The quality of mainstream economic analysis is extremely poor, evidenced by its consistent failures. The latest evidence of this paucity is a growing realisation that the US economy is in recession, particularly as yesterday's job opening numbers (JOLTS) hit the lowest level since February 2021. Wake up folks!

Anyone who understands that a GDP number driven by government deficit spending is not economic growth is either ignorant or being informed by personal bias. But it is thinking of this ultra-low quality which dominates financial markets today.

Now that there is an awakening to recession, mainstream analysts seize the opportunity to talk rates down: "Citigroup says that the Fed will have to cut interest rates in July and at every meeting until mid-2025" (Ambrose Evans-Pritchard, today's Daily Telegraph). And others are talking of reducing exposure to equities in favour of bonds.

The simple assumption is that a recession is a period of falling demand and unsold goods. This is half true in that there is falling demand. But the error is to assume that supply won't decline as well. In fact, supply declines first, as foretold by the JOLTS number. A recession leads to a drop in employment first, and therefore total consumer spending second.

An even more significant error is to assume that for the purpose of economic forecasting the purchasing power of the currency remains constant. If the currency was bound to gold, this would be broadly true. But today's currencies are valued and therefore their purchasing power is determined by faith in them purely as credit.

Among America's foreign creditors, this faith is plainly waning, though the useful idiots in America's financial mainstream simply don't understand the danger this presents. While domestic users of the dollar are generally clueless, it is foreign holders who will set the dollar's value, not so much against other currencies, but in terms of its purchasing power measured in commodities.