It still isn’t winter in Westeros, at least not on television, although there is no shortage of reminders that it is coming. The seasons in George R.R. Martin’s “Game of Thrones” aren’t regular or celestial. Summer can last a few minutes or many years. At this point in the show, the start of the fifth season, it has gone on for a decade, the longest in the realm’s recorded history. The balmy weather is about to give way to snows and famine, and astoundingly, no one in the land seems prepared.
There’s an economics lesson here, and not just for fans of the show. Seasons in Martin’s world are like business cycles in ours. His summers are our economic expansions. Sometimes they’re short and sometimes they stretch for years and years. His winters are our recessions. They often come with forewarning, and not everyone is ready when they do.
Historically speaking, we’re in range for another winter soon, though most economists doubt we’ll see one in the next year or so. We’d better hope they’re right. Like the soon-to-be-starving people of King’s Landing, we haven’t stocked up enough in the expansion years to ride out the snows.
America has now marked nearly six years of economic growth. That’s hard to remember, because the growth has been so meager. Still, the Great Recession ended in June 2009. Technically, we’ve been in summer ever since. Not a great summer. It’s been just warm enough for people to start getting back to work again and to start repairing the damage wrought on households by that epic winter.
That repair job has required almost every arrow (“Game of Thrones” superfans may substitute “pot of wildfire”) in our national economic arsenal — which is to say, all the economic weapons that the U.S. political system can stand to deploy.
Congress bailed out big banks and automakers as the economy plunged into crisis. It goosed consumer demand with deficit-financed spending and tax cuts. The Federal Reserve has kept interest rates near zero for an unprecented period, and it has unleashed monetary stimulus measures never before tried in the United States.
Thanks in large part to those efforts, the American economy has grown post-recession at a faster clip than most of the world’s wealthy countries. Those efforts also appear to be running out of steam. The 2010 tea party victories at the ballot box effectively shifted fiscal policy away from stimulus and toward austerity. Everybody hates bailouts, liberals and conservatives alike.
The Fed has racked up a nearly $3 trillion balance sheet by buying bonds to push down long-term interest rates, amid mounting public criticism, particularly from conservatives. It ended its latest round of quantitative easing and now appears prepared to raise interest rates as soon as this summer. Theoretically, it could start buying bonds again if the economy slides back toward recession — but the opposition to that move would be intense.
“It’s one thing to say, ‘Can, economically, the Fed put the economy on its back?’ ” said Michael Greenberger, a law professor at the University of Maryland who spoke on central banking issues at a Levy Institute conference in Washington last week. “It’s another thing to say, ‘Will the American people let it?’ ”
If the United States plunged back into recession with little room for fiscal or monetary policy to respond, it would be kind of like waking up in Westeros, after years of devastating intra-kingdom wars that burned crops and gobbled up food stockpiles, to feel the chill of winter descending.
In Martin’s books, the people of Westeros are warned that this is imminent, both perpetually, by members of the Stark clan (family motto: “Winter Is Coming”) and urgently, by messenger ravens sent from a northern outpost where the first signs of the season appear.
The U.S. economy might get that kind of warning before its next downturn, but it might not. Historically, it’s time to start thinking about another recession. Since World War II, the average economic expansion has lasted just under five years. The duration has grown since the early ’80s, to nearly eight years per expansion. And we’re six years in now.
Economists generally agree that a downturn in the next year is unlikely, though not impossible. There are plenty of more promising signs: Economic growth is steady, though not spectacular. Inflation is low. The unemployment rate has fallen to 5.5 percent, but given the millions of workers who have left the labor force — and who could return now that the jobs picture is improving — there’s plenty of room for employers to accelerate hiring without overheating the economy.
“The two biggest U.S. recessions in modern times, the Great Depression and Great Recession, have partly been a result of thinking that winter was never coming, and not because summer is too long,” said Adam Ozimek, an economist at Moody’s Analytics. “In some ways ‘winter is coming’ is the perfect rebuttal to ‘this time is different.’ Homeowners who thought house prices would never fall could learn a lot from the motto of House Stark.”
And yet, there are a few ravens bearing concerning news about the health of the recovery, here and around the globe. International trade is slowing, the World Trade Organization has announced.
Low oil prices are undercutting one big driver of the U.S. recovery — a revitalized oil and gas sector. They’re forcing companies to shut down rigs and lay off workers. Overall U.S. job growth slowed unexpectedly last month, the Labor Department reported. Factory production is sluggish. Small-business owners are pessimistic about the future.
The International Monetary Fund has cut its global growth forecast and warned that new risks are on the rise in the financial sector.
It’s enough to set a kingdom to worry, at least a little bit. If we were all Starks, we’d be stockpiling food; this is sort of what U.S. families are doing when they choose to save their windfall from cheap gas instead of spending it. If we were all Lannisters, the cunning family that holds the great Iron Throne of Westeros, we’d probably do the opposite — spending whatever we can now to boost growth and hope to have our house in order by the time winter arrives.
“The Westerosi story has implications for individuals,” said Ryan Decker, an economist who writes the Updated Priors blog. “It doesn’t matter what causes the next recession. It’s better to enter it with higher savings. If you end up with more savings than you need, you may be able to trade your wealth for assets that other houses need to offload at fire sale prices.”
In other words, you cannot control the weather, but you can ready for the storm.