Story Stream
recent articles

A little less than six months ago, the Bureau of Economic Analysis reported that real GDP for last year’s second quarter in the US had regained its pre-COVID high set back in the fourth quarter of 2019. The announcement seemed somewhat perplexing given that many in the public had been led to believe the American economy was on fire; Warren Buffett had even declared it “red hot.”

 Therefore, taking six quarters, a year and a half just to get back to where we started might have seemed troublesome, perhaps even a bit of a contradiction to the widely reported glowing inflationary fires the first half of 2021.

 In reality, the situation was even more troublesome than that. It still is, by the way. During last year’s third quarter (the latest data), the US economy only added a few percent more, way less than expected leaving estimated total output (at a seasonally-adjusted annual rate) not even 1.5% better than that prior Q4 2019 top.

But Q3’s GDP number compared to Q4 2019 isn’t actually the standard for comparison. To understand the true scale of the disaster, you have to first figure out the counterfactual; what if the lockdowns and March 2020’s equally unnecessary GFC2 hadn’t occurred?

Counterfactuals are always tricky, so obviously grain of salt. However, we needn’t seek exact precision here, only some practical summation. Doing some math, had the economy kept growing at the meager pace it had averaged over the years up to the end of 2019, real GDP during Q3 2021 “would” have been just shy of $20 trillion (SAAR) instead of the $19.47 trillion put out.

And, remember, that $19.47 trillion includes the trillions Uncle Sam injected over two years and whatever lasting effects those may have produced (not many, it now seems).

At first, it really doesn’t seem like a big deal. We’re “missing” only a bit more than $500 billion in output - and that’s an annual rate – just half a trillion out of twenty off the prior pace.

If you stop and think about it, though, while the numbers themselves might make it appear trivial, what does the country look like with another five hundred billion? And it isn’t just for the third quarter, either; the total economy at least as measured by real GDP has been missing that much and more ever since that fourth quarter two years ago.

Our human wits just don’t comprehend big numbers well at all. Then put these massive digits into an abstract concept like “the economy”, and this whole thing becomes a dizzying tangle to sort out.

Should we be encouraged that America finds itself “only” $500 billion behind? You might look at these results and think them wholly encouraging for how after the gross mismanagement of 2020 and the disaster it provoked, we’re darn lucky to have escaped with this much still intact.

Or might we consider that half a trillion an enormous deficit, and then wonder why it is taking so long to make it back?

Part of the problem is that our lizard brains weren’t meant for considering huge numbers, vast distances, or possibly enormous lost output to a complex system we can never grasp by experience and sense. Set back in primitive subsistence mode when everything could be qualified simply and only ever required the smallest terms, our primordial ancestors didn’t have to worry about the mind-boggling difference between a million and a billion; let alone five hundred times that.

But, see, the actual counterfactual is twelve times more than the five hundred times.

If one million seconds is the same as eleven and a half days, and one billion seconds work out to a gargantuan thirty-one and three-quarters years, then how much time is five hundred times the latter times anothertwelve and three-eights? It touches literal incomprehensibility.

The US economy, unfortunately, didn’t just fall off in 2020 for the corona’s benefit. The detour began a long time before, back just before the start of that first Global Financial Crisis back in 2007.

Prior to 2020, most people would have agreed the economy had been good if not booming. They figured this because Jay Powell said so and everyone in the financial and mainstream media agreed with this assessment. There were a couple of very simple numbers which appeared to align with this view, starting with the unemployment rate and its drop down to 50-year lows by 2019.

Insofar as real GDP may have been concerned, for the vast majority it’s hard to make sense of quarterly growth rates at seasonally-adjusted annual terms. What was easy to appreciate and accept was how this measure in Q4 2019 had been more than $19 trillion – a huge number already – and this was a record high.

While technically true, the comparison was all wrong in the same way the first one above had been. Again, appealing to a counterfactual, had US real GDP not deviated starting in 2007 and had been able to maintain its prior average over the course of the intervening fourteen plus years, estimated output for Q3 2021 “should” have been something in the neighborhood of $25 trillion rather than about $19.5 trillion.

How can we comprehend $6.5 trillion of plausibly missing economic output? And, remember, it’s not just what was absent from Q3 2021; there’s multiple trillions (even at a quarterly rate) in economic activity which didn’t happen each and every quarter for the past fifty-six quarters.

If you total them up, assuming you went through the work of converting the GDP figures to like terms, you end up with a number so big it’s not even worth mentioning (but I will anyway; it’s about $50 trillion).

Quite reasonably, you can’t blame most people for just accepting that the economy has been fine, maybe even doing well. But, as I’ve been personally writing about ever since I started this column more than a decade ago, most people can tell, far, far too many can intuitively feel and sense that for all the simple numbers declaring things are good something just doesn’t add up in their own daily experience.

Some numbers I had crunched five and a half years ago in June 2016:

“[Y]ou cannot conceive of $10 trillion in ‘missing’ global trade; the best you can do is understand how much disruption and turmoil such a calculation would easily explain. The people are skeptical of economics because economists have given them every reason to be.”

That particular calculation has only grown exponentially since.

This has not been exclusively an American deficit. A global veil has descended upon the world’s peoples where similarly huge numbers could account for what reasonably should have taken place but never did; they’re just too big to immediately accept this was possible. As such, the consequences were never going to be just economic or financial.

US citizens, in particular, have instead died by the hundreds of thousands for opioid addictions no one either can adequately explain, an obvious correlation of sadly simple arithmetic which corresponds to the same exact period in question.

It’s like living in the worst sort of dystopian fantasy where, unlike even the best novels or movies in the genre, we, meaning far, far too much of us, don’t even get to live the lie; at least those plugged into the Matrix, for example, they got to “experience” the peak of human existence even if they were fast asleep under machine control.

