Practical analysis for investment professionals
11 February 2020

The Silent Depression: Trundling Is the New Booming

Your author recently had the opportunity to contemplate whether there is any relationship between today’s global economic circumstances, how they are reported by the financial media, and the mind, body, and spirit of John Blutarsky. The anticipant reader will not be surprised that, indeed, a tortured connection was found.

Bluto, as he was known to his fraternity brothers, is a character in Animal House, a 1978 comedy about the American college campus on the cusp of the countercultural revolution of the 1960s.

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Bluto is a frowsy man. Unkempt. Rumpled. Bedraggled. His physical condition could be charitably described as circular. As for intellect, he has little. According to the dean, “Mr. Blutarsky” is “maintaining” a grade point average of “zero point zero.” (Though, to be fair, the dean does not elaborate on the grading scale’s range.) When his fraternity is expelled en masse, Bluto responds: “Seven years of college down the drain.”

But what he lacks in body and mind, Bluto makes up for in spirit. The expulsion galvanized Bluto, and upon the movie’s release, audiences were treated to one of the most rousing speeches in US history — an oration played to this very day in sports stadiums and arenas across the nation. The fiery address gained added sharpness by its contrast with and juxtaposition to a speech given one year later by then–US president Jimmy Carter.

President Carter delivered a prime-time address that, like Bluto’s, sought to rouse the crowd to confront the obstacles that lay before them. In Bluto’s case, the audience was his fraternity brothers, their obstacles institutional in nature — the dean who had expelled them and the more strait-laced and influential fraternity that had conspired against them.

Carter’s audience was the American people, the related challenges economic. The country had been suffering through years of high unemployment, high inflation, gasoline shortages, and a general economic stupor. The official title of the address was “Crisis of Confidence,” but it has since become better known by another name: The Malaise Speech.

It was, as one political commentator put it, “perhaps the most politically tone-deaf speech in modern American history.”

Your author brings all this up because the spirit of the Malaise Speech — and not Bluto’s — has seeped into today’s media analysis of the world economy and by extension the public consciousness.

Though the following focuses on one media outlet’s analysis of a lone month in a single country, it illustrates a broader point. The financial media offers diversions and detours all the while ignoring the obstacle itself: the 150-month malaise in global economic activity.

Ignorance is strength.

How was the US economy performing late last year?

The Economist offered three points on this question as the curtain closed on 2019. The first:

“Official data to be released this morning may show that America’s index of industrial production, a widely watched measure of economic health, fell again. In recent months, weak oil prices have hit mining interests; a strike at General Motors constrained manufacturing output. The trade war with China has hardly helped. President Donald Trump, who wants to give America’s heavy, dirty industries a shot in the arm, may be disappointed with the latest numbers, but, fortunately, such industries only make up a small share of the whole economy.”

What about the timeframe in question? Industrial production is doing poorly, a consequence of a medley of issues in “recent” months found in the “latest” numbers. This author will offer no disagreement. Industrial production has been poor for the reasons listed.

But what about the proverbial elephant? Nay, mastodon! The one standing unremarked upon in the room?

Chart showing US Industrial Production

The index of industrial production was reported to be 109.7 at the time. That is only 4.1% higher than in December 2007. US industrial production has grown 4.1%. Not per year. But in 12 years. Total! 

But no matter how many sofa cushions have been gored by the pachyderm’s tusks, few acknowledge it.

The US Federal Reserve tracks industrial production with monthly data stretching back to January 1919. In the last 100 years, US industrial production fell well-off trend growth and stayed there only three times: from 1920 to 1921, during what James Grant dubbed the Forgotten Depression, and during the Great Depression. The third time? In the present day. Of course, the first two instances were properly fussed about, but today there is only the sound of silence.

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The second observation:

“But, fortunately, such industries only make up a small share of the whole economy. And that is doing rather well. The latest jobs report was a blockbuster, with the economy adding 266,000 positions (well above the expected 180,000).”

The November jobs report was a “blockbuster” because the US economy added 266,000 positions. Is 266,000 good? Well, it is better than the expected 180,000.

When the White House trumpeted these results, it emphasized “smash[ing] expectations.” As per the Council of Economic Advisers, “November’s impressive gain greatly exceeded median market expectations by 44 percent and brought 2019’s average monthly job creation to 180,000.”

The council and financial media agree: November was great because economic forecasters were super wrong.

But the question remains unanswered: Is the 266,000 number, later revised to 261,000, any good? What about 180,000? Are any of these numbers good?

The answer is no. They’re not. None of them.

