Atlanta Fed predicts -2.8% GDP | Hacker News Reader

Atlanta Fed predicts -2.8% GDP

atlantafed.org

219 pointsawnird248 comments

Not the Atlanta Fed, the Atlanta Fed’s GDPNow model [1].

It’s pretty good [2]. And we are seeing a flattening of 2024’s aggregate wage growth of 4.15%. But the difference in wages is like 0.42% which is indistinguishable from noise. (GDPNow predicted a phantom recession in 2022.)

In this case, the model is probably recording a surge in January imports without “an offsetting increase in inventories,” as “that is a lagging indicator” [3].

[1] https://www.atlantafed.org/-/media/documents/research/public...

[2] https://caia.org/blog/2024/08/15/increased-accuracy-gdp-mode...

[3] https://www.calculatedriskblog.com/2025/03/a-comment-on-gdpn...

That's important because it's a pure mathematical model which may be wrong as it cannot take in all influences that drive it.

Ding ding ding

"All models are wrong, some are useful"; Why should I care what the ATL Fed's GDPNow model predicts? By all accounts a mathematical model is only as good as its assumptions and we know even the best economic models have spherical cow level assumptions

Mathematical models are so inflexible and unresponsive to real-world, commonsense facts, that as far as I know the value of what's in my pocket goes up at the grocery store. What we need is a grounded, grassroots approach to banking that eschews the elitism of sums involving numbers that, as far as anyone knows, are no more real than Plato's perfect spheres.

Some of these numbers are nearly impossible to measure because:

- tech gets better - products move upmarket as companies target richer customers - sometimes, products move downmarket and gets worse - products fall out of use and new ones take their place

With something like TV's, we can clearly see deflation at work. Your dollar buys vastly more TV than in 1990.

But what about education? That's nearly impossible to measure because we're learning different things. So if the price goes up by, say, 100%, how do we offset that against the nearly unmeasurable change in value?

You can see why economists resort to measuring Platonic, spherical eggs.

This is a GDP "nowcast," which only involves measurable numbers. The main criticism of GDP is that by focusing on the exchange of currency, it underestimates barter and social exchanges such as are prevalent in developing countries and Bethesda's Fallout series.

Fallout is getting more relevant every day, it seems.

If you're concerned by inflation in XP points earned doing post-apocalyptic errands for people, you've got bigger problems than a GDP decline.

> But what about education? That's nearly impossible to measure because we're learning different things.

At least at the college I attended, what you studied had zero correlation to the cost, every full-time student paid the “same” tuition as everyone else.

Without using any elitist numbers, can you express the odds that somebody will miss this parody?

I’m missing the source (and don’t know if I know it), but am curious :P

I don’t know if it is a quote or meme or anything like that, it might just be some bespoke hand-crafted parody.

If you have a better idea, a literal Nobel prize awaits.

Ah, but you're wrong. The "Nobel Prize" for Economics is actually not a literal Nobel Prize but one established by the Nobel committee after Alfred Nobel's death which has some distinctions making it different from the others.

But that's all just me being pedantic :)

https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Econom...

A literal one but perhaps not an original, authentic one :)

GDP itself is a mathematical model too - just a much more sophisticated one which utilizes more data.

> GDP itself is a mathematical model

GDP is a metric. The specific way in which we construct it is based on a small zoo of models, each working to estimate a myriad of parameters.

It's estimated via a model. We don't actually know the value of all economic activities happening in the country. We just have statisticians survey some fraction of businesses on how they're doing, and plug those result into a model to estimate how the entire country's doing.

> It's estimated via a model

So is every physical constant. The gravitational constant is a metric. We then measure it by way of models.

GDP isn’t a model per se. GDPNow is.

> it's a pure mathematical model which may be wrong

Sort of. It means it requires interpretation.

An altimeter is an analog mathematical transformer. It takes a trained pilot to properly read it in cold weather. Similarly, GDPNow is not a headline number, but a tracking model. Someone struggling with the definition of GDP isn’t its intended user.

No model can take in all influences that drive the economy. The more important aspect of it being a pure mathematical model is that there's no fudge factor for how much they like the current government. So it's not like the Doomsday Clock where the number is intentionally adjusted to drive the news cycle.

Rather, the GDP nowcast dropped because of the release of economic data that was historically associated with a drop in GDP. So if the model is wrong in this particular instance, there would have to be some reason why the historical association no longer holds.

Without knowing the detail, it's almost certainly a statistical model. Call it ML if you like. GDP nowcasting models take contamporaneously observable variables like foot traffic as features and GDP - which is observable only with a several-month lag - as the target.

The same caveats as with all statistical models apply. We only see the relationship as observed in the past and it only captures correlations (clearly, foot traffic in and of itself does not meaningfully cause GDP).

All models are wrong, but some are useful.

https://en.wikipedia.org/wiki/All_models_are_wrong

> GDPNow is an excellent tracking model, however, the January surge in imports - especially for gold - caused the model to move negative. As the Atlanta Fed noted: "the contribution of net exports to first-quarter real GDP growth fell from -0.41 percentage points to -3.70 percentage points".

Anyone know what's up with the surge of gold imports? We don't have gold tariffs, right? Are people hedging against the dollar's instability?

Drive by comment, I saw: https://unusualwhales.com/news/the-race-to-move-gold-bars-ou...

> The sudden shift is fueled by fears of tariffs as Donald Trump threatens a trade war that could disrupt the gold market. Traders, worried that gold imports may soon face tariffs, are rushing to get their bullion into the U.S. before the policy takes effect.

These models all seem like they are lagging. Are there any models that are more leading?

All due to exports collapse (scroll to the bottom):

https://www.atlantafed.org/cqer/research/gdpnow#Tab3

May still hold true, the 2s10s has recently deinverted, which is typically the last stage pre-recession.

Full forecast: https://www.atlantafed.org/-/media/documents/cqer/researchcq...

It is funny seeing this thread's title compared to the disclaimer right on the title page (specifically that the numbers in this report are NOT an official forecast of the Atlanta Fed):

>Note: The Atlanta Fed GDPNow estimate is a model-based projection not subject to judgmental adjustments. It is not an official forecast of the Atlanta Fed, its president, the Federal Reserve System, or the Federal Open Market Committee.

Actually, it says that in the first sentence of the second paragraph on OP's link too:

>GDPNow is not an official forecast of the Atlanta Fed.

Seems like a disclaimer more than anything.

GDPNow is a forecast.

And it's a forecast coming from the Atlanta Fed.

The fact it's not "official" means what exactly?

It means they’re not prepared to stand behind it and stake their reputation on it.

> fact it's not "official" means what exactly?

It means no humans in the loop. GDPNow is a tracking model designed for reading by experts.

In this case, the context is the ISM Manufacturing report recorded a surge of imports while corresponding inventory numbers are still coming in. Once they do, the model will rebalance.

To the extent the model is saying something, it’s that we need to watch inventories, particularly in construction.

https://tradingeconomics.com/united-states/exports-by-countr...

https://tradingeconomics.com/united-states/exports/canada

https://tradingeconomics.com/united-states/exports/mexico

https://tradingeconomics.com/united-states/exports/china

https://www.canada.ca/en/department-finance/news/2025/02/lis...

> May still hold true, the 2s10s has recently deinverted, which is typically the last stage pre-recession.

For those of us not in the know, could you give some more detail? What is 2s10s, what does it mean that it's deinverted, and why is that typically the last stage pre-recession?

My searching turned up this: https://www.simplify.us/blog/trading-2s10s-inversion

So the difference in 2 year vs 10 year treasury bonds. If they are not trending in the same direction, the near term thinking is that the market is doing poorly.

I assume they mean the 2 year Treasury vs. 10 year treasury yield curve (dunno what the s stands for).

https://fred.stlouisfed.org/series/T10Y2Y

Normally long-term bonds have higher interest rates than short-term bonds, because investors need to be paid more money to take the risk of locking up their money for longer time period. The exception is that when you expect interest rates to fall in the near future, it makes more sense to hold long-term bonds, because you lock in today's rates for a longer time period, while the investor that picks up 2 year bonds will have to roll them over at whatever they can get in two years. That bids up the price of long-term bonds, which makes the effective interest rate fall. This situation is called an "inverted" yield curve, because it is the opposite of the normal situation.

A "deinverted" yield curve is when you have an inverted yield curve but the difference suddenly goes positive again. That's the situation we're in now, as you can see from the graph. And usually you get into that situation because the scenario investors feared actually happens: short-term interest rates drop, partially as a response from the Fed to inject more money into the economy and stave off the recession, and partially because stocks become very risky in a recession and so investors flee them and go to short-term bonds instead to preserve capital.

