The past 24 months have given us a lifetime of “extremely rare” events, but as we suggested last week, these are only “rare” from the perspective of an analyst that sees the past 24 months as a typical post-WW2 recession. In a balance sheet recession, these extreme events are the norm, so the “extremely rare” would be things like, expansion of private credit, strong inflationary pressures, rapidly declining unemployment and rising interest rates.
Relying on indicators that have been useful in previous post-WW2 recessions is like comparing the statistics of U.S. football teams versus the statistics of Australian football teams. They may be called the same thing but they are different sports. The economy is one sick puppy and we are seeing first hand now what it looks like once the crutch of government support is taken away.