Not only is 266,000 not good, it is actually bad. In something of a coincidence, the median monthly employment growth during the 1990s outside of recession, adjusted for the size of the labor force, is also equal to 266,000. Put another way, what was average during the 1990s is “blockbuster” today.

If we define “blockbuster” as results in the top 90th percentile, use the 1990s and 2000s as our control group, and adjust for today’s larger US labor force, then we would need between 317,000 and 433,000 jobs a month. And that’s if we’re being conservative. The 1960s, 1970s, and 1980s saw much bigger job gains as a proportion of the labor force.

Chart depicting US Employees on Nonfarm Payrolls

Finally, for any surviving readers, your author comes to the magazine’s final note:

“GDP growth is trundling along at an annual rate of about 2%, very respectable by international standards. If this strong performance endures, Mr Trump will have a big advantage when he seeks re-election next November.”

Synonyms for “trundle” include: “roll,” “plod,” “shuffle,” “slog,” “trudge,” and “waddle.” Might this be an example of two nations divided by a common language? This American is confident that The Oxford English Dictionary (OED) will not list “gliding,” “sprinting,” “galloping,” or “striding” as synonyms of trundling. This, we are told, is “very respectable by international standards.”

And indeed it is. The United States is performing admirably. When compared to a world mired in a global depression. That is really an epic standard by which to measure against, a real stretch-goal to set for a country that styles itself the leader of the free world. Not too long ago, the late US political commentator Charles Krauthammer described the country as “a single superpower unchecked by any rival and with decisive reach in every corner of the globe . . . a staggering new development in history, not seen since the fall of Rome.”

But now, President Trump may be able to defend his incumbency atop the, “respectable by international standards” hill? From behind impregnable “waddling economy” fortifications?

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A Silent Economic Depression

Two paragraphs ago, this author claimed that the world was in an economic depression. A depression is not an unrelenting contraction or an uncommonly severe recession. Instead it is the prolonged absence of upside and advancement, a pervasive listlessness where economic opportunity, recovery, and reflation is repeatedly denied, deterred, and deflated.

The financial media’s analysis of the past dozen years, of which the referenced article was but an example, doesn’t see it this way. And has thus inspired your author to crown our current economic doldrums with the sobriquet: The Silent Depression.

This depression is just the third such worldwide economic phenomenon of its kind in the past 150 years. The first was known as The Long (1873–1896) and the second was, of course, The Great (1929–1947). As 2020 represents only its Year 13, the current could not possibly wrest the mantle of “Long” from its predecessor. Moreover, since its initial shock was nowhere near as severe as the 1929–1933 contraction, it doesn’t qualify for the appellation “Great.”

So, why “Silent”? By labeling it thus, your author is referencing the saying, “If a tree falls in the woods and nobody is there to hear it, does it make a sound?” Or, more plainly, if industrial production falls off its century-long trend but the business press is not there to report it, does it count? If monetary technocrats and the political establishment redefine average to mean “blockbuster,” can there be disappointment? If professional economists imply the economy is booming when they say “trundling,” can it be acknowledged?

Chart Depicting US GDP Per Capita

The Economist‘s blurb sounds positive and impressive. But a closer look at what was qualified, discounted, and left out shows that it’s really saying, “Hey, it could be worse.” All of which is a few hedges short of President Carter’s infamous 1979 speech:

“The symptoms of this crisis of the American spirit are all around us. For the first time in the history of our country a majority of our people believe that the next five years will be worse than the past five years. Two-thirds of our people do not even vote. The productivity of American workers is actually dropping, and the willingness of Americans to save for the future has fallen below that of all other people in the Western world. As you know, there is a growing disrespect for government and for churches and for schools, the news media, and other institutions. This is not a message of happiness or reassurance, but it is the truth and it is a warning.

When read, Carter’s speech does not come off badly. But that was not how it was received. Many interpreted it to mean that the multi-year economic crisis was due to the average American’s lack of self-esteem. The Carter administration’s gaffe is all the more baffling when the template for a stirring, chin-up, buckle-down speech had been laid out on the silver screen just a year earlier by Bluto:

“What? Over? Did you say ‘over’? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell no! It ain’t over now, ’cause when the goin’ gets tough . . . . . . . . , the tough get goin’! Who’s with me? Let’s go! Come on!

“What the [quack] happened to the Delta I used to know? Where’s the spirit? Where’s the guts, huh? This could be the greatest night of our lives, but you’re gonna let it be the worst. ‘Ooh, we’re afraid to go with you, Bluto, we might get in trouble.’ Well, just kiss my [rear sector] from now on! Not me! I’m not gonna take this.”