The deinverting isn’t so much due to the Fed injecting money as it is an anticipation the Fed will inject money by cutting rates in the coming future. The 2 year yield drops in anticipation of the Fed dropping interest rates in the next couple years. That’s what makes it a leading indicator.

> https://fred.stlouisfed.org/series/T10Y2Y

And using the 3-month instead, as was done in Campbell Harvey's original paper:

* https://fred.stlouisfed.org/series/T10Y3M

I imagine the s comes from the colloquial pronunciation as 2s & 10s e.g. "I'm long 10s at the moment" meaning "I'm long the 10 year treasury"

It's one of the most popular predictors of the scary scary recession. In short, borrowing money for longer periods of time should cost more than borrowing money for shorter periods of time (even if you normalize both values to percent per year). There is also an explanation that is more mechanistic and related to central bank activities. However, sometimes the opposite is true, and that is the "inversion". Here's a nice explainer from the FT:

https://ig.ft.com/the-yield-curve-explained/

And here is just the chart (which is the top result for "2s10s"), click on Max:

https://fred.stlouisfed.org/series/T10Y2Y

BTW, there is something very similar in commodities markets - contango and backwardation. Contango comes from some old British word that's similar to "continuation" and describes the usual situation for non-perishable goods where if you, a buyer, want to delay the delivery of goods then I, the supplier, will charge you a little extra for using my storage space. This little extra is called "continuation fee", or "contango". It shows up in modern commodity markets like the CME on price vs time-of-delivery curves. But sometimes the markets are in backwardation and earlier deliveries are more expensive than late deliveries.

PS. "2s" meaning "the twos", meaning "two-year Treasury bonds"; it's a common abbreviation.

Thanks for expanding the “2s10s” :)

But to be a little pedantic, the 2-year and 10-year issues are Treasury Notes, not bonds. I don’t know why they use 3 different terms depending on the duration, but they do.

Yeah. I always think of them as "bonds" because then I don't have to change the name when dealing with corporates, or other countries sovereign debt.

After decades of seeing various administrations get blamed for economic downturns that were set up by conditions well preceding their terms, I guess it will be interesting to see what happens now that we're finally heading towards one that actually was caused by a discrete, identifiable policy, all within a couple of months.

Easy enough to forecast: he'll blame Biden, and his cult will lap it up.

I feel like the defining feature of modern American conservatism is now a pathological inability to distinguish cause and effect.

Critical thinking makes baby Jesus cry.

But adult Jesus says, "Whatever you do to anyone, you have done to me."

Fakeass Christians don't understand that means undocumented folks, non-white folks, non-Christian folks, women, and folks of other sexual preferences and gender identities.

"That which you do to the least of my brothers and sisters, that you do unto me." --Jesus of Nazareth

"Love your neighbor as yourself." --Jesus of Nazareth

The thing about the "No true Scotsman fallacy" is that the person does have to at least be a Scotsman, if that's what they're calling themself.

> folks of other sexual preferences and gender identities

Since Jesus was an observant Jew, who explicitly said that not a letter of the Mosaic Law would pass away, I don't think he would be support of sexual "preferences" and "gender identities". The Law pretty much placed everything except sex within marriage as out of bounds, and not only did Jesus uphold the Law, but he even upped the requirements from actions to unexpressed desires. For instance, the Law only required not committing the act of adultery, but Jesus said that even looking at someone lustfully was adultery. So I can't see Jesus being supportive, but rather saying "go and sin no more".

Actually, I think Jesus was rather opposed to people who had identities of any sort, since he called people to an identity in himself. He had the harshest words for the Pharisees, who had an identity of "holy". The prostitutes and tax collectors and other "sinners" that Jesus hung out with agreed that they were not keeping the Law and repented of it, but if you've got an identity (that is, it is what you define yourself by), by definition you aren't going to be repentant about it.

He also said, "There is much that you cannot bear now, but when he, the Spirit of Truth, comes, he will lead you into all things."

Love is the rule. The Great(est) Command(ment) of all.

And, Jesus, of course, manifested such love completely, so his saying, "go and sin no more" is love, but he wasn't throwing any stones (literally), only giving advice -- but very, very good and important advice, for sure. And he also did literally protect the adulterer from get stoned, and he was fulfilling the Law there, too.

What we do in our homes behind closed doors is our business and our business alone (unless we are harming another adult against their will (or harming a child), then we must carefully intercede as a society on behalf of the innocent).

Put more simply, we all have the free will to choose how to live according to our wishes, with those certain caveats and careful, compassionate discernment.

Absolutely, there are societal-level problems with sex outside of marriage, regardless of the genders of the people involved, but I'm pretty sure we are not authorized to intrude into someone's home life, except in extraordinary circumstances.

The Law's sole purpose is our happiness, and serves to guide us towards an ever more compassionate society. But societies also have the right to create rules for themselves, should their majority decide to set them into stone, so to speak. [Democracy is God's Will; the oppression of tyrrany is a form of evil.] I don't believe that intruding into someone's personal life outside of the public's view is ever in love's best interest.

Regardless, the rules for oneself are intrinsically on a different level and nature than those imposed by govt upon everyone, yet we must try to walk a very blurry line and make a dilligent effort to incorporate the Great(est) Command(ment) into our societies' laws and enforcement -- or failure, misery, and strife will be the result.

I, personally, wouldn't be comfortable punishing someone for what they do in the privacy of their own home, but I can't in any way claim that to be authoritative, it's just my sense of loving others and wanting them to be happy with the choices they make. My counsel would be to keep things simple and not let the vice of greed/lust dominate one destructively, for both their and society's well-being and happiness.

> He had the harshest words for the Pharisees, who had an identity of "holy"

Phuck the Pharisees, those worthless fools. They have sold their souls for a small price. They get all the reward they're going to get from their hypcritical proclamations. Their "identity of holiness" is an utter lie and is not worth a jot.

> if you've got an identity (that is, it is what you define yourself by), by definition you aren't going to be repentant about it

Well, everyone's stubborn until they're not. Everyone acts out of vice until they choose to learn how to be virtuous. Patience is the last perfected virtue (and few reach that lofty peak), and is required to be "pure in heart" as stated in that one Beatitude.

Thanks for your well-considered, thoughtful, and though-provoking response. I don't have all the answers on this very thorny problem here in 2025. I hope my reply makes sense, though it is surely the first time I've put serious thought into or words together on this topic in this level of detail/amount of rambling :-)

Peace be with you. Thank you for this conversation. I am at your service.

> He also said,

This can easily be explained by wide application of the https://en.wikipedia.org/wiki/Principle_of_explosion in the bibles.

saying it can be explained <<< actually explaining it

I don't think it's inability to distinguish. At least for those in the public sphere, it's a willful disregard for facts entirely, because acknowledging facts would put them in opposition to the president, thus potentially setting them up to be banished by the party.

> because acknowledging facts would put them in opposition to the president

Let’s be honest, both parties are doing these dances of hypocrisy. Stay-the-course Dems defending Biden and continuing to demonise both wealth and populism aren’t much better. It’s not as bad, blatant or personalised. But it’s there.

Honest? If the Democrats even remotely demonized wealth, we’d be in a completely different situation today.

> If the Democrats even remotely demonized wealth

The point is we have strong rhetoric around both. That is internally inconsistent.

I think the GP might have been referring to voters, I frequently hear from them how Republican economics are better because, allegedly, there is less spending ("allegedly" is doing a lot of work there - we all know how the national deficit trends between the two parties). Businesses across the country initially reacted very well to him coming to power, though that honeymoon is abruptly coming to an end.

The last episode of This American Life[1] really nails it to the wall:

> The bully lie is different. It doesn't try to convince you. It doesn't present evidence. It just tells you to pick a side. So when the president said that diversity programs caused the plane crash over the Potomac, when he called the president of Ukraine a dictator without elections, he didn't lay out a set of facts to make his case. He wasn't interested in rebuttal.

> When he does this kind of thing, Masha writes, he's "asserting control over reality itself" and splitting the country into those who agree to live in his reality and those who resist and become his enemies by insisting on facts.

[1] https://www.thisamericanlife.org/855/transcript

I think in addition to that, he has learned that his behaviour is rewarded with unprecedented social and media exposure and share of the social consciousness, and when all everyone talks about is Trump, it in some way legitimizes whatever he says by nature of choking out everything else. This has basically only escalated based on everything he has done so far in his second term. Even if whatever he said is dumb and doesn't work or he is wrong, it doesn't matter because that story is buried under the stories covering the 10 other outrageous things he has said since. Whenever he says something absurd, he is inviting everyone to join him in his reality, and everyone hops in.

I think institutional trust is too low, the media cycle moves too fast and people are too divided for facts to matter much in this environment.

