A watched recession never comes

A financial collapse helped elect FDR in 1932. Another one elected Obama in 2008.

The pattern is easy to discern. If Republicans are in the White House and the economy implodes, America will vote for a Democrat.

Consumer confidence: looking up this year

Will Bernie get the crisis he needs?  


The stock market is down 3% as I write this morning. Is this the beginning of the end of the good times? Probably not.

The economy, by most measures, is pretty strong. Most people are better off today than they were four years ago. Donald Trump says the strong economy belongs to him, not Barrack Obama.

Obama let him get away with this narrative. It was a glass half full/glass half empty problem for Obama. The economy was much, much better by 2016 than it was when Obama was inaugurated, and unemployment had fallen to about 4.2%, objectively low and going lower. However, the recovery was spotty. The coastal cities had recovered, but the country's midsection and their traditional manufacturing industries had not. It didn't seem politically right to call it great, not with the recovery incomplete, so Obama didn't. Democrats did not have an effective counter to Trump's message that the economy was an utter disaster, "carnage."

Consumer Confidence, Ten year uptrend

Then Trump, the better salesman, two months into his presidency, called the economy great, the greatest ever, and all due to him.

He said it like he believed it, and he sold it, and not just to Republican but to businesses and consumers in general. He was a cheerleader with a message: the economy is great!!!

Democrats can like it or not, believe it accurate or not, but for better or worse, this is Trump's economy in the public's mind and Trump has people generally thinking it is good.

How do we know? Polls show it, and more importantly, consumers are still borrowing and spending. They may regret the borrowing and spending later, but that is what is happening, and consumers are carrying the economy on their back. Moreover, investors are still investing, buying risk assets, searching for yield in an economic environment where asset prices are high and returns are low. High asset prices make people with assets feel rich, so they spend.

Meanwhile, Bernie Sanders is talking misery. He observes that half of Americans are one emergency away from financial ruin, young people are drowning in student debt, homes are unaffordable, health care costs are crazy high and millions are uninsured, people are living on the streets, and capitalism is making the richest richer and nearly everyone else no better off, and maybe worse. He is right; there are people who are missing out on the prosperity, a half empty glass.

The economy recently set some records. The SP500 was at an all time high. Unemployment is at an all time low. Interest rates on 30 year treasuries set an all time low record of 1.89%. Three records.

Critics say that the economy only looks good, on an average, but that disguises the effect on everyday Americans. On the average Michael Bloomberg and a homeless vagrant have $30 billion each.

Critics say the economy is held aloft on a sugar high of crazy-low yields, made possible by crazy-aggressive central bank policy that is being carried out for the benefit of Trump's political interest, not sound economics. Whatever. The numbers are good.

An eleven year bull market. 

Other critics say it is held aloft by crazy-large federal budget deficits. They say It is madness to run a huge deficit at a time of full employment and a strong economy. If we cannot live within our means now, when will we ever? Once again, consumers say "whatever," and keep spending.

The budget hawks, those Republicans who preached living within the government's means, only meant it when a Democrat was in office. Now deficits don't matter. It was just a ploy to stymie Obama. Democratic hearts were never really into austerity, so now neither party wants to put away the sugar.

Eventually debts will be paid or they will be written off. Either way someone pays a price. Someday there will be a crisis, but it does not look like one today. Not in time for the election.

Timing is everything. Sanders may be twelve years too late, or one year too early, but Democrats who are considering this election and the message that will resonate need to reconcile themselves to the fact that this is not an ideal time to sell economic redistribution to alleviate the pain of an unjust, rigged economic system. Not when there are help wanted signs everywhere.