[Music]
We start with a close look at two indices
collected and reported in monthly values:
the Consumer Price Index and the Producer
Price Index.
These indices are controlled by both price
of commodities and the volume bought and sold
in competitive markets.
As consumers we see the blue line on a general
inflationary trend since 1980 with some peaks
and troughs, although neither drastic nor
extended in recovery.
In red we observe the Producer Price Index,
the PPI, showing the market for producers
of all products made and sold in the USA where
peaks and troughs are more exaggerated as
we move through time.
The vertical grey lines are periods of recession
in the USA.
Observe how peak and trough patterns in the
PPI mostly match periods of recession.
The most extreme recession since the Great
Depression happened in 2007-09
with the Great Recession.
Observe how the PPI peaked at over 200 then
fell to 170 before starting recovery again.
We need to look again at what started in 2014.
What's up with that?
Great Recession recovery was tripped up in
July 2011 as a series of starts and restarts
were attempted by US businesses, until another
fall started in April 2014.
The business environment struggled to expand
as new laws for health care took hold, introduced
tax burdens were established, and international
competition factors handicapped US based businesses.
The new PPI drop means businesses both sold
fewer products in the market and sold them for less.
From June 2014 to April 2015 our economy was
systemically weakening again.
Then in May we started another climb lasting
only until August 2015
when another "out of our control" event happened.
The Chinese government devalued the Yuan.
American producers were faced with weakened
exchange rates for Chinese products making
Chinese goods more affordable.
More expensive American products could not
compete so well with Chinese sourced goods,
so buyers diverted their purchases to lower
cost Chinese goods, including American buyers.
Observing the reaction of the CPI in respect
to recessions in the US economy, recognizing
how all indications point to another recessionary
period in our economy.
A period I have called the Greater Recession.
Only the National Bureau of Economic Research's
Business Cycle Dating Committee can officially
announce a recession.
They never announce one that is currently
in progress, waiting until recovery movement
is confirmed: they do not want to panic the
populous.
So, here we are sitting without panic to anticipate
the inevitable recession's announcement.
What do the Chinese have to do with our Greater
Recession?
Look at what happened to our PPI when the
Yuan was devalued, our index dropped as the
strength of the Yuan recovered in respect
to the US Dollar.
They won the trade competition battle as they
devalued their currency
and they strengthened their economy.
It seems that was good planning.
How strong did it make the Chinese economy?
We recognize how trading partners experience
a Gross Domestic Product Convergence.
As our GDP growth slowed substantially during
and since the Great Recession,
the Chinese GDP has been strengthening.
This convergence means potency in their economy
realized through their ability to be more
competitive in all tradable markets.
[Music]