> The last episode of This American Life[1] really nails it to the wall:

This was also 'on display' in Trump 1.0 with the claim of "the largest crowds ever" for his first inauguration—which they weren't:

* https://www.bbc.com/news/world-us-canada-38707722

* https://www.theguardian.com/world/2018/sep/06/donald-trump-i...

* https://www.factcheck.org/2017/01/the-facts-on-crowd-size/

A bunch of comments then about it being a 'loyalty test' if you were willing to repeat the line.

I'd call many of the non-Trump factions of the Republican Party conservative. But the current administration is far from that given their threats to the long-term allies, weakening NATO, and swift changes to the federal govt.

After the shitshow in the Oval Office, I finally do unironically believe that he could actually walk down fifth avenue and shoot someone, and they’d still cheer for him and proudly declare it the victims fault.

>and shoot someone, and they’d still cheer for him and proudly declare it the victims fault.

except for those who happens to be that "someone" who got shot and immediately stops cheering then while getting very confused and sorry for themselves.

Watch the interviews with the Trump voters who got recently laid off by Trump & Douche, err... Doge.

> Watch the interviews with the Trump voters who got recently laid off by Trump & Douche

Have a link to anything quick?

https://m.youtube.com/watch?v=77WjtNoCta4&pp=ygUUVHJ1bXA

God these people are idiots…

Not an interview but

https://www.washingtonpost.com/politics/2025/02/27/fired-fed...

These anecdotes however are few and far between. With a federal worker there's pretty obviously "nowhere to hide the bodies" - Trump came in, fired a bunch of federal workers. If you were a fired federal worker, it's impossible to read that any other way.

With something less direct, like losing your job during a recession? There's still plausible deniability that it's Biden's fault, because headlines like "Economists suggest <thing Trump did> might have triggered a recession" is too abstract and far removed from their own lived experience.

We now have a potential deputy secretary of defense who is too scared to acknowledge the objective fact that Russia invaded Ukraine [1] because that gets people ostracized by their cult. We are fucked when government officials can't govern unless pretending the emperor is clothed. This is Salinist/Maoist levels of fuckery. They will happily lie to their sheep with a straight face knowing that they will lap it up as the truth.

[1] https://youtu.be/1EbKchdMd8k?feature=shared&t=81

In my experience people will vent and complain and then just return to the previous normal. In some cases it's still mentally 'easier' to go back than to reassess fundamental beliefs.

And then will force ceasefire between Ukraine-Russia and Russia will open the market to US and it will be flooded with US products.

Not sure how he is going to force a ceasefire. Unless he is planning to invade Ukraine.

He is doing it right now. He cut the oxygen pipe to Ukraine(no financial support or weapons), and Europe are not going to do anything about it because they care about themselves and are weak ( except Germany, but that will be not enough).

I guess we'll see how your prediction pans out.

His cult don't matter though. It's the 5-20% of Americans that don't consistently vote for a single party that matter. They've already been convinced that inflation was Biden's fault -- keeping the blame on Biden might be possible.

> They've already been convinced that inflation was Biden's fault

It was. Manchin was right. The MMT gang overstimulated the economy in ‘21 and then didn’t pass deflationary tax increases or spending cuts once the problem reared its head.

If that was the major cause, then inflation would have been lower in countries like Germany that didn't overstimulate.

Instead those countries had higher inflation.

> then inflation would have been lower in countries like Germany that didn't overstimulate

Germany massively stimulated to the tune of 15% (fiscal) and 25% (guarantees) of GDP [1].

[1] https://www.imf.org/en/Topics/imf-and-covid19/Fiscal-Policie...

Those numbers are significantly smaller than the American numbers, yes? Also, Germany kept their deficit under 3%.

> numbers are significantly smaller than the American numbers, yes?

15 and 25% versus 25% and under 3% strike me as in the same ballpark.

> Germany kept their deficit under 3%

Now. Not in the pandemic [1].

[1] https://www.imf.org/external/datamapper/GGXCNL_NGDP@WEO/DEU

Government spending drove a material amount of inflation during the pandemic, but other factors contributed as well (expectations, supply chain dysfunction, corporate profits).

https://www.washingtonpost.com/us-policy/2022/10/09/inflatio...

https://mitsloan.mit.edu/ideas-made-to-matter/federal-spendi...

https://globalmarkets.statestreet.com/research/portal/insigh...

https://www.brookings.edu/articles/covid-19-inflation-was-a-...

https://www.thebignewsletter.com/p/on-inflation-its-the-mono...

https://www.thebignewsletter.com/p/corporate-profits-drive-6...

> Government spending drove <50% of ~2022 inflation

Totally. But if prices were up under 18% (3.5%/y) over the last five years instead of 37% (6.6%) [1], I don’t think we’d have Trump.

[1] https://fred.stlouisfed.org/series/PCE

I disagree. We'd have Trump regardless. Prices are an excuse, these voters are voting their identity, their tribalism, and their bitterness.

Look no further than every interview with a regretful Trump voter: "I didn't think I'd lose my job." "I didn't they they would deport my family member." This is no different than "The only moral abortion is my abortion." Unless they are personally impacted by the policy, they vote their harmful belief system.

> “He’s not hurting the people he needs to be”: a Trump voter says the quiet part out loud

https://www.vox.com/policy-and-politics/2019/1/8/18173678/tr...

https://www.theguardian.com/us-news/2025/jan/11/there-are-a-...

> these voters are voting their identity, their tribalism, and their bitterness

Agree for the Rust Belt not for swing voters who didn’t vote Trump in ‘16 and ‘20.

The history of inflation and electorates is my only evidence, this time may have been different, but I’d need to see something beyond anecdotes to conclude that when voters said the economy was their issue [1] they were lying.

[1] https://www.pewresearch.org/politics/2024/09/09/issues-and-t...

To start, https://vcresearch.berkeley.edu/news/economy-sexism-and-cons... and https://www.bloomberg.com/graphics/2025-youtube-podcast-men-... | https://archive.today/htWBY

I'll find more for the next convo on the topic.

I’d love to see a breakdown of these factors in tipping-point states if you have it.

I suppose a counterpart bias to conspiratorial thinking is taking as faith the wisdom of crowds. Perhaps this election was mass delusion and an argument for electoral restraint (which I’m sympathetic to).

But even if I concede that overstimulus didn’t cause Trump, I think it’s fair to say it did cause voters to blame Biden for inflation.

It's a good ask for obvious reasons. Let me chat with someone I know at Pew Research and see if I can provide anything material, and if not, what it's going to gather the data (if at all possible).

Not sure you're paying attention but they wouldn't bat an eye at not certifying an election or two.

It's consistently voting for a single party that gets us into this trouble. I wish I had sane Republicans to vote for to squelch the corrupt politicians on the other side. They've all run for the shadows and let MAGA take over the party as if Animal Farm was a howto guide.

IME from other countries' autocracies, blaming the predecessors works wonders, but only for so long - maybe 6-12 months.

Eventually voters want cash in their pockets and if they don't have it, they get angry with whoever is at the top.

In Turkey, Erdowan managed to win an election a couple of years ago after pursuing a policy for years of reducing interest rates to "tackle inflation" (resulting, rather predictably, in inflation topping out at 44%).

I don't think it matters as long as Trump and others grab power hard enough. There still are lots of tools still available on the table to make voting against Republicans harder in the elections. A recent example: https://www.democracydocket.com/analysis/trump-postal-servic...

> May still hold true, the 2s10s has recently deinverted, which is typically the last stage pre-recession.

Perhaps worth noting that Harvey's original paper was about 3-month and 10-year Treasuries, but 2-year is now used by some folks:

> To determine whether the yield curve is inverted, it is a common practice to compare the yield on the 10-year U.S. Treasury bond to either a 2-year Treasury note or a 3-month Treasury bill. If the 10-year yield is less than the 2-year or 3-month yield, the curve is inverted.[4][5][6][7]

* https://en.wikipedia.org/wiki/Inverted_yield_curve

* https://people.duke.edu/~charvey/Term_structure/Harvey.pdf

> Harvey: Flat or inverted yield curves are historically associated with slow economic growth or recessions. I did notice that the yield curve inversion of the 10-year Treasury bond and the 3-month Treasury bill yield curve preceded all four recession since the 1960s. My dissertation committee at the University of Chicago was concerned that this might be a fluke given there were only four recessions. Frankly, I was nervous too because it is well known in science that strong findings become weaker after publication -- or sometimes vanish. However, in my case, this did not happen. Yield curve inversions preceded each of the next three recessions, including the important global financial crisis.

* https://www.linkedin.com/pulse/yield-curve-inversion-explain...

I always wondered about the choice of 2 years, it's fascinating to learn that the original choice was 3 months. What motivated the change? Is 3 months so short that it captures "noise" not related to long term planning or something?

