Our Dismal Metier

“The fundamental cause of the trouble is that in the modern world the stupid are cocksure while the intelligent are full of doubt.” [The Wiggin Sessions] September 08, 2022 [WEBSITE]( | [UNSUBSCRIBE]( An Open Letter to Shirley N. “The fundamental cause of the trouble is that in the modern world the stupid are cocksure while the intelligent are full of doubt.” ― Bertrand Russell [Addison Wiggin] Addison Wiggin Dear Reader, “I've been reading various financial and stock newsletters for a couple decades now,” writes Shirley N, who’s been around long enough to critique our dismal metier. “Jim Rickards has predicted 25 of the last two recessions and economic collapses.” “He sells fear and panic,” Shirley continues, going for the jugular, “always with great urgency. You gentlemen who keep pushing his advice are losing stature in my eyes.” Thank you, Shirley. We share because Shirley’s comment reminds us of another chestnut of the newsletter business: “Even a broken clock is right twice a day.” Meaning, we occasionally get things right even if only by accident. My favorite, however, is this one: “You’re often wrong, but never in doubt.” Oy. What’s a writer to do? We like Jim Rickard’s analysis. You can do with it what you may. In the end, we are all students of the markets. A question posed to you, dear reader: Who and what would you like to hear more about? You can write to us [here](mailto:Feedback@TheFinancialReserve.com). Otherwise… and onward. [Click here to learn more] As the old adage goes: “A broken clock is right twice a day.” (Source: Creative Commons) In this week’s Session – “[Inside the Global Liquidity Crisis, Part 2]( – Jim Rickards reconciles the difference between a “Recession”, a “Depression”, and a “Panic”. To him, it’s a matter of mismatched definitions. As we often write, our financial situation is a reckoning with truth and consequences. Before we can have that conversation, we ought to get our nouns and verbs, our p’s and q’s, dotted t’s and crossed i’s down pat. “A recession is very numeric,” Jim starts off. “There is a referee, something called the National Bureau of Economic Research (NBER) based in Cambridge, Massachusetts. It's a panel of nine PhD economists, and they decide when a recession starts and when it's over. They're not an official body.” He continues: Their rule of thumb is two consecutive quarters of declining GDP. They look at unemployment. They look at incomes. They look at a number of other factors. Based on the rule of thumb, we're already in a recession today. The U.S. had declining GDP in the first quarter of 2022. We had declining GDP in the second quarter of 2022. The loss was not as big, but it was still a loss, still in the red. Jim goes on with [some choice words]( about former Fed Chair Janet Yellen, now Biden’s Secretary of the Treasury. We’ll spare the children in the room by not repeating those comments here. But an important point Mr. Rickards makes about the NBER: they haven’t declared an official recession, yet. “But that's not unusual,” Jim continues: What's normal is that the National Bureau of Economic Research can wait three months, six months, sometimes a year before they call the balls and strikes. And for that matter, it's not unusual that the recession's over before they tell you it started. So I don't expect to hear from the National Bureau of Economic Research until late this year, maybe early next year. And oh, by the way, wouldn't it be interesting if they waited until after the election? “Don't underestimate the political twists,” Jim warns. So… we're in a recession. Our view. Jim’s view. A Depression is completely different. Rickards is good on this point too: People say, "Well, okay, if a recession is two quarters of decline in GDP and a depression is worse than a recession then a depression must be 10 quarters of declining GDP or something like that." That's not true either. You can have growth in a depression. The Great Depression is conventionally dated from 1929 to 1940. It was a severe technical recession from '29 to early '33, and then another technical recession in '37 and '38. But from 1933 to 1936, the economy grew. The problem was it was growing from a very low base. In other words, unemployment in the first term of the Roosevelt administration went from 22% to 12%, but it was still 12%. I mean, 12% was an improvement, but nothing to write home about. “So the point is,” Rickards is fairly emphatic about, “a depression does not mean continuous declining GDP growth. What it means is depressed growth, growth below trend.” [Click here to learn more] Rickards: “We're in a depression, have been since 2007.” (Source: Franklin Delano Roosevelt Memorial in Washington, DC.) A lot of numbers follow… but it’s worth understanding the distinction between a recession and a depression: If the U.S. growth potential is 3.5% to 4%, which it probably is, but it’s only growing at 2% – which from 2009 to 2019 average annual growth rates were 2.2% – then you have depressed growth. That's lost wealth. It's now well into the trillions of dollars of lost wealth because we're in a depression. [I would argue we've been in a Depression since 2007.]( Nobody, especially government economists, like the D word. The word Depression doesn't have a rigorous mathematical definition. You can't plug it into a mathematical equation. Shirley, these are complex issues. And there are more (see P.S. below). Even if you don’t spend a dime on Jim Rickards – or any of our newsletters, for that matter – this crotte is real. And we believe in it enough to think, write, share… what we strive to make useful to you, too. So it goes, [Addison Wiggin] Addison Wiggin Founder, The Wiggin Sessions P.S. Tomorrow, we’re going to dig into why the dollar is completely deracinated from its fundamentals. And why it’s actually good to have “cash” in a financial crisis. We might touch on supply-side inflation v. demand side… we’ll see. If we get too wonky, it’ll feel like the economics class you always wanted to skip so you could go skiing. (Wait, did I say that out loud?) P.P.S. We would be remiss if we didn’t mention Queen Elizabeth II died today. May she rest in peace. We remember, back in the day, Bill Bonner writing in The Daily Reckoning a tribute to the Queen and likening her steadfastness through the years to the gold standard itself. Of course, as the Internet is what it is, we haven’t been able to locate the essay for reissue… yet. We’re going to keep trying. Hopefully, with some success. Long live the Queen. Sponsored by Legacy Research Now Live! [Click here to learn more]( Viewers of Nomi Prins’ Running on Empty Summit discovered Amazon’s secretive investing arm. This investment arm essentially FORCES their own investments higher. They’ve done it nine times. And, viewers saw their tenth target. (Get in for less than $1!) [Breaking Research: The Running on Empty Summit…]( Ed note: Got something to say? Send your feedback to The Wiggin Sessions [here.](mailto:WigginSessions@5minforecast.com) LISTEN ON [The Wiggin Sessions]( The Wiggin Sessions is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Consilience, LLC. delivering daily email issues and advertisements. 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