Predicting Next Recession
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Predicting Next Recession
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Re: Predicting Next Recession
#2Most recessions are easy to predict because they’re intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work.
Re: Predicting Next Recession
#3Most recessions are easy to predict because they’re intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work.
Those are actually somewhat rare. US in the late 70s with Paul Volker and the famous British Pound short by Soros which interrupted the government chocking off the economy with high interest rates, broke the pound and saved the UK from a recession.
Do you have more prominent examples?
It's usually policy error in the other direction - keeping easy money for too long. I.e. you don't handle a catastrophe by fixing the down leg (that's emergency measures with bad side effects), you prevent the up leg. Alan Greenspan will be forever remembered and hated by some after his efforts to create the dotcom and the housing bubble.
Re: Predicting Next Recession
#4Most recessions are easy to predict because they’re intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work.
Then why not short sell stocks and become rich?
Re: Predicting Next Recession
#5Most recessions are easy to predict because they’re intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work.
That sounds like a conspiracy theory.
Also, I fail to see how this theory applies to the recession of '08.
Re: Predicting Next Recession
#6Most recessions are easy to predict because they’re intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work.
Conspiracy aside, that doesn't make it easy to predict.
It is like saying that wars are easy to predict because they are (obviously) the result of governments declaring war.
Same thing for companies, even if a layoff is planned, no one knows exactly when it will happen, not even the people who planned it. It may be earlier than expected, or later, or not at all depending on the results, the whims of the market, the legal framework...
Re: Predicting Next Recession
#7Most recessions are easy to predict because they’re intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work.
Those are actually somewhat rare. US in the late 70s with Paul Volker and the famous British Pound short by Soros which interrupted the government chocking off the economy with high interest rates, broke the pound and saved the UK from a recession. Do you have more prominent examples? It's usually policy error in the other direction - keeping easy money for too long. I.e. you don't handle a catastrophe by fixing the…
The Japanese central bank single handedly caused the lost decade.
Re: Predicting Next Recession
#8Most recessions are easy to predict because they’re intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work.
Then why not short sell stocks and become rich?
Because it can’t actually be predicted or they would do just that.
Re: Predicting Next Recession
#9What's in the author's portfolio will really tell you what they think about the next proximity of the next recession.
Re: Predicting Next Recession
#10Most recessions are easy to predict because they’re intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work.
Conspiracy aside, that doesn't make it easy to predict. It is like saying that wars are easy to predict because they are (obviously) the result of governments declaring war. Same thing for companies, even if a layoff is planned, no one knows exactly when it will happen, not even the people who planned it. It may be earlier than expected, or later, or not at all depending on the results, the whims of the market, the l…
While it doesn't make things predictable unless you can predict central banker's whims, this is no conspiracy theory. It's a fairly accurate description of mainstream Keynesian macroeconomics. I might tone it down by saying bad recession happens when central banks accidentally overdo their inflation control but sometimes it doesn't seem so accidental, and more a question of incompetence.
Like when central bankers refused to use negative interest rates even though the natural rate was clearly plunging into the negative. In 2009 their own Taylor rule models put the correct rate at negative 4% (https://www.brookings.edu/blog/ben-bernanke/2015/04/28/the-t...). Central banks kept interest rates very high at zero.