Your K Is Little More Than The Identifying Details Of This 2nd L

The first segment illustrated above, B to C, now that is a recovery and the only form of recovery by the term’s only applicable definition. Notice how it sure does resemble the letter “V.” For an economy experiencing the typical rigors of a normal business cycle, recovery means you end up where you would’ve been had you avoided experiencing a temporary deviation or setback (that’s what a recession means; temporary).

But if it ain’t really a “V”, it ain’t really a recovery. And that’s only where the problems begin.

What’s going on instead Y to Z may look and sound and feel somewhat like what happened B to C, but this second form is an altogether different thing. Categorically so. Yes, the economy is moving upward again, the economic accounts uniformly or near uniformly positive. Those, however, are the only superficial resemblances to recovery.

As are how the top echelon experiences conditions in either; those who are doing well continue to do well even during the worst contractions in history. What separates these “V’s” from the “L’s” is the size of the group left outside of basic economic performances when it all starts to come back up; especially jobs and labor. In the “V”, this group may start out large, as in 1981-82, but in relatively little time it shrinks right back down.

The “L” experience, by contrast, there also begins a huge number in this suffering cohort as the contraction hits X to Y, but then during the upturn Y to Z that number doesn’t improve nearly enough. By the definitions of mainstream “analysis”, that’s their “K” – which, again, is really nothing more than a derived “L.”

Too many stuck for suspiciously too long in the lower leg of the “K” are what give us this “L.”

The longer run consequences of this are not purely economic in nature, though that is where they are felt most readily even on-the-ground, closer to home. Lack of legitimate recovery and economic growth has always been associated with social and political upheaval. And, in many historical cases, the worst periods of them are those when few real answers are available to explain for their economic deficiencies.

 

Eurodollar University’s Making Sense; Episode 15: The Mass Opiate of Our Time

 

In the 21st century, we like to think of ourselves and our “experts” as having conquered all such boundaries of ignorance; when the people of America, for example, faced the Long Depression of the 1870’s they didn’t know where it came from or why it seemed to just stick around and create misery for so long. Surely modern Economists would’ve filled in all the gaps by now?

Except, no. Not remotely. Instead, what happened is the embedded expectations for econometrics – that business cycles of the post-war economy (1945 to ~2000) were some new kind of different template from which it was assumed (by Economists) no economy would ever again deviate. This subjective interpretation was even hard-wired (no unit root) into the statistical models that dominate the discipline, therefore drive the public’s opinions on such matters.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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