Hope You Enjoyed the “Recovery” Because We’re Due for Another Recession

CNS News posted a rather sobering economic story. Their headline is: “Obama Recovery Now as Long as Average Post-WWII Recovery.” If that isn’t clear to you, perhaps I can help by offering my own translation: We are due for another recession any time now.

If the economic expansion continued in April, then

That would make it as long as the average economic expansion period in the post-World War II era, according to estimates made by the National Bureau of Economic Research.

Since World War II, according to NBER, there have been 11 complete economic cycles, each with a period of expansion followed by a recession. The 12th post-World War II cycle began when the last recession ended and the current expansion started in June 2009.

The first eleven post-World War II expansion cycles were 58 months long on average, according to NBER. The longest expansion was the 120-month period from March 1991 to March 2001. The shortest was the 12-month expansion from July 1980 to July 1981.

Four of the post-World War II expansions have been longer than 58 months. Six have been shorter than 58 months. One–the expansion from March 1975 to January 1980–was exactly 58 months.

CNS leaves the real causes of these boom bust cycles out of their story. But it is the Federal Reserve and its entourage of banks that misallocate resources to produce booms and then busts. The central bank sets or manipulates interest rates to keep them low. This communicates false information to entrepreneurs who borrow money to start ventures. But as many people try to use cheap money, they begin bidding up limited resources. Eventually, it becomes clear that everyone is engaged in an unsustainable boom. At that point everyone does whatever they can to protect themselves. Economic growth stops (because it wasn’t really growth in the first place) and the economic system starts recovering.

Also, this way of measuring economic growth is highly problematic. Realistically, we may already be in a recession. The so-called growth was all due to Obamacare increasing healthcare expenditures.