It's not really clear which one is "objectively better" to look at. The tradeoffs are exactly those that you've listed. But you know, for a given point of time you can look at the entire yield curve - that's what I usually do. And when it comes to plotting you can plot both differences (it's easy to do in FRED, you can do many fun things with time series there).

Kind of the other way around in some ways e.g. at very short end of the yield curve you are basically just trading the market expectation of what the Fed will do, +- credit and liquidity and so on, whereas further out things are way more complicated and reflect various risk premia and higher order sensitivity to rates, and so on.

Looking at that graph, though, while exports collapse is certainly the biggest factor, it's not the only one. That is, looking at the March 3rd entry, "Residential Investment" is now negative, and if I'm reading it correctly (I hate it when colors on a graph are too similar) consumer spending is now zero when it was recently quite positive.

Easy fix for that! Just change the definition of GDP by excluding government spending: https://apnews.com/article/trump-gdp-economy-government-spen...

There are easier ways. I'll write a poem and sell it to you for $50 trillion and you draw a picture and I'll buy it for $50 trillion from you. We could get this done today and bump GDP by $100 trillion.

Sales or income tax will be a problem though.

Not if you sell in a state without income tax. And I imagine someone creative can probably find ways to make this not classify as income.

True. We'll probably have to make the poem and picture about Jesus and do it through our new church in New Hampshire.

Solve the deficit at the same time!

I hear the standard practice is to have the IP of the poem owned by a foreign entity(Ireland is pretty popular) and then for the US entity to pay a royalty of $50 trillion to the foreign entity so that the net revenue in the US is zero.

I believe it has it's own name - The double Irish.

Yeah but then that only contributes to the GDP of Ireland, not the US.

Not coincidentally, Ireland has one of the highest GDP per capita in the world.

This only works within the European Union because the EU rules allow it.

It would not work between the US and Ireland.

https://www.bea.gov/system/files/2020-04/GDP-Education-by-BE...

>Who calculates GDP?

>Economists at the U.S. Bureau of Economic Analysis estimate GDP using thousands of data points gathered by other federal agencies and some private data collectors.

I presume these economists would ignore outliers such as that example, especially ones that would result in unrealistic sales tax or other tax liabilities.

They have a spreadsheet showing sources here:

https://www.bea.gov/data/gdp/gross-domestic-product#:~:text=...

> I'll write a poem and sell it to you for $50 trillion and you draw a picture and I'll buy it for $50 trillion from you. We could get this done today and bump GDP by $100 trillion

Nominally, yes. Real, no. (In practice, given the barter resemblance of the trade, there would be no impact.)

Why is it real GDP when a government contractor makes a PDF report, but isn't real GDP when I make a poem?

Because money paid to the government contractor results in a person (persons?) getting paid along the way and then a large part of that flows into the real economy via consumption / spending.

In your $50 trillion poem example, no money can possibly flow into the real economy because you simply do not have $50 trillion to pay anyone - you're just describing a wash trade of a worthless $50 trillion IOU note not unlike a NFT or crypto memecoin. Best case is that the poem is worth something non-negative.

That's the point.

GDPNow tracks real GDP.

Ah, thanks! Interesting. How does it know which is Real and which is poems?

Ask DOGE ;)

I doubt this sort of chicanery actually happens, or would actually work.

I see you’ve never heard of the market for fine art.

also NFTs

That's great for money laundering, but you'd have to pay taxes on it. Good luck.

Unless you leave it in some warehouse by the airport.

> https://hyperallergic.com/51913/the-shadowy-world-of-art-in-...

But then it would not contribute to US GDP, would it?

You might not agree that a blank canvas is a $100k "art piece", but assuming both parties are sincere, what's the issue? It's not really any different than some luxury brand selling a $50 (being really generous here) t-shirt for $500.

Their worth is inflated and their whole suite of same artist work increases in value.

Not relevant. The effect is almost entirely from net exports collapsing.

But redefining the numbers does effectively prevent us from noticing.

> redefining the numbers does effectively prevent us from noticing

Not really. If they started fucking with BLS statistics, that would be a problem. But DOGE hasn’t gotten there yet.

they're working on it https://apnews.com/article/trump-gdp-economy-government-spen...

I think they are pointing out that the current admin is doing the "sharpie on the hurricane path", or the "if you don't test for it you don't have cases" sort of approach.

But like those two ridiculous events, it's much, much larger than just government cuts. I mean...it doesn't even account for government cuts yet.

Does anybody know how that would work? I know of the 3 ways of measuring GDP in econ basics (All income, All expenditure, All value add). I assume they only use one method and just pull out government? I assume it's expenditure method, but what would it mean for income method. Ignore incomes of gov employees? But then what about contractors. At what point do we start to view the number shifting as untrustworthy like China and Russia.

It was a joke

This surprises nobody. People import goods before tariffs because the price is lower, and that money going to trade isn’t going to GDP. Greater economic uncertainty and higher savings rates. Difficult labor market.

The only question is the depth and the duration of the dip.

It's interesting that the Great Depression was triggered by tariffs.

https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Ac...

That's what put "Great" in Great Depression. Let's see if this one will be "great again".

My understanding is that it was more the 9000 bank failures effectively created a credit crunch. Like if a bank closes and there's no replacement, then most small business were unable to get loans. Farmers who couldn't afford to plant new crops, factories can't improve equipment, inventory get's squeezed across the supply chain, ect. Exports were about 5% of GDP, suggesting that maybe tarrifs may have been the trigger but weren't the primary cause of the depression.

https://www.sjsu.edu/faculty/watkins/depression.htm

Then after that, they passed Hawley Smoot Tariff Act to make up for the budget short fall. That caused an already bad situation to get much, much worse.

Banking crises are largely accounting problems and can - mostly - be fixed from accounting.

There will be winners and losers, and many people won't like the result, but it's not going to end in a Great Depression.

Tariffs - on the other hand - can break your actual, real, non-financial economy - which cannot be fixed by accounting.

The problem was tightening the money supply, this is common knowledge. It is why the central bankers always flood the system with liquidity when things go south now.

I would honestly pay a monthly fee for a board like this that is completely devoid of political nonsense. It is just so boring to read in every subject.

Though, to be fair, the level of tariffs we're talking about in the 30s was like 60-70%; that's a very far cry from where we're at today.

Didn't Trump campaign on a 60-100% tariff on importers buying from China?

Given importers have been paying tariffs averaging close to 20% since Trump raised them back during his first term, that would imply that they'll be close to 40% in a week when they get raised again.

> People import goods before tariffs because the price is lower, and that money going to trade isn’t going to GDP

It does, in inventories. But 34 have 77% reporting on inventories and 85% on imports [1]. To the extent this model is saying something, it’s to watch inventories build and deplete.

[1] https://www.ismworld.org/supply-management-news-and-reports/...

Hire clowns, get a circus.

it's more like the circus hired psychotic villains because they thought it would be funny. The state of things is a direct result of a functioning democracy.

it's more like the previous guys were so bad that people said that the guy the media lied to them about from 2015 until 2024 wasn't that bad after all.

- we now see that "bidenomics" was a disaster after the media decided to stop lying about it and blaming the people for not believing "the stats". job numbers revised down massively after it was no longer viable to lie during the election.

- crime rates revised silently UP: https://www.realclearinvestigations.com/articles/2024/10/16/...

- apparently there was no need for a "bipartisan border bill" or for "congress to act" in order to shut down the border as encounters are down 90% now.

people have their panties in a bunch about tariffs, but I don't understand why reciprocal tariffs are so bad.

it appears that people here are happy for things to go south just so that they could shit on trump. how about having a bit more optimism for the future, even if the near term will be a bit shakey?

> it's more like the previous guys were so bad that ...

Current "guy" used to be previous as well.

The 25p tariffs on ca and mx are not reciprocal.

It’s hard to have optimism when there seems to be no plan to make the economy better, only destruction

I'll just comment on the tariff part. They're bad because they're hostile and they damage economic relationships. Maybe you don't care about economic relationships with China but should very much are about Canada and Mexico, the only countries that border the US! They can find other trade partners, and military alliances are now damaged for a long time. Even if the policies are reversed and a new administration takes over, the US is now an unreliable and unstable partner to have. Tariff's can be a useful trade tool, done for economic reasons and after trade negotiations over time. But consider all the demeaning and hostile remarks about Canada, Mexico, their leaders and their people by the current administration, that is the context where tariff's are being applied.

Make no mistake, the current administration is anything but. They are systemically destroying the nation, so that they can forever rule over the ashes that remain. In the mean time, some groups of people will enjoy the warmth of the nation burning down. I desperately wish I was speaking hyperbole, being emotional or exaggerating.

