Hey, Recession Isn’t So Bad, The Washington Post Says

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Commentary

You know it’s going to happen. The Biden administration spent months saying there will be no recession. When it finally showed in the technical data, they said that it wasn’t true. It’s only a matter of time before they admit that it’s here, at which point, they will claim it’s a good thing.

That’s exactly what we saw with inflation.

To prepare the way, The Washington Post is always happy to assist. So let’s turn our attention to a prime example of punditry malpractice written by Michelle Singletary. Her column explains why “a recession isn’t all bad news” because of “seven silver linings.”

No. 1: “Housing prices may finally come down to reasonable levels.”

That’s interesting because I don’t recall anyone celebrating the housing crash of 2008. Yet, if it is true now, it was true then. Lower prices are always good for buyers. You could say the same about the Great Depression. On the other hand, crashing prices are bad for sellers.

Every transaction has a buyer and seller, so to claim a price change is good for one or the other is always possible.

However, there’s a complicating factor: These homes are bought on debt. You borrow against an earlier valuation. A quick crash such as what we are experiencing indicates that homes will be underwater, now as in 2008. That means that you could be better off abandoning the home rather than paying a monthly mortgage payment for a home that is worth nowhere near the price you paid when you bought it.

The big difference between now and 2008 has to do with high interest rates. Whatever you buy in the future, no matter the sticker price, will carry huge costs in mortgage payments.

Before going through the rest, let’s skip to No. 6 because this one illustrates the point.

“Your used car is worth more,” Singletary writes. “If you’re looking to upgrade to a newer car, and your car is in fairly good condition, you’ll get more for your trade-in.”

True enough, but here you see the trick. Houses are down and that’s good; cars are up and that’s good. She shifts her outlook to seller from buyer without explaining why. You could say that higher gas prices are great for those who own oil stocks. Or that a crashing stock market is great because then you can get stocks cheaply.

That’s all silliness.

She also leaves something out of the seller market: If you sell your car, you will need another one. It will be more expensive. You don’t come out ahead unless you decide to bike everywhere, and maybe that’s the whole point. Who knows?

But that does not make sense in light of her No. 4: “Although a lot is in flux, if you have plans to travel overseas, your dollar may go a lot further.” That’s true but prices of flights have easily adjusted to equilibrate the rise in dollar value. Prices for domestic flights aren’t entirely outrageous but international flights are soaring higher by the day.

Plus, with such an economic crisis loose, who has the extra funds for holiday travel overseas? Only elites, and that’s for whom this column is written. But The Washington Post is used to this. It’s the whole of their readership. These are all the same people who could “stay home and stay safe” and get their groceries delivered by people who don’t read The Washington Post or The New York Times.

Let’s return to the list of all the reasons you should be happy about the recession.

No. 2: “At least one bright side of the Federal Reserve raising rates to fight inflation is banks are paying people more to hold their money. My credit union has a special 20-month offer on a certificate that would pay me a 3 percent annual percentage yield.”

My goodness. Someone needs to introduce our friend to a thing called the inflation adjustment. At 9 percent inflation, a 3 percent return means losing 6 percent of the value of the dollar, meaning you are still in the red. I simply can’t believe that someone wrote this.

It’s an inflationary recession, meaning that interest rates paid have to be higher than the inflation rate to be a winning deal. Unless you are a dealer of 30-year mortgages, you are going to lose. Even then, the mortgage industry is in meltdown because there are ever fewer takers at 7 percent rates.

Essentially, it’s almost impossible to find a return on money held anywhere in the markets. How is that good? It’s not. It’s a disaster for everyone.

No. 3: “The Series I Savings Bond was created as a hedge against inflation,” she writes. “Until the end of October, the bonds are paying 9.62 percent.” Great, call your broker right away! He will tell you the downside of this fancy trick: the bonds pay you zero percent. So sure, you can get inflation protection but no return. This is good news?

No. 5: “Unemployment is still relatively low. People with jobs and money to spare can spend on luxuries such as a vacation.” I don’t see how one follows from the other. There are as many as 8.5 million people missing from the workforce. So the sense in which unemployment is “low” is purely technical. Millions are demoralized, doped up, unable to find child care, or otherwise disengaged from the labor markets, which is seriously harming enterprise.

No. 7: “Student loan forgiveness is coming.” I fail to see how this one is related to the recession. In any case, it’s not as if Biden has magic fairy dust. All he did was shift the burden of payment from those who took out the loans to taxpayers and the general public. The whole scheme is an outrage, and a costly one.

And that’s it, all the reasons why this writer can come up with why this recession isn’t so bad after all. You can fully expect the White House to clip and save that one, fully ready to deploy it when it becomes impossible to deny that we’re in a recession. The White House will soon be celebrating lower house prices and advertising inflation-adjusted bond portfolios.

Columns like that infuriate me because they are so obviously political. If a Republican were president right now, there would be screaming about inflation and the sufferings of the poor and middle class, not celebrating cheaper homes and higher car prices.

It bothers me when economic thinking is deployed in wildly distorted ways to serve partisan political interests. Sometimes, recessions are necessary to correct errors of the past. But this one is entirely man-made—as were the conditions that led to its inevitability—and not an accident.

There is something very wicked going on. Some people call it a controlled demolition. Maybe so. The truth is that our economic conditions are crushing and getting worse by the day. There is simply no honest way to put a good spin on it.

They will try anyway because The Washington Post has a dog in the fight, and they are terrified that the American people will rise up at the polls, kick out the paper’s friends, and install its enemies, who then might enact changes to make the likes of the past three years impossible in the future.

Regardless, there’s no getting around it. Recessions are terrible times. Inflationary recessions are worse. The only people who will benefit are those with the means to stay out of harm’s way. Maybe that includes some journalistic elites but for everyone else, this amounts to a fearsome pillaging of the poor and middle class.

There’s only one reason why a recession could be considered a good thing. It cleans out the fakery in economic structures to prepare the way for solid growth. That only happens if you have the conditions in place for future growth. Washington right now is doing everything possible to ruin that, too.