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The Sahm Rule in macroeconomics (named after former Federal Reserve and Council of Economic Advisors economist Claudia Sahm) is a heuristic measure by the United States' Federal Reserve for determining when an economy has entered a recession. It is useful in real-time evaluation of the business cycle and relies on monthly unemployment data from the Bureau of Labor Statistics (BLS). The Sahm Rule was published by The St. Louis Federal Reserve Bank's Federal Reserve Economic Data (FRED) system in October 2019 and can be seen here: https://fred.stlouisfed.org/series/SAHMREALTIME
The Sahm Recession Indicator signals the start of a recession when the three-month moving average of the national unemployment rate (U3) rises by 0.50 percentage points or more relative to its low during the previous 12 months.
Here is an interesting interview with Claudia Sahm:
Ha! First thing I thought as well!
I think one very telling thing she elaborated on the past few days is the commitment of the Fed to directly inject money into the economy through "stimulus" checks. Listening to her remarks it is easy to infer, and almost begs the conclusion that the Fed is prepared, at any "crisis", to print and distribute money to Joe Public. No contract, obligation, interest, or expectation of return except through a small tax increase.
This willingness to print money without regard for value should be very concerning to all Americans, especially those of us who are still doing the prehistoric savings thing. This more or less leaves gambling in the markets the only avenue to wealth and security in ones advanced years and further confirms my suspicions we are no longer seen as individual humans but instead are more or less a giant lab rat in aggregate, to whom is given more or less sustenance based on the velocity of money. It's no wonder Powell is unhappy with "excess savings".
This is sort of black box economics it appears to me, with no hint if stimulous will start, how long it will last, how much it will be, etc. How does one make a plan in this type of muck?
In the final days of the Soviet Union, Mikhail Gorbachev told a joke, a lament about economists in general:
President Bush has ten Secret Service agents, one of them is a terrorist!
Francois Mitterrand has twenty mistresses, one of them is an assassin!
I, Mikhail Gorbachev, have one hundred economists, one of them is smart!
Friedrich Hayek pointed out the greatest flaw of modern economists, he called it the “pretense of knowledge”. It’s the general notion that we can 1) understand the dynamics of complex markets, and 2) use theoretical constructs to affect real-time changes in economic outcomes.
In the final days of the Soviet Union, Mikhail Gorbachev told a joke, a lament about economists in general:
President Bush has ten Secret Service agents, one of them is a terrorist!
Francois Mitterrand has twenty mistresses, one of them is an assassin!
I, Mikhail Gorbachev, have one hundred economists, one of them is smart!
Friedrich Hayek pointed out the greatest flaw of modern economists, he called it the “pretense of knowledge”. It’s the general notion that we can 1) understand the dynamics of complex markets, and 2) use theoretical constructs to affect real-time changes in economic outcomes.
First, you are using FvH's word out of context. That line was a salvo directed at Keynesians per a serious bout of stagflation. Not modern economists in general.
Second, history has been brutal towards FvH's economic work. His luddite's view of econometrics/leveraging algebraic constructs, data gathering, government spending and macro-economcis in general has wilted into the ether over time.
IMO FvH should be celebrated and remembered for two things: A. writing, "The Road to Surfdom"....everyone should read it every several years. His direct and indirect critiques of socialism have weathered very well. B. his later academic work focusing more and more on sociology and economics from a sociological perspective nearing political science - this was his best academic work by far.
That said he tarnished his own legacy by never really casting off the lead-suit of his association with von Mises and his career long blind spot per math and econometrics. Of course math and econometrics are/were kryptonite to Austiran Schoolers.
No OECD or close economy has followed the tenets of LvM, FvH, Murray Rothbard etc. All of them leverage an overwhelming dose of Keynesianism every day.
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