Oh, and what is bidenomics exactly? he hardly passed any controversial economic policies. Just lots of investment on america and creating jobs, infrastructure,etc.. nothing remotely partisan, except the climate focused stuff maybe.

What demeaning comments were made about Canada and Mexico? As far as I know from reading the comments here, they're just part of Trump's aggressive negotiation tactic - same as the tariffs that are currently being applied.

Perhaps you've missed that Trump and several administration officials keep referring to Canada as the 51st state, stating in no uncertain terms that their goal is to annex Canada. Canadians have definitely not missed that. https://www.westernstandard.news/news/trump-dhs-sec-straddle...

Let me ask you a question. What does the US House of Representatives look like with a new 41 million person state? How about the Senate? I’d say that it’s very blue.

Does Saipan vote in American elections, I forget?

Truly in the sense that democracy is susceptible to demagogues, of which Trump is certifiably one

A car rolling down a hill is 'functioning' too, despite the fact that its brakes are out and it's on fire.

I prefer a more exclusive definition.

Hmm, if the brake system on a vehicle designed to have working brakes… doesn’t work, no it is not functional.

The US is hardly a functioning democracy. You have two bad choices every four years who can only get elected if they have billions to spend on campaigning.

Are his voters at least in marginal numbers realizing whats happening and possibly about to happen, to US itself and globally? Or its all fine and going on as expected for them.

We get 0 on-the-ground info here in Europe on such topics (at least not in mainstream media), its all bombastic shit like he still runs his reality show and not directly affecting lives of hundreds of millions with each tweet/outburst. I'd expect massive difference in above between cities like SF, LA, NYK compared to midwest or bible south for example.

It's hard to say as conflicting reports float around out there. Some things claim his approval rating is increasing, and others say it is decreasing. And of course there's plenty of stories out there about people who "regret their vote" or whatever, but you can also find stories about upset people who then say they'd still vote for him.

I can't find it now but I did see something the other day where a question like "Are you happy with the job Trump is doing" had an overall positive response. BUT, asking "Are you happy with topic X" for a variety of X like economy, DOGE, etc and most of them were quite negative. I suspect this is closer to reality: people aren't happy but they're not blaming him.

I can give you some anecdata on this. Just yesterday I was talking with my Trump-supporter family members, and they literally had no idea he'd been convicted for felony fraud - they thought his only charges were related to the sexual assault accusations from E. Jean Carroll and they hand-waved those away with gusto anyway.

So to answer your question: It's all fine and going on as expected for them, and if you tell them otherwise you're labeled an alarmist crybaby democrat.

I think that's unlikely. My theory is that the voters will prefer to blame immigrants, Muslims, DEI, the Woke mob, Democrats, trans people, Antifa, and RINOs in approximately that order.

If Hitler could convince 65 million Germans that all their problems were caused by a million Jews, Trump should be able to manage something similar.

My previously mostly sane center right family members have all been spouting Russian talking points after the blow up in the Oval Office.

I think the information environment of most Americans that do not actively seek out true information is just cooked.

Sunk cost fallacy for a lot of them, to be honest. I’ve heard people criticize his big policies (trade war, trying to be isolationist and etc.), but still say “still better than what the alternative could become”.

The other side of the aisle did not do themselves any favors with the "bitter clingers," "basket of deplorables," or "hell yeah, we're gonna take your AR" type comments. That was all red meat that fed right into people being able to radicalize folks into "vote for Trump, or the other side is coming for you and your way of life."

People on the right were literally calling 2016 a "Flight 93 election," i.e. "storm the cockpit before they can fly this plane into the Capitol," and it was because they feared Hillary would nominate a Supreme Court supermajority that was the opposite of what Trump did, and that it would bury their way of life. You can agree with this or think it's horseshit, but either way you still have to start by understanding that it's what many voters believe. The dismissive condescending comments that Obama and Clinton got caught making, combined with the backlash to George Floyd being murdered in the form of riots and extreme left-wing viewpoints getting aired fed straight into fears in red states that they were going to get bulldozed unless they struck first.

My MIL lost half the people she works with in the federal cuts. She’s been a massive massive trump supporter (wears maga hats in public, even in San Francisco, has a painting of trump in her house, etc), but the cuts shook her. She told me “I thought they were only going to fire the people who didn’t do anything!” And “but what we do is so important, why are they firing us?”

Now she’s very worried because her, her husband, and all of their children except my wife work for the federal government. And one of her son’s entire life is funded by Medicare (which republicans have made clear they want to gut to make room for tax cuts).

Of course, they blame musk and not trump, but even for diehards like them I’m starting to see some cracks. They still have “faith” in the Donald but I think it’s a shaky faith now. If things get bad enough people really may stop liking him. We’re not there yet tho.

I believe this is due to a surge in imports in response to looming tariffs - supply chains are trying to stockpile before they hit. I am skeptical that this stockpiling is significantly displacing real investment.

The way that the figures are calculated views imports as a negative factor to GDP (because NET exports is an input to the model). Please correct me if I am wrong.

In any event, view the headline with suspicion.

Imports are neutral to GDP. The reason they're subtracted in the standard formula for GDP is that makes it easier to count.

GDP = Consumption + Investment + Government Spending + Exports - Imports

The reason that imports are subtracted is because Consumption, Government Spending and Exports all have a domestic and imported component. So instead you could have GDP = (Domestically produced consumption) + Investment + (Government spending on domestic products) + (Domestically produced Exports) and not subtract imports.

But that's a lot harder to measure than measuring totals and subtracting imports.

Imports may be neutral to GDP, but they aren't neutral to this forecasting model [1]

[1] https://www.calculatedriskblog.com/2025/03/a-comment-on-gdpn...

Yes, they're part of the model because they're not excluded during consumption calculations.

> this is due to a surge in imports in response to looming tariffs

“GDPNow is an excellent tracking model, however, the January surge in imports - especially for gold - caused the model to move negative. As the Atlanta Fed noted: ‘the contribution of net exports to first-quarter real GDP growth fell from -0.41 percentage points to -3.70 percentage points’.

Usually there would be an offsetting increase in inventories, but that is a lagging indicator. This is a short-term distortion and will balance out over the next month or so. I don't expect negative GDP in Q1.”

[1] https://www.calculatedriskblog.com/2025/03/a-comment-on-gdpn...

I think, this named deferred demand - people known before about new tariffs and buy really need things before new policy taken effect, so now will be some time without new buys.

It will normalize in few years, may be for some markets in few months, and for some will need decades, from EU practice.

This looks like the work of a team of stable geniuses.

Just wondering: If we magically made the federal government 20% more efficient would that decrease GDP substantially?

> If we magically made the federal government 20% more efficient would that decrease GDP substantially?

Not in the long run. (Particularly not if being done in the current deficit-increasing way.)

The question is underparameterized.

20% more efficient happens when you accomplish 20% more work with the same amount of money.

It also happens when you accomplish the same amount of work with 17% less money.

Right now it looks like neither option is happening.

Ah yes but you see, all that government spending was just waste. So in the mind of the administration (or at least their public statements) they have miraculously achieved the second case.

What percent of government spending is due to federal employee payroll?

I heard it was 3% to 5%. If so, then 20% layoffs would save < 1%.

Unless they have a "trickle down/up" effect?

Similar data downthread: https://news.ycombinator.com/item?id=43246891

But then those 20% stop spending money which has a knock on impact on the rest of the ecomony

What if we make it accomplish 20% less but spend 10% more money?

Not necessarily. Hypothetically speaking, if the federal government becomes more efficient, i.e., it produces the same services for less money, the FED could stimulate the economy with low interest rates, so that the private market employs the people released from the federal government and we will have higher production and higher GDP.

Practically, speaking if you just fire a bunch of federal employees and close departments randomly, you are not making the government more efficient you are just making it less productive. Then if, at the same time, you put in a bunch of sudden arbitrary tariffs that cause inflation across the board, then you tie the hands of the FED and the FED cannot lower rates to preserve employment. So in that case, yes GDP will decrease.

This is all by design. At least we get a nice unethical experiment to corroborate what everyone already knows.

What is unethical about giving the majority of voters what they asked for?

It is unethical to give the majority of voters what they ask for when what the majority of voters ask for is unethical.

In the short term, yes. Long-term, no (it would have the opposite effect). Productivity gains accrue compounded over time, spending cuts show up immediately.

Government spending is included as part of GDP, so a 20% reduction in spending would have an immediate effect on this number.

That's why a lot of economists think GDP is a bad metric, since a debt-fueled spending spree (like the US government loves to do) shows up as GDP growth which makes it hard to compare GDP numbers since nobody ever adjusts for debt-to-GDP ratios.

