Markets Are Obsessed With A Term No One Can Define
The US is either in a recession already or headed into one soon. Now if only we knew what a "recession" is. Or was. Or isn't. Or wasn't.
Last week, Bill Ackman took the lead in redefining the term. "Two quarters of negative GDP growth does not... seem to be a reasonable definition during a period with high inflation," he said, adding that the economy has "a supply, not a demand problem [which] does not seem like a set up for a true economic recession regardless of the favored definition."
With
A global, permanent no-growth mode that transitions to a negative growth mode probably won’t be reached until the late 2030s, early 2040s. For an excellent treatment of the subject I recommend the book “2052” by Jorgen Randers.
It is as if we (human species) are simultaneously playing a video game where different groups of players have different definitions of “winning”- where “winning” broadly means achieving some level of pleasure and entertainment.
However, at the individual level, the definition of “winning” can be extremely and wildly varied. To further complicate matters, one is allowed to change their definition of “winning” at any point during the game!
Events such as “recessions” are just second or third tier aspects of the game which simply impact how one might want to change game tactics in order to “win” more. Also, players can change allegiance among various sub-groups while playing the game – if doing so is believed to help a player win more. And so on….
Reminds me of when I used to play the game of Life with my brother when we were kids. I always followed the written rules and often thought that I had “won”, but he would declare himself the winner by explaining that his rules were different- defined as “getting more of what he really wanted than I had gotten of what he believed I had secretly wanted”. This would literally infuriate me to the point we would get into a huge fight!
With hindsight (haha), he might have been more correct than I was capable of understanding. That was so crazy growing up with him- he still challenges my personal definition of “winning”.
I don’t know your history but am glad to see your pages intend to impart wisdom.
GDP (for the US) was invented around the Great Depression: it better allowed policy makers to measure the impacts of various programs. I suspect “Recession” is still useful to convey things are “trending worse”, especially given how insulated our oligarchs and government elites have become.
Increasingly members of our society seem to wish to claim victories by being the individual who wins the argument about exactly what a person, event, or condition ought to be called. This activity is mostly sophistry. A former boss, and very smart friend, used to break up to arguments about labels by saying, “Look, call it Fred and let’s get on to the actual issues.” Right now “Fred” is a mess we really can’t deal with very well so we argue about his name and walk away from the important problems we have… for wasted years we can’t get back.
Thanks, H, and commenters …
another binary outcome…a thoughtful article and conversation in a largely unenlightened world….
Bravo post!
I’m the kind of cynic who leans toward the notion that nothing means anything. Not just in general, but particularly when people blithely ignore standards or conventions — our “pound” is 14 oz, our men’s large is like a regular small, our iced tea has no actual tea, and my name is spelled Denise but I pronounce it Bernie.
But does “nothing means anything” have much more meat on the bones than “it is what it is” (which positively vexes me too)? I mean it at least sort of has a name — nihilism — and, as Big Lebowski speculated, must be exhausting. Perhaps. But to this cynic, it seems much less exhausting than relying and acting upon something you thought had meaning, only to discover long after your reliance/action that it did not.
If another analogy might be indulged, extended warranties come to mind. Consumers mostly needlessly buy them, and actually mostly feel better about doing so. They feel less risk or threat having that warranty in hand. arguably deriving some utility, at least until they actually have to try to use it. And that’s when the pain usually starts.