twelve months ago the ECRI Recession was running eight months late and TRI was instead suggesting 4.0% growth for 2012 & 3.1% in 2013...

blast from the past:

<<<  Sept 26 2011

What Recession?  While Hussmann, Rosenberg & ECRI were all declaring the USA had entered a Recession so deep the FOMC would be impotent to mitigate the damage, TRI USA was projecting clear sailing ahead.  BEA has since announced 2011Q4 was 4.1%, 2012Q1 was 2.0% & 2012Q2 was a 1.3% pace.  No false positive signals in this chart!

blast from the past:

<<<  Dec 23 2008

The TRI-USA model (blue line) was the sole forecasting tool warning 2008Q4 Real GDP was running in the -9% vicinity in real-time.  BEA had been reporting a mere -0.5% pace (yellow line).  Finally on July 29 2011 BEA finally corrected its Q4 GDP to -8.9%.

~

Top

 TRENDLines Recession Indicator - USA TRI venue

FreeVenue Economics-Home • Realty Bubbles Monitor • G-20 Recessions Monitor • TRI Canada • TRI China • TRI USA • Real Unemployment Rate USA • Debt Wall USA  

 Economics  @  FreeVenue

FreeVenue Home • Peak Oil • Economics • Climate Change • Elections

( 1989-2013)

~
3 ways to join the MemberVenue:

$25/month Annual Membership  or  $35/month Quarterly  Membership or  $50 Project Access-fee

password reminder

About    Contact

Media Access

Speaking Engagements

Let's keep the site ad free ... please consider subscribing to the MemberVenue or a donation to assist my research!

FreeVenue:   PeakOil   Economics   ClimateChange   Elections

Beware ... the Lunatic Fringe

MemberVenue:   PeakOil   Economics   ClimateChange   Elections

  Canada Flag
Trendlines Research  ...  Providing macro-economic charts & guidance for Legislators, Policymakers, Investors & Stakeholders
long-term multi-disciplinary perspectives by Freddy Hutter since 1989
send email to charts@Trendlines.ca with questions, comments or navigation corrections with respect to this web site[Under Construction]
Copyright 1989-2013 Trendlines Research ~
Last modified: November 03, 2013