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Ask HN: Do you think this is the start of the new financial crisis?

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Re: Ask HN: Do you think this is the start of the new financial crisis?

#81

Post by stephen_g »

pas wrote: post #77
stephen_g wrote: post #46

Earlier quoted context omitted.

Raising rates never really reduced inflation anyway… In the 70s Volcker shock, when the oil crisis eased the inflation came down of its own accord, and would have with or without the rate hikes (and the money supply was expanding when the inflation started coming down, which was the exact opposite of their theory - they were trying to reduce the money supply with their rate rises, which they thought would reduce infl…

why do you think it's not effective just because it's not perfect? the US central bank has a dual mandate, price stability and close to full employment. having just one it could be much more aggressive.

Because it's never proven to be effective in either direction! (Neither stimulating the economy by dropping rates, nor controlling inflation by raising them)

Re: Ask HN: Do you think this is the start of the new financial crisis?

#82

Post by Quarrel »

Clubber wrote: post #23

I think it's more like 2000 when there was a significant over-investment in tech, then Greenspan increased interest rates quickly and all the companies had to adapt to non-free money. I think the housing market will correct (crash) and tech jobs will be harder to come by for junior folks and people who aren't that great at it. Not a great time to job hop. It won't be horrible like 2008 but it won't be great. Should b…

I agree that it feels more like 2000 in some ways. Certainly the crypto space was just as bubble-icious.

2008 when the crunch came it was super bad. Tech companies just froze their product plans. Stopped spending money. Lots of good startups failed through very little fault of their own, when they couldn't ride out the year or two before their customers would spend again.

In 2001 I founded a VC funded startup, and while it was a shit time to be raising money, it was a great time to be hiring. I think we could get to that position again this year. Right now it doesn't feel like good engineers are really struggling to find work though, while in 2001 that was definitely the case, and VCs are definitely getting more cautious.

In 2008 I had the sale of that business fall through as a major SV tech company's CFO said "Nope, we're just not spending any money on anything" after lots of work and terms being sorted out etc. People (CEOs & CFOs) were really scared about contagion and problems well beyond just "tech share are prices falling". I hope we don't get to that point again this time.

Re: Ask HN: Do you think this is the start of the new financial crisis?

#83

Post by smt88 »

nostrebored wrote: post #61
smt88 wrote: post #36

Earlier quoted context omitted.

People have been saying that since 2016.

Because we’ve deferred the pain of 2008 for years. The market makes no sense.

Consumption, job creation, and wages are still going up (on average). Most appreciating real estate is in high-demand urban centers where construction can't/doesn't keep up.

On top of that, a lot of older people are realizing the equity in their homes or their stocks, and they can buy in cash.

In that environment, you expect high home prices and high debt (as people assume their income will keep rising).

Re: Ask HN: Do you think this is the start of the new financial crisis?

#84

Post by antibasilisk »

neural_thing wrote: post #9

The vibes are similar to early 2008. But the financial structure is different. Banks are not overleveraged. Housing is not all adjustable rate. That being said, easy to see weakness. Commercial real estate is a big one. I'm somewhat concerned about non-bank Financials. Some large foreign banks (CS(dead) , DB, HSBC) I'm skeptical of. And a recession feels imminent (felt to me this way even before SVB). To sum up, I do…

>Banks are not overleveraged

But the people are, consumer debt is out the wazoo

Re: Ask HN: Do you think this is the start of the new financial crisis?

#85

Post by moremetadata »

adamredwoods wrote: post #73
UncleOxidant wrote: post #7

No, I remember 2007-2008 pretty clearly. That felt much more precarious. Right now it seems pretty clear that if your bank fails you're going to get your money. That's not to say that this isn't the start of some kind of a financial crisis. But it could be very different from 2008. In this case I think the risk is more towards high inflation - for example, if enough banks were to fail (hypothetically - I doubt this w…

2008 crushed the Icelandic bank system. I don't think any one is in that kind of trouble right now. https://en.wikipedia.org/wiki/2008%E2%80%932011_Icelandic_fi...

[dead]

Re: Ask HN: Do you think this is the start of the new financial crisis?

#86

Post by thethimble »

alxmng wrote: post #78
hanoz wrote: post #31

Yes, because interest rates clearly need to go a lot higher to get inflation under control around the world, yet banks are already starting to fail from the stress of it at these low rates, and the central banks' bailout mechanism is itself inflationary. Although, strictly speaking the answer should be no , this is not the start of a new financial crisis, it is a continuation of the 2008 crisis.

Yes. It’s counter-intuitive but both lowering and raising interest rates are inflationary. A rise in rates means more bond coupon and more bonds sold (new money), and lowering rates results in more bank lending (new money). A rise in rates is actually more inflationary, since bank lending won’t necessarily increase with lowering rates, but a rise in rates necessarily means more bonds and bond coupon from banks purcha…

Even if your argument were true there would have to be a theoretical interest rate that minimizes inflation (how can a function increase in both directions but not have a minimum?).

That said I think there’s reason to be skeptical about the link between rising rates implying more bonds sold - particularly as you consider other factors like creditworthiness.

Re: Ask HN: Do you think this is the start of the new financial crisis?

#87

Post by rawgabbit »

No.

2008 was Wall Street convincing folks to hand over cash for magical beans called mortgage backed securities. When that bad trip caused companies like AIG to vomit cash, the US govt bailed them out because they weren’t the only ones who bought magical bean securities. The entire US financial system was facing collapse. You can Wall Street a fool. But they got bailed out; private investors got squat. Who is the fool? Private profits and public bailouts is modern US capitalism. In the meantime, some will jump up and down swearing bailing out student loan borrowers is murder.

Re: Ask HN: Do you think this is the start of the new financial crisis?

#89

Post by dragonwriter »

sacnoradhq wrote: post #88

This crisis is slower moving and much more insidious because inflation of essential, inelastic consumables is quite bad: food and energy.

> This crisis is slower moving and much more insidious because inflation of essential, inelastic consumables is quite bad: food and energy.

Energy component of CPI has been trending down (in absolute terms, so a negative inflation rate) since June.

Re: Ask HN: Do you think this is the start of the new financial crisis?

#90

Post by dragonwriter »

> For people who lived through 2007-2008 do you think the current times feel similar to how the last financial crisis unfolded?

Not even slightly. Largely, because it wasn’t preceded by anything like the hollow post-2001 expansion, which, despite being an expansion (the period of aggregate growth between recessions), saw the upper income limit of the four lowest quintiles, and the low limit of the top 5%, all decline in real terms, with all of the gains concentrated in a very narrow segment at the top. It took the top of the bottom quintile until 2018 to bounce back to the 2001 level, for the second quintile that was 2016, for the third 2015, for the fourth quintile and the bottom end of the top 5%, 2013. For most of society, despite the gains at the top between recessions, the crisis was really 2001-2009, not just the “Great Recession” years of 2007-2009.

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