The US economy has been in suspended animation for 12 years. The lack of upside is so pronounced, pervasive, and oppressive that in Year 13 of the Silent Depression, the growth in real GDP per capita trails what it was during both the Long and Great depressions. The United States is not alone. Canada, the United Kingdom, and Australia also trail their performance in either the Great, Long, or both depressions through 13 years. Nor is this an English-speaking phenomenon.

Of the 28 countries with data on real GDP per capita that covers all three depressions, 39% (11) are, as of the end of 2019, forecast to be worse off in Year 13 of the Silent Depression than citizens were at the same point in either the Long or Great Depressions. Only five of the 28 countries (18%) are better off today than they were at similar points during the first two episodes. So, with respect to the recovery in real GDP per capita, of the 28 countries in your author’s study, 82% are forecast to be, as of the end of 2019, in a similar or worse position than they were during the Long Depression and Great Depression.

Economic actors are searching for “bold colors.” Instead of joining that search party, economic pundits labor to cosmeticize “pale pastels.”

A Caveat

There is, of course, an alternative explanation for all of this: Your author does not know what he is talking about. 

The Economist has an illustrious staff of Ivy League and Oxbridge graduates. Meanwhile, this author studied at a school not dissimilar to Bluto’s: Arizona State University, winner of the designation “Party School of the Year” for all 13 years of the 1990s.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images/AnkiHoglund

About the Author(s)
Emil Kalinowski, CFA

Emil Kalinowski, CFA, is employed in the metals and mining industry writing about how socioeconomic and geopolitical trends affect the supply, demand, and price of base and precious metals. His present focus is on the 2007 malfunction of the monetary system and its continuing disorder. Presently living in the Cayman Islands, he is also radio talk show host (@MoneySenseRadio) and newspaper contributor (@cayCompass) but ratings and letters to the editor suggest he's probably going to have to keep his regular job. When he's not attending Flight of the Conchords performances, you can find him on Twitter @EmilKalinowski.

23 thoughts on “The Silent Depression: Trundling Is the New Booming”

  1. george stockus says:

    Nice piece.
    The policy of separating asset prices from economic reality, presumably to improve economic reality, has whitewashed main stream media’s coverage.

    1. J. A. (Sandy) McIntyre says:

      I’m not sure that potential labour force growth is today similar to the 70s, U.S. median age 28, 80s U.S median age 30, and 90s U.S. median age 33. The median age is now 38.2 in the U.S. and the rate of labour force growth has fallen as a result. In the context of the G7 the U.S. is in good shape. Germany & Japan’s median age is well over 48 and their labour forces are shrinking. If potential nominal GDP is truly labour force growth + productivity growth + inflation a smoothed series points to potential NGDP of around 3.2% for the U.S. and much lower for Germany and Japan. For some reason countries with aging populations seem to have low inflation/deflation.

      1. Hi Sandy. I am very happy you brought age to my attention. So, an age-adjusted employment-to-population ratio would be a more nuanced view of employment gain potential? That sounds reasonable to me. Do you have any recommendations where I may look to learn more about this? Perhaps the work of Neil Howe? And, no doubt, as you rightly point out the United States is in significantly better demographic shape than many of the world’s top economies. Still, I would be surprised to learn if the age-adjusted employment-to-population ratio would suggest that the US doing “blockbuster” or that employment gains are “surging” as the financial press described two of the last three employment reports. Indeed, if you compare the “blockbuster” number to just the post-2008 era it is not ‘super-awesome’ even to this low-growth period. And that is my overriding theme of the article, the US economy presently – compared to itself – is in a 13-year malaise, a condition so poor that it is comparable to some of the worst economic doldrums of the past 150 years. An article by Jeff Snider yesterday looked payroll gains in the US over the past 70 years of business cycles. He doesn’t adjust for age but his graphs do show how poor the present run is, even though it avoided recession. Recommended (as is all his work):

  2. Emil Swartz says:

    You only won Party School of the Year because the University of Miami has attained professional status.

    1. Arizona State University is the “safety school” for those who fail to meet the high-grade qualifications of The U. That’s a fact.

  3. Thanks for commenting George. I just have a difficult time understanding the general lack of curiosity by the press. Is it that the reporters are curious and asking questions but it is being neutered by the editors? Or is it that being trained in journalism – but not economics – the reporters turn to economists to explain the economy, and the economists do a poor job?