If you look at this chart, you can see what I'm talking about. For the sake of argument let's say both Sweden and the UK had the same GDP growth rates and similar levels of government spending. Sweden would be the more productive economy because they'd be doing that with far less debt: https://en.wikipedia.org/wiki/Debt-to-GDP_ratio#/media/File:...

A debt fueled spending spree by private enterprises boosts GDP too, for the same reason. That’s kind of the point of the number that measures spending sprees (and the other various kinds of spending).

The degree to which it’s a “good thing” or not is another question. The assumption that either party is automatically productive or wasteful is obviously incorrect. Governments can burn money or invent the internet and private industry can build jet engines or tamagotchis.

If GDP is growing equally fast in both countries but with dramatically different levels of indebtedness, you can unequivocally claim one is more productive than the other at present.

Sure, either country might invent the next AI in the future.

But if we're assuming debt-fueled government investment is what results in this future growth (big assumption), then the less indebted competitor still has the capacity to take on all the debt they aren't shouldering at present to grow even faster.

> If GDP is growing equally fast in both countries but with dramatically different levels of indebtedness, you can unequivocally claim one is more productive than the other at present.

Why?

I don't know. If we had a time machine, we could go back to the 1950s and defund government-sponsored education and research programs instead of increasing spending on them, and see how things turn out, GDP-wise.

Trouble is, that could easily do enough damage to prevent the invention of our time machine in the far future, or at least seriously delay it. Maybe not such a good experiment after all.

It depends on what the broader economy is doing

Is government spending crowding out private investment? (Is the private sector competing with the government for employees?). If so then GDP should increase

Is unemployment high? Then probably it would hurt GDP, but that depends on interest rates. If interest rates are very low, then there's very little cost to having excess employees being paid by the government: indeed presumably you can find something else useful for them to do. If interest rates are high, then the government is paying a heavy rate to subsidize these now-redundant employees. That's stagflation, which is essentially economic hard mode.

For example, what a waste it was during the Great Recession, when interest rates were basically zero, to have people unemployed instead of doing something useful, like maintaining or upgrading infrastructure. Alas!

It's funny that this question isn't answered anywhere in the news!

The question is a bit vague, let's split it up into different options:

1. The government does exactly the same work as it does today, but with 20% fewer employees. The US spends $270B on civilian employees. So 20% of that is $54B. US GDP is 27.72T. 54B is totally irrelevant.

2. The government spends 20% less on everything it can. Most of what the government spends on cannot be cut, it's fixed. Social security, medicare, defense, healthcare, veterans benefits, interest in existing loans, etc. https://fiscaldata.treasury.gov/americas-finance-guide/feder... If you take away the parts that cannot be cut, you're left with discretionary spending. https://usafacts.org/articles/how-much-of-the-federal-budget... That's about $300B (because we need to leave out defense and things like veteran's benefits and income security which are discretionary but must be paid). What remains is education, parks, research, etc. If we cut 20% of that about $300B which is left over, we're still talking $60B.

So no, a magically 20% more efficient federal government won't do anything to GDP, because it won't do anything for government spending. Pretty much all government spending is in direct payments to help people and in defense. That's why DOGE and others cannot possibly make any difference at the large scale, they can only hurt people while providing nothing meaningful to the country.

Definitely, no. After Laffer, in normal open market, all government spending (equal to sum of all taxes), should be less than 30% (less then optimum, so will have gap for emergency cases).

Why it is more effective to limit taxes, because by definition, private business is most effective form of production, and gov't entities are least effective form, and with tiny taxes people will have more money to reinvest into economy grow (via investments into existing and new private businesses), which is definitely more effective than spend money by government or just use government to redistribute money to people.

So in ideal case, fed gov should be zero size, and only in extreme cases appear and save world, then immediately disappear and return zero taxes.

https://en.wikipedia.org/wiki/Laffer_curve

PS what's also funny, usually money redistribution bureaucracy spend more money to their functioning than distribute to people, even in cases of very large systems with millions participants.

PPS yes, exist number of cases, where concentrated spending via government is beneficial, because of size factor. But problem is, many of such cases are only seen post factum, and it is not easy to predict, if something is such big thing.

Examples of cases benefit from fed size, are: railway from west to east on early 20th century; nuclear power ~80 years ago; space scale rockets in 1960s. - Now all these cases will be more effective handled at private business.

For now we have perspective cases of AI and quantum computers, but at the moment we don't know, which approaches will deliver value and which will just gather low hanging fruits.

PPPS must admit, army/navy (including veterans care) and weapons industry are special cases, which need concentrated money to effectively function, and unfortunately they typically cannot be optimized, because already working underfunded.

Why need finance own army - to not finance enemy army. In ideal case, own army must be only tiny bit more powerful than enemy army, and this will be enough to save from war.

> After Laffer, in normal open market, all government spending (equal to sum of all taxes), should be less than 30% (less then optimum, so will have gap for emergency cases).

And your evidence for this claim is?

Please explain, what exactly you don't understand from my comment?

- I have included source where you could find additional info, but sure I have not included huge number of other sources, because they are well known for people really interested in economy, and sure I will add some others if somebody ask.

The Wikipedia article you linked to doesn't support the assertion that Government spending should be less that 30%

And in-facts disputes the claim that lowering US tax rates would actually increase the tax take

We actually have the evidence to back this up as the deficit grew when Trump cut rates

> Why it is more effective to limit taxes, because by definition, private business is most effective form of production, and gov't entities are least effective form

This is also an unproven assertion as there are plenty of examples effective public spending and ineffective private production

> effective public spending > ineffective private production

You really thinking, if private company will be ineffective on concurrent market it will survive significant long time?

And you also thinking, exist some superhero, who always stopping ineffective public spending?

I think, you just manipulate, showing rare cases as typical practice.

And yes, I agree, could be exceptions, but I said about typical cases, because we cannot lean country on rare things. Country should have concrete reliable foundations.

https://i.redd.it/9wrb5nbycyle1.jpeg

You ain't seen nothing yet.

In a few short weeks, Trump imploded the fundamental US brand from good to um, pretty much pure evil. We are untrustworthy backstabbers. Rightly so, people hate us now; they are literally burning the American flag all over the world. USA products and services are toxic items. Not that we make much money off the travel industry, but you'd have to be a complete idiot to vacation in (or really even travel to) the US now.

It's going to get really ugly; I don't think people get it yet.

I think in various parts of the world people were already quite negative towards US. What happens now though is that some other countries will have second thoughts. I hope enough people can distinguish between one administration and "the people", but trust is hard to gain and easy to loose, so yes, some things will get harder.

The US was already granted its mulligan in 2020. And then 4 years later the populace went and double down on all of this. It won't be so easy going forward.

Countries? My friend right now add there all former US allies, including whole Europe and both your neighbors. Maybe gaining some new like guy from Argentina, Saudis with their murderous chieftain, and of course lets not forget biggest country on Earth by landmass.

US is a bully, and extremely unreliable one. We're in a no-trust era now. You will find some sympathizers of him everywhere of course, they mainly align with russian war supporters, at least in Europe. No surprises.

All this could reverse eventually but I just don't see it happening. 4 years is painfully long period and things will change forever, and I suspect not in ways 'architects' wish for. God I desperately hope we have at least some leaders with balls in Europe now that can steer adaptation to new situation quickly. We have massive potential at least matching current US one, but incorrect ideology for these times. And I suspect in 4 years situation won't change dramatically, if at all.

Remember those times that were, and how they were, how world was. I slightly feels like when 60s hippie era died and one Hunter S. Thompson quote comes to mind.

I'm reading his book Hell's Angels: A Strange and Terrible Saga right now and there's an uncanny resemblance to present day in his comments about both the media and the ignorant, violent and societally useless men with deep-seated masculinity issues who became the Hells Angels (or MAGA as it is now).

> I hope enough people can distinguish between one administration and "the people"

"The people" voted for this administration precisely because of its xenophobic stance. Nearly half of us didn't want this, but we're going out the bathwater regardless: the majority and the administration are in agreement, and that's the correct perspective to have on the situation.

I'm sorry to break the news to you, but for a large section of the world population (especially in the global South), the US was the villain for a long time before Trump came along - and I don't mean only in the "evil empire" countries.

Trump only managed to spread this sentiment into the West, where it wasn't dominant so far, and sow doubts among formerly close allies.

If the US being a villain to most of the world is a surprising concept to you, I highly suggest you read about the original 9/11 in Chile.

Sure but we are talking about economics, and now the list includes our two biggest trading partners. Why he thinks making every day Canadians hate us is good strategy is beyond me.

Europeans don't like Americans, but are happy for Uncle Sam to bankroll their defense while they take 4-6 week summer vacations, retire at 60 with pension, have free education and throw away welfare on illegal migrants.

