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Thursday, August 09, 2012

Last Post For Today

The ISM PMI headlines don't work that well as recession indicators unless you look at backlog of orders for Non-Manufacturing combined with Manufacturing PMI, and then they do:

Manufacturing was holding us out of recession. That seems to have ended.

If you add retail sales it makes the diagnosis a little clearer:

It's sort of like "What's left?" There's no air being pumped into the balloon.

I have been rolling around alternately laughing and whimpering reading Fed minutes - they're not exactly acting in a timely fashion if they hoped to fend this off.

I'm sure raising the price of commodities by talking about QE is going to prove a wonderful strategy. It should crank these curves down pretty sharply over the next couple of months!

Truthfully though, there was nothing the Fed could do. Congress would have had to act, probably by mailing each household a $600 check. That would have worked, provided they got the checks by the beginning of June. Otherwise. 

Without credit, the myth of central banks controlling the business cycle is only a myth. 

The reason the overall business cycle separated from the inventory cycle was just the growth of credit. Here's the longer term sequence on the manufacturing:

My thesis is that with constrained credit we have to return to those days when the inventory cycle pretty much controlled the business cycle. Recessions rolled around a lot more quickly then. 

Sigh - I forgot to put in the graph. I started on this post just to explain why this means something: 
 
It couldn't be clearer

Comments:
MOM,

My thesis is that with constrained credit we have to return to those days when the inventory cycle pretty much controlled the business cycle. Recessions rolled around a lot more quickly then.

For what it is worth, I'm a believer in the theory.

March 18, 2012
Mean Time Between Failures

I know it feels like we just got out of a recession, but historically speaking that's not the case.

5 months have elapsed since I posted those charts.
 
The cold vendor calls index has been running at alarm levels since June.
 
Consumer non-durables have been scraping bottom for months. That certainly explains your report, John.

We are now in a recession. Normally this wouldn't be too bad, but the fiscal issue and promised spending constraints loom on the horizon, and that impact could add some punch.

My word verification is "ackgraps", which I suppose is the 21st century's equivalent of the grapes of wrath.
 
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