  4. peter brindisi says:

    Understanding the general lack of curiosity by the press. Number of reasons.
    Far fewer newspapers, those still publishing have fewer journalists, those journalists are not given the time they once were to properly research a topic, especially business reports. that has been replaced by think pieces which require little time and effort. Sometimes impression maybe there are pages of business news, but mostly superficial, meaningless quotes , fluff. Newspapers want staff to write to entertain the reader. Editors no longer bother to send journalists into the woods to hear a tree fall. That is dangerous

    1. Hello Peter. Thank you for taking the time to comment. Have you seen Gallup’s “Confidence in Institutions” poll? It is a five-decade long survey of confidence in US institutions such as organized religion, labor, the military, judicial system, media and so on. I am going to place a $5 bet that you will not be surprised that of the 17 institutions listed the media (internet news, television news, newspapers) are the absolute worst! Well, except for Congress. Congress is in a class of its own in terms of ‘no-confidence’ but, you know, it’s Congress. Ok, I see that Health Maintenance Organizations are also pretty low. But your point stands! Politicians in the US are held in low esteem and the politicians meet those expectations. But the media is supposed to do better, it hasn’t, and it’s one of the least confidence-inspiring institutions in the US.

  5. Sasha Sharkoff says:

    Excellent article.
    Thank you Emil.

    1. Thank you Sasha, my goal with these articles is to not write the worst thing on the Internet that day. Sometimes it is a close call.

  6. luzyfuerza says:

    Emil, an on-point piece with very entertaining spin.

    In this election year, the economic malaise of the last decade is not lost in the gut feel of the electorate.

    Their sense of discontent has led to the rise to prominence of the unabashed welfare-statists on the left. Not since George McGovern have the standard-bearers for the left been this, well, left. If economic security isn’t to be had by working, then let government provide!

    On the other hand, the same sense of discontent has given rise to a “drain-the-swamp” rejection of the status quo. If the economy isn’t great, then government, taxes, regulation, unchecked immigration, and the courts must be at fault. I keep working hard, but can’t get ahead; get government out of my way!

    Unfortunately, the electorate (just like Carter) doesn’t know what to do to change the trajectory of the economy. If I remember my Animal House correctly, doesn’t Bluto end up being elected US Senator?

    With Bluto in charge, is it any wonder that cheerleading for 2% growth, Fed risk asset pumping, massive federal deficits, and interminable increases in the welfare state continue? Is it realistic to expect anything to really change?

    1. I appreciate it luzyfuerza. You remember correctly, Bluto was elected Senator; makes sense to me!

      It seems to me perfectly natural for the electorate to seek out non-traditional answers during a period of prolonged economic stagnation. In the US, in the 1930s, many thought to give communism a try because after all, if ‘this is what capitalism is supposed to look like let’s give something else a try’. Similarly, in the 1896 US election an odd populist came to the fore and almost won the presidency.

      And of course, this is by no means a US-centered story. The Economist’s Democracy Index is at its historic low ( Cambridge University’s long survey on satisfaction with democracy is, also, at its historic low ( I do not think it unreasonable to say we are in a global depression.

  7. david ricardo says:

    caught u on macrovoices and figured i would visit the blog. cannot disagree with your analysis; glad you mentioned Jeff Snider in the comments as he has been beating this drum for years.

    got any solutions?

  8. Hello David. Big fan of your writings, am surprised to see you are still kicking around. Yet another example of the need to verify Wikipedia entries (they have you passing away 200 years ago). Thank you for the kind words!

    If you have been reading/listening to Snider then you’ll have noticed he (wisely) never offers a solution other than saying something along the lines of, this is the most complicated problem and will require the highest level of effort to solve. I, of course, lack his wisdom and do not have any solutions but I’m not going to let that stop me from throwing something out there.

    I will note that the LDC / Latin American Debt Crisis of the 1980s, in which about half the world was in depression, was solved by welcoming those countries back into the global capital markets by forgiving/restructuring their existing debts. These were the Brady Bonds, and my understanding is that the US government told banks to get on board as it was better for everyone.

    When did the Great Depression end? It is often said it ended with the advent of the Second World War but I read that many people (in America at least) believed the depression was going to start right back up after the war, especially as the country fell right into a recession after the war’s end. It seems to me the depression ended with the wholesale reorganization and reorientation of almost all national economies towards rebuilding, towards a new future. So it seems to have been a socio-political decision. (I need to find out if there was some large release of financial capital at this point.)

    The depression of the First World War, in which half the world fell into depression (advanced economies), seems to have been ended by the wholesale national reorientation and reorganization of economies.

    The Long Depression ended because the global shortage of money (i.e. gold mine supply) was reversed by the South African gold bonanza. Also, at least in the USA, there was a political election in which the country made an explicit decision about the nature of its economy (1896 Silver Bryant vs. Gold McKinley).