Maybe it's time to cut down the $700+B/year of spending on NATO and let the proud Europeans pick up the slack?

> bankroll their defense

Like post 9/11 Article 5 or Afghanistan or Iraq?

Also decent amount of European defense budget went to US manufacturers. This will probably change with de-facto end of NATO.

True but still a massive net gain for America. The irony is, as the Founders knew, America can actually afford to basically not even have a standing army, it's a massive, heavily civilian armed continental sized country with weak neighbours and an ocean either side. So logically Europe should have a far larger defence budget than America.

We both know that US wanted to do it, because that’s how you become the global soft-power and have influence on every other nation. Also, it’s not the fault of Europe that Americans don’t want free education, pension, 4-6 week summer vacations and etc.

You’re trying to find a reason why quality of life is worse in the states, compared to Europe and some Asian countries. However, you’re not willing to blame yourselves, and will keep finding an excuse.

Most of people who say the same thing at the same time call Europeans “poor, no growth, no ambition” citizens. And that’s ok. But you can’t have it both ways, you know. Go enjoy your richness or growing stock market.

Europeans went wild with their social welfare spending so badly that now they need to import 3rd worlders because they have too many people who are on the government dole and not enough young people to pay into the system. Quite ironically, these "guests" are ending up eating away further from the welfare system and repaying their hosts with terrorism, as was recently seen, and will continue to be seen.

Also, it's easy to have social welfare when you have a homogeneous high-trust society... The more migrants the EU lets in, the more you see the whole thing deteriorate.

There's no such thing as "free" anyway, it's always paid by someone else. Pension at 60 is unsustainable, free education just devalues it, making it harder to fire people makes it harder to hire people, etc...

Europe is in economic decline, it's in population decline (as many other western nations btw), it's becoming more authoritarian (the UK prolly arrests more people for social media posts than Russia nowadays), and it's failing to compete on the world stage.

> Europeans went wild with their social welfare spending so badly that now they need to import 3rd worlders because they have too many people who are on the government dole and not enough young people to pay into the system. Quite ironically, these "guests" are ending up eating away further from the welfare system and repaying their hosts with terrorism, as was recently seen, and will continue to be seen.

As a "3rd worlder" that migrated to Europe, this comment is wrong on so many levels that I have my doubts if you are trolling or are just really stupid. Maybe a little bit of both.

Europe imports people for the very same reason the US imports people (and the US imports A LOT of people). Advanced economies are complex beasts that need manpower and expertise beyond what a single nation can generate - And most European nations are small-ish.

The country I originally moved to actually had unemployment in low single digits. It needed people. It was not because "everyone was living on the dole".

But you are free to repeat your fairly racist and jingoistic bullshit around. It's a free world after all.

Sorry to continue the thread, but it’s a bit baffling to see how a good chunk of America really thinks without them everyone else would be a toast. Sure, we would be worse off, but so would they. Basic self-sufficiency is almost every normal government’s major goal.

By all means, I am enjoying this.

For a very long time I wanted EU (and other parts of the world) to rid itself from US influence, that I consider to be malignant to progress. US always leveraged its power (both soft and hard) to its own benefit first and foremost.

What I never expected is that this would happen by the US itself shitting its own pants so hard. I am actually very optimistic that EU will be forced to step up its integration, and other economies will be forced to step up on trading among themselves (not only goods, but also knowledge, services and cooperation) to replace the vacuum left by the former all powerful ally.

Interesting times ahead.

The US literally bailed Europe out in two world wars. Does that fit your category of "not being toast"?

When someone else bankrolls your defense by spending almost a trillion dollars a year that leaves quite a lot of the budget for other things, doesn't it?

Don't want to discuss your statement about "bankrolling" here, I'm not into the topic enough.

However, since this post is about US GDP I'm now curious, what do you think where this money is going and contributing to GDP?

> When someone else bankrolls your defense by spending almost a trillion dollars a year

That is the whole defense budget from the US, not how much it spends in Europe.

And yes, EU should stop relying in the US for defense. That arrangement only benefits the US, to be frank, EU should develop its own defense industry instead of strengthening the defense industry of a foreign nation. Especially now that said foreign nation is essentially enemy territory.

Again, literally all of it are just projections. Eurozone quietly accepts non-double-digit growth YoY in exchange for fairly balanced life style. If you guys don’t want that, that’s up to you. Until this point, all the previous governments in charge made their decisions on behalf of Americans. Retroactively blaming others is just… weird? Go figure out a government or method that’s best for you, since everyone writes their own destinies. At the end of the day, everyone will adapt, change and survive. To the better or worse. Pointing at others’ houses’ messiness while yours is extremely far from being clean is just not nice.

You might be surprised how much American "double digit growth" is just the upper class erasing the middle class.

Fair. I just really dislike when someone actively starts bullying others and talking down on them. Especially when the life in their own state is just, objectively, by most metrics, is worse.

Balanced poverty lol. And it isn't "accepted", the EU is having a meltdown about how they're becoming less and less competitive vs EU. No politicians has ever said "yep, all the policies we support are the reason you're falling behind, and that's a good thing!"

(And I'm British, so this isn't some pro American rant)

The UK's pathetic growth, bad under the previous government, now even worse under a new leftist government that is bringing in continental style employment regulations etc, is the main topic of national debate right now

Whoa, and who's gonna replace the loss in the primes' revenue, hmmm? They pay top dollar lobbyists to prevent such a radical notion.

lol

Not only could America have had better benefits than Europe but you guys chose over and over again not to yet it’s Europe’s fault.

Love watching you guys shoot yourselves and yell at others. Popcorn has never tasted better.

> Not only could America have had better benefits than Europe but you guys chose over and over again not to yet it’s Europe’s fault.

The social welfare experiment has negative expectation. That's partly why the Europeans are importing young migrants from 3rd world countries who despise them -- they are running out of people who pay into the ponzi scheme.

I can't wait for Trump to exit NATO and show that the European king really had no clothes after all.

I can’t wait either. Because then Europe will get its shit together and reduce its need on America. Then you guys are truly fucked.

See the news about the 800 billion euro investment in Europe for Europe defense? Thanks America. Also did you see the stock market? To think that tariffs would somehow benefit America. All you’re doing is isolating yourselves and forcing decoupli by. Let me know how your relationship with Russia goes. According to history, not very well :)

too funny how the MAN made you believe you cant have nice things because of “nato budget” :)

As a Brit I'm more negative about Trump/Musk than the US as a whole. That's probably true of much of the world.

Trump wants lower interest rates. The road to getting there will inevitably involve some pessimistic forecasts. That benefits Trump too because he can say "they all said the economy was going to be bad, but look what I accomplished" when the higher rates heat things up.

Hey e/acc subset who were pro-Trump because of how much he was recruiting from Silicon Valley, is this the whole massively revitalized economy we were supposed to be getting?

Guarantee you the super wealthy want deflation here.

Buffett etc is sitting on hoards of cash and want to swoop in and save the day again by taking over banks and oil companies.

Yep, definitely true.

I rather doubt Buffett himself wants it although he's prepared.

I'm seeing a lot of "one easy answer" type posts for this data, and I thought I'd contribute my own hypothesis as to why an economic downturn of some sort seems inevitable. Bearing in mind this is grossly oversimplified, and an eensy bit hostile in tone, and written from one of the internet's multitudes of "armchair theorists", so take it all with a healthy dose of skepticism.

---

On the one hand, you've got a tech industry so addicted to ZIRP that they've actively been trying to engineer a recession since COVID's interest rate hikes. They don't want to adapt to a new norm of low interest rates, they want zero interest rates so they can take out all the debt they need to justify share buybacks, AI and Quantum investments, and further industry consolidation around infinite services rather than tangible products. To those types of leaders, the pain is the point, and a means to their end of depressing wages and fueling more artificial growth.

That said, they're ultimately a drop in the current bucket. Once the current President got elected, businesses immediately began bulk-importing ahead of tariffs to preserve margins, in the hopes they could lobby to get them dropped again like last time. That is not happening, partly because one of their own is President de facto if not President de jure, and this man is rampaging like a petulant toddler through the ranks of the Civil Service. Laying off and outright firing a bunch of workers - surprising absolutely nobody with a basic grasp of economics - has knock-on effects on the larger economy. Those people have bills to pay, and often took lower-paying Civil Service gigs for the stability of the role - something the economy adapted to as dependable and reliable income streams. That image has been irreparably shattered, and Civil Servants are viewed as the same unstable debtor as private sector workers, surviving not even admin-to-admin anymore. This means employers are nervous about their hiring practices, eliminating open roles (the "Job Market Freeze" as it's being called) and not backfilling others, with a prime example being the tech sector refusing to hire developers and claiming AI will replace them.