Today, we live by the machines (the Fed Cult, Big Science, credentialed elitism, etc.) yet robbed of so many trillions the term trillion itself is bended and distorted. But we “have” to say everything’s wonderful anyway because everyone says so.

All of the lie; none of the benefits.

Has anything really changed since 2017 when I called out “globally synchronized growth” as mere spin on record high GDP numbers that didn’t tell any part of the real story?

“When the economy doesn’t work for a prolonged period people turn increasingly to extremes. Communism caught on in the thirties in a way it hadn’t in the twenties for obvious reasons. When confronted by constant stagnation and depression, people cannot be blamed for thinking the system is broken; and a terrible cost belongs to those who broke it.”

Not just Communism, obviously, nationalism and other political or social extremes understandably though regrettably flourished during the Great Depression and with all these same telltale signs. Today we have a much better grasp on what had just occurred in the early thirties, back then no one could account for either its seriousness or the depression’s prolonged nature.

Things seemed fine and then life didn’t make any sense.

For all these massive figures today and the many others which do reasonably describe the situation quite well, the underlying problem is just this simple: we may be able to peer through the fog and in a vague sense comprehend something about the world is way off, but we have no idea what, specifically, got broken, why this happened, or who broke it.

Those who did, or who allowed it to break down, they aren't about to fess up now (subprime mortgages, you know).

No wonder or mystery at all, then, like the thirties there may have existed throughout the world what psychologists call “free floating anxiety.” It is an ambiguous yet palpable feeling that the utterly complex and equally abstract modern world just doesn’t make sense and isn’t about to start making any anytime soon.

A condition our human brains are hard-wired to do something about; even if self-destructive.

This is one precondition necessary for what’s called “mass formation” or “mass formation psychosis.” If you’ve been on any part of social media lately, the term has been everywhere across every platform, being put out into the vast spaces of virtual abstraction when podcast superstar Joe Rogan interviewed Dr. Robert Malone.

As usual, the implications of the good Dr’s suggestions have been highly controversial, especially as they’ve been tasked to the past two years of COVID era insanity. Malone has been declared an anti-vax nut by some, a sage by others. Most are instead unsure of what to make of all this – just add it to the growing list.

Typically, we could otherwise chalk this up to some form of partisan football; left vs. right, and that has been the divide in individual nationalities where whichever “side” immediately attacks what the other has done or said. What’s odd therefore telling about the corona is that these don’t add up, either, across boundaries.

In some places, nominally conservatives have become petty COVID tyrants resisted by leftists while in others the positions have flipped.  For every Biden mandate, there’s a Merkel or one from Boris across the sea (not to mention Trump’s which were decried by Biden and his supporters). For Australia, there’s New Zealand. You get the point.

What’s common is simply that whichever government finds itself in power, by and large, they’ve all incredibly taken the most extreme road to the pandemic. Only relatively more recently have any of them, mostly on a local level, come back to their senses.


Free floating anxiety and mass formation psychosis might reveal some underlying truth. I’m obliged to state here that I do not believe the COVID pandemic was some trivial outbreak of the flu; on the contrary, I’ve had it, this was and remains a very, very serious situation that authorities everywhere should absolutely take whatever reasonable steps to mitigate.

But that’s not really what happened. Instead, the pandemic seems to have galvanized the political classes wherever they were to go overboard trying to deliver a complete knockout, to achieve a tangible and total victory over a serious foe to an increasingly disturbed population that even the so-called establishment could tell was verging closer and closer and still closer to the edge (remember Brexit, Trump, the socialist march through South America, each before 2020).

Everything has been turned way up to eleven.

Make COVID into the common enemy – at all costs - and in doing so deliver at least one complete victory, a concrete and easily understood answer to a public desperate for any.

To the desperate, that’s the psychology (below is what I transcribed from the Rogan interview with Dr. Malone):

“When you have a society that has become decoupled from each other and has free floating anxiety and a sense that things don’t make sense, we can’t understand it, and then their attention gets focused by a leader or series of events on one small point just like hypnosis, they literally become hypnotized and can be led anywhere…You remember back before, 2019, everybody was complaining, the world doesn’t make sense…then this thing happened and everybody focused on it.”

The world was fine and then, bam, corona! No.

Again, this idea is highly controversial but I think it does help explain what happened, in a sense, during 2021 and why 2022 begins under so many similar suspicions. We’ve still got variants of the disease, governments all around the world laser-focused to go all out in response to them regardless of any other considerations, and huge and hugely abstract economic numbers that are so big now you really do need a sizable spreadsheet just to keep up with them.

Assuming you even know you should; hardly anyone does (inflation!)

In one key sense, it is chillingly the same as the 1930’s barreling headlong toward the 1940’s; among Dr. Malone’s more provocative allusions (and what social media is using to censor the man as well as his interview). As I said in early 2018:

“To avoid [real conflict] requires recognition of our shared common ground. I don’t mean the standard bland boilerplate paean about how wonderful globalization is and how the status quo must be maintained at all costs. Quite the opposite, actually. Eurodollar-based globalization has been an utter disaster, and the consequences of its continuing defect are now much more than economic in nature. There has to be a Western political movement toward reality.”

Instead, we only add this corona confusion to a troubling trajectory that the planet has been on ever since “subprime mortgages.” It’s certainly not too late, it can never be too late, but we’d all be wise to start filling in these huge gaps. And we can’t do that until we begin to realize what’s actually happened to us.

A global pandemic, sure, but it’s really been the numbers.  

Jeffrey Snider is the Head of Global Research at Alhambra Partners. 

Show comments Hide Comments