Idle Rambling On A Day When No Wells Come Off The Confidential List -- August 30, 2018

Updates

September 13, 2018: when will the longest expansion on record end? See this post.

Later, 1:32 p.m. CDT: below, in the original post, I suggested breaking up the red line into two lines, a yellow line for the Obama-expansion (beginning in 2009 and extending to 2016; and a red line for the Trump-expansion (beginning November 8, 2016 and extending to the present day. A reader asks (rhetorically) if I could name one thing that Obama did that resulted in the "Obama-expansion." I could not. The stimulus, perhaps, but if folks remember, the stimulus was highly targeted and highly flawed. On the other hand, "everyone" can list any number of things that the Trump administration specifically did that led to the Trump-expansion. The corporate tax bill (and all that was associated with that bill) was perhaps the one biggest line-item that can be tied directly to the current US economic expansion. Going farther, the lack of any specific Obama initiative that could "explain" the Obama-expansion confirms that even an incredibly "poor" president cannot stop the United States economy. It just won't grow as fast as it otherwise might.

Original Post 

Time to say what I've been thinking for quite some time, but first this graphic from John Kemp over at twitter:

"Everyone" is talking about how long the current period of economic expansion has lasted, saying that it is now the longest on record. Some think the economic expansion still has legs; but others, think it will "soon" come to an end. CNBC is generally talking the market down (my two cents worth). It's my perception that even those who think the expansion will "soon" come to an end, don't think it will be as "soon" as next year (2019).

I have not followed economic cycles. I know nothing about them except what the "average" person on the street might know.

A couple of things from the graph:

• first, and I was surprised by this, the current expansion is still almost a year shorter than the longest one (the one that began in 1991)
• most surprising: how short the periods of economic expansion lasted after WWII
• 1945: 3 years
• 1949:  3.5 years
• so much changed after 1933, I don't think it's worthwhile to go back farther than 1945 when considering economic cycles; some might argue going farther back than 1969 is even going back too far

I'm absolutely convinced that the current economic expansion had two (2) periods, both set in motion by entirely different events.

The current expansion is said to have begun in 2009 and has gone on without interruption; it began after coming out the second worst downturn in US history; at some point, the economy had to turn.

Had the pundits been correct, the market (and possibly the economy) would have tanked immediatly after Trump's election (November) and it was going to take two to three years to recover.

Had that happened, the graphic above would show:

• economic expansion for 6.5 years -- not atypical for for modern-era America -- ending in late 2016
• the next economic expansion would have begun in 2018; we would now be into our first year of another period of new economic expansion (all things being equal)
• "all things being equal" -- had the market tanked in 2016/2017, it is unlikely Trump would have gotten the tax cut or the other changes that propelled the economy we are seeing now; he likely would have been impeached by now if the Trump election had put the US into a depression
• however, assuming that "all things being equal" -- that Trump persevered and his policies went into effect, the economy would have righted itself, and taken off

Bottom line:

• I would suggest breaking up the red line in the graphic above that begins in 2009 into two separate lines:
• the first segment would begin in 2009; end in 2016
• the second segment would begin in 2017 and extend to the present day

If one does and if one considers a typical economic expansion cycle to last six years in the modern era, we still have four years of this economy growing.

My two cents worth.