Anyway, so we have tariffs squeezing already-declining consumer demand as COVID surpluses have dried up, a demolished civil servant base (the Federal Government is the single largest employer in the country, and possibly the Earth inclusive of its multitude of other, oft-excluded branches), and an unstable Executive Branch more focused on agendas of hatred and vengeance than sound economic policies.

That still only scratches the surface.

Compounding the above are asset prices and inflation, both of which I'm going to grossly oversimplify and lump into the "infinite growth" problem category. The only thing holding back the human species from stripmining the entire planet is policy, and that policy has been globally manipulated and hollowed out to funnel cash upward from the working class worldwide. It's not an American problem, and it's not a Capitalism problem (Communist and Feudalist countries have had the exact same issue). By funneling more wealth into fewer hands, there's less avenues for production of goods and services other than "rental" markets (like streaming, or XaaS) - a market segment that's been infamously toxic with bad returns in the long run relative to other investments, though always buoyed by better-than-expected returns in the short-to-mid terms as investors seek market capture through "disruption". Paradoxically, giving consumers the ability to own actually increases economic output to a degree, especially if products are well-made and repairable, by propping up local craftspersons and small businesses; perpetual "rental" services focus that capital into very few hands, and deter such knock-on economic expansion, which ultimately slows growth.

And that growth is the problem every country faces right now. The past century (post-WW2 in particular) has been strongly focused on growth at the expense of all else, and that was never sustainable in the long run. Until and unless we actually have (practically) infinite resource extraction, refinement, and re-utilization, infinite growth is functionally impossible - and even then, growth would be limited to the sum total of the value of resources effectively exploited in a closed-loop supply chain. When growth halts or slows, we get recessions as the investor class, greed impossible to satiate even in the best of times, withdraws from markets until such time that new industry or technological innovation creates the illusion of infinite growth yet again. With population growth stagnating (due to wealth inequality - go compare birth rates to wealth inequality ratios historically to see how neatly those two inverse one another), this also threatens systems built with the presumption of infinite growth forever - like government welfare programs based on low taxes and high population/wage growth, rather than higher taxes and fixed benefits.

So now we circle all the way back to the beginning, and my hypothesis on the potential recession:

* Consumer sentiment is low because people keep getting laid off, wages remain flat, RTO mandates eat away at time and money savings the pandemic created, and asset prices remain unaffordably high for the 90%

* Business confidence is low because higher tariffs disproportionately impact American businesses who import most goods, and a dysfunctional Federal Government more focused on tantrums, authoritarianism, and identity politics than effective governance weakens that confidence further since lobbying is no longer a guarantee of outcome

* International confidence in American institutions (government and private alike) is decreasing as a result of highly-public meltdowns of both the President de jure and the President de facto, forcing many developed economies to reconsider their business and political relationships with the world's largest economy.

* A hollowed out economic core that focused exclusively on services (which can and are continuously outsourced) in lieu of diversity of industry, making it incredibly vulnerable to outside market and political forces

* A capital class that believes it can escape any harm by simply relocating elsewhere

And that's my position. I'm definitely oversimplifying complex issues for the sake of brevity (economic diversification, asset valuations, the housing crisis, etc), but I think my core position is pretty sturdy.

Around 150,000 people leave the Federal Government every year anyway [1], and there's likely significant overlap between those who accept the DOGE eight month severance and those who were already planning to leave this or next year. In fact, it was only back in 2021 that some agency heads were excited about the possibility that all the retirements happening and forecast in 2020/2021 would enable them to clear out cruft and hire younger and more experienced individuals [2]; but, of course, no one likes it when its done to you.

Its also, obviously, the case that we wouldn't see most of the macroeconomic impact of these cut workers for at least a few months, when their severance runs out and when those who can't find further work change their spending behavior.

[1] https://ourpublicservice.org/blog/recent-trends-in-quits-and...

[2] https://federalnewsnetwork.com/workforce/2021/11/time-for-th...

Thanks very much for this well-thought out thesis. Sometimes it feels like I'm taking crazy pills whilst reading the Internet, and this brought back a much needed dose of sanity to my corner of reality. Interested in any additional reading material along these lines of thinking, if you care to list any.

The single best economic resource I can recommend myself is the various Federal Reserve datasets, especially the St. Louis FRED tables[1]. A lot of my own OCD and generalized anxiety has been channeled into reviewing those on the regular, if only to understand my own economic risks and placate anxieties about things like employment or housing. Seriously, the fact those datasets are free blows my mind.

Admittedly I'm a bit weird in that I don't have a whole lot of books to recommend, because I'm often just reading and interpreting datasets or whitepapers instead. Books, while immensely useful and generally recommended as the best way to communicate complex information (seriously, read more books), are also colored with bias and opinion that can be difficult to untangle from actual fact in the moment, especially when they're agreeing with your own prejudices or biases. It's why I always try to approach what I'm reading with a giant bowl of salt, so I'm not as easily taken in by good writing or flimsy arguments (which has been super handy for my current read, Strauss and Howe's "The Fourth Turning"; no wonder cryptofascists hold this thing up like a Bible).

Basically, consume more data, try to identify correlating patterns, and build your own conclusions based on that data. Read more books in general (any book on systems analysis - economic, historical, logistical, technical, whatever - is going to be a great starting point and build out foundational reasoning), but always ask yourself what their bias/angle might be in the narrative.

And for what it's worth, next on my economic reading list is "Capital in the 21st Century" by Thomas Piketty, a book that's seemingly either the height of genius written by a brilliant visionary, or propaganda garbage trumpeted by a Frenchman cosplaying as an economist, depending on the critic in question. It's come up a lot as a reference in some other books I've read, so I figured I'd challenge myself and see what new info I can grep from it.

[1] https://fred.stlouisfed.org

Uh-oh.

I wonder how all the Ayn Rand acolytes in power today will react to the bad news.

Their approach to macroeconomics can be summarized as: first, they always blame bureaucrats for bad economic conditions; and second, they believe that if they can get the bureaucrats out of the way, they need only to inspire people, to get everyone's animal spirits roaring, so the economy can grow, because they believe "growth is a choice." I'm exaggerating, but only slightly.

Well, all these Rand devotees are successfully destroying the federal bureaucracy, or at least preventing it from functioning, as they have always dreamed, and they're constantly chanting about making things great again, to inspire people. So far, they're getting everything they want, and yet... here we are, seemingly headed for a recession.

Could it be they don't understand things as well as they think they do? It sure could. Alas, they won't want to change their minds. As J. K. Galbraith wrote, "faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof."

If we indeed have a recession, my best guess is that we'll see them repeatedly calling for more optimism, or something like that.

Turns out that one of the best things for a healthy economy is a stable economic infrastructure provided by a reliable government! Not randomly and rapidly disintegrating conditions and unclear directions.

Businesses like predictability and if there is change, steady predictable change. Across the board tariffs on our closest trading partners and allies results in recessions and depressions. It doesn't take a genius, it just takes a bunch of yes men and a cult leader.

Yep, exactly. Predictability makes logistics work. Unpredictability makes logistics break. This is all the kind of thing that we could probably teach to children with blocks. Stupefying that a large number of supposedly intelligent computer scientists are duped into this via "move fast and break things" type logic.

To be fair, I don't think Ayn Rand acolytes love tariffs, in theory.

Though experience has shown me that plenty of people love Ayn Rand not because they love the ideology, but because they're a bit selfish and support policies that remove barriers to their personal success rather than those which they feel are best collectively. So in that sense, ideological consistency is not mandatory.

I agree, they don't "love" tariffs, but many are so uneducated about economics that they will publicly state things like "import tariffs are better for the economy than income taxes."

they don't. The Ayn Rand thing is a bad call. This is the work of chaos worshippers of a circus clown.

It's not hard to find out that many individuals in the current administration -- and the thinkers they praise -- are fans of Rand. In particular, they are fans of her novel, Atlas Shrugged. Many of the terms these individuals use, like "moochers" and "looters," come straight off the pages of Atlas Shrugged. Even the president, who by all accounts almost never reads anything, says it's his favorite book. Am I exaggerating Rand's influence? Perhaps, but not by a lot. All it takes to verify my claim is a few web searches.

sure they're fans, but they certainly are not in any way acting like libertarians. Libertarians are live and let live, leave my property alone, personal rights, we'll settle this in court, people are equal; that's not what the MAGA movement is. These MAGAs want women's right taken away, free press jailed, LGBTQ people punished and declared insane, and on and on. It's a christofascist movement at it's core, and they only want one voice in the room, theirs.

You know things are bad when you have negative GDP!

With a 6% deficit and growing.

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