That's all we got for the trillions....

By Fester:

The US economy is in recession for most people.  Either their disposable income is getting compressed due to high price increases in hard to substitute goods such as fuel, energy, food, education and healthcare, jobs are being lost and mobility is being restricted by the very high costs of changing positions and assets are losing value.  The top line GDP number may or may not be low enough to call a recession, but it sure feels like one to most of my peers; the bottom 95% of America.

Menzie Chinn is pulling out an interesting graph from the CBO on the nature of the output gap.  This gap is calculated by subtracting real economic changes from projected trend line changes based on full economic growth.  Over the long run, the average difference should be very close to zero.  In this situation, one would predict that wages would roughly track with productivity growth.  When the output gap is positive, real wages should rapidly increase as labor is comparatively scarce while the opposite occurs when the gap is negative. 

The recovery from the turn of the century recession was not particuraly impressive when viewed from this angle.  It was never that impressive when viewed from an employment, workforce participation, industrial capacity, wage and income growth or any other metric.  Even by GDP growth, it was a trend to below trend recovery. This is despite the fact that the economy was goosed by multi-generational low interest rates, massive military Keynesian stimulas and trillions in debt. 

I sure hope this party was good as the hangover looks like it is going to be a killer....