    So, my clearly incomplete investigation, suggests that the solution for present day could be sketched out as some combination of:

    1) access to a sustained surge in global financial capital (central bank QE ain’t it);
    2) a wholesale reorganization of national economies;
    3) a socio-political decision to take a path forward and not look back.

    It seems like the last two options require a unifying event in which ‘everyone’ agrees to row the boat in the same direction.

  9. peter brindisi says:

    Don’t think I would have taken your bet. I live in Australia, and
    poll ratings are similar. That politicians and news media rate lowest should probably be of great concern. But no. Black swans will abound because no one is seeing or bothering to respond to long, slow build up, little by little, until no longer can be contained —-financial, bushfire, stock market, volcano eruption, virus, depression…… The big worry is that two black swans might arrive round the same time. Maybe they have!
    Take care.

  10. Tom Moran says:

    You major headline point is of course correct; the job gains are by no means mind blowing and it is silly to say otherwise. However, I have several problems with the way you argue the point later:

    a) First you re-define a Depression to mean no upside in several places – but a Depression DOES mean a severe contraction actually. And therefore really your graph with the “we are here pal” note doesn’t make a point at all because the current “depression” had no huge drop in real GDP – only a modest contraction frm 2009 to 2008.

    b) Dalio & Prince say that boom and bust are over with all this Fed anesthesia ie money printing – – the Fed smooths things out with ever higher levels of Debt/QE – again – calling this the “Silent Depression” because of the lack of deflating&reflating is hyperbole. More like a “Zombie Economy” where anesthetized patients are kept on life support and “dead wood” is never cleared, at a huge cost per year to keep the Zombie Circus going.

    You approach the same level of hyperbole of the press you criticize I think when you conclude: “The lack of upside is so pronounced, pervasive, and oppressive that in Year 13 of the Silent Depression, the growth in real GDP per capita trails what it was during both the Long and Great depressions.” The contraction in the Long/Great Depressions was so much more dramatic, they were such deep holes, that yes they had % wise greater gains as they went from nearly dead on the table to getting a pulse again. By no means is our experience as pronounced, pervasive and oppressive as what happened in the 1930s. You can’t mean it!

  11. Tim Aka says:

    thanks for this article. I also heard you on MV and appreciated your presentation as well as your attempts at levity on this very serious topic. The timing of your article is quite spectacular also. Since we were just starting to see the impacts of the Covid-19 pandemic.
    Now with two months past, which feels more like a lifetime, and the world has completely changed, what additional observations could you offer with regards to the escalating decline in economic output or demand. From your day job, do you have any thoughts on real assets (precious metals or other such things).
    What did you holding back from saying, because you were worried that people would think you were crazy, but now maybe not so much.
    Should we be partying like its 1999?
    Thanks for any more insights.

  12. Hi Tim. I appreciate your comment and very much want to comment and have been meaning to do so for WEEKS! I am keeping one nostril above the waterline here. I hope to write back next week.

  13. Hi Tom. Will you believe me if I tell you that I have been wanting to write back and address your comments for the past two and a half months? I intend to. Next week is looking promising but perhaps I should say that I will do so in 2020. Great challenge.

  14. Thomas Moran says:


    I must be less busy than you with all this Covid downtime – I had booked mark t this 🙂

    I say your article doesn’t stand the test of time either now,wouldn’t you?

    Americans household wealth is at an all time high. Of course, due to all the free money. But you can buy a lot of stuff with the free money still – it hasn’t become worthless at all. Deflated relative to assets that capitalist pigs like ourselves like to buy; but for Joe Sixpack his beer and gas is quite affordable.
    Thus this is by no means a silent depression, the FED and politicians have seen to that. We are of course screwing the next generation, and sure the government might come to me in 10 to 20 to 30 years and confiscate my wealth or the wealth of anyone not light on their feet and clever enough to get it offshore. Maybe I’ll become your neighbor man.

  15. Thomas Moran says:

    Emil, I rescind my earlier comment after listing to Eurodollar University Episode 44 Part 1 – after minute 14 (youtube) or so you and Jeff Snider go back to a depression definition and largely define it as the economy loosing its upside, continuing in a very unstable way sideways, etc. as per the definition per original Bureau of Statistics in late 19th century of an industrial depression being a prolonged serious change economic but also a mental and moral malady etc.

  16. john portwood says:

    ” To see what is in front of one’s nose requires a constant struggle. ”

    George Orwell

  17. Kirk Cornwell says:

    This reminds me that incumbents should not get credit for a good economy (“soft landing”) or be blamed for a “bad” economy. Of course, they are.

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