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Why a global recession is inevitable in 2023

economist.com

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Re: Why a global recession is inevitable in 2023

#231

Post by imtringued »

FooBarBizBazz wrote: post #185
dcolkitt wrote: post #164

Earlier quoted context omitted.

No, the fundamental reason for lack of housing affordability is a lack of supply relative to demand. Since 2008 we've dramatically under built new housing units relative to household formation. Playing with inflation or interest rates may change who loses out, but it still doesn't change the fundamental problem that we don't have enough housing to go around.

This is one of the problems with rate hikes. They reduce production and investment. New home builds are down . Manufacturing is down . All of this is exactly the opposite of what we should want, which is low prices due not to a scarcity of money but to an abundance of wealth.

The problem is people don't use the cheap money to build more. They are being showered with it and then laws prevent building housing. It looks like a money problem because money moves faster than real estate but this isn't a 2022 problem, it is a problem that has been creeping up since the 70s.

Re: Why a global recession is inevitable in 2023

#232

Post by imtringued »

phkahler wrote: post #120
midasuni wrote: post #94

Earlier quoted context omitted.

As household wages have increased (especially with increasingly two full time professional incomes now, which was very rare 30 years ago) and internet rates have been low, the monthly cost of housing hasn’t changed as a percentage of take home py, it’s just you need two full time incomes to do it. This is the fundamental problem though, because there is a shortage of housing, as wages increases, housing costs (either…

>> the monthly cost of housing hasn’t changed as a percentage of take home pay, That is by design. Banks figure your monthly payment as a percent of income. Then based on interest rates they figure out how much you can borrow. Then everyone - the sellers, the agents, even the bank - push you to borrow the max allowed and spend it. This is why lower interest rate cause higher house prices. Interest rates are going up.…

>Then everyone - the sellers, the agents, even the bank - push you to borrow the max allowed and spend it.

That only applies if housing demand exceeds supply because buyers are competing. When sellers compete they try to reduce the price to cost plus profit where the profit is no lower than 3-5% because at some point other industries pay more.

Re: Why a global recession is inevitable in 2023

#233

Post by imtringued »

Izkata wrote: post #171
yucky wrote: post #125

Earlier quoted context omitted.

> Then everyone - the sellers, the agents, even the bank - push you to borrow the max allowed and spend it. You are not forced to spend above your ability to pay. People used to be ok with buying smaller homes, or in less hip neighborhoods. If you can afford a $500k house you can also afford a $350k house. People need to stop making excuses for living above their means.

> If you can afford a $500k house you can also afford a $350k house. Those numbers seem insanely high to me. I would've thought people are looking for more like $100k.

You won't find houses for $100k unless they are in poor condition or a bad location. That is roughly the price you would expect to pay for an average condominium in Germany.

Re: Why a global recession is inevitable in 2023

#234

Post by slaw »

pastacacioepepe wrote: post #142
slaw wrote: post #139

Earlier quoted context omitted.

To lower house prices would require heavy deregulation of the housing market. Zoning regulation and building constuction regulations.

> To lower house prices would require heavy deregulation of the housing market There's no actual requirement for deregulation. Austrians made prices affordable and improved housing quality with public intervention, and it worked well[0]. I yet have to see an housing deregulation experiment that worked. .0: https://www.youtube.com/watch?v=41VJudBdYXY

Did you see housing deregulation experiment that didn't work?

Re: Why a global recession is inevitable in 2023

#235

Post by imtringued »

BirAdam wrote: post #55
paulpauper wrote: post #3

Hasn't it been inevitable every years? It seems like the media writes this headline every year. Anyone can find reasons for recession if you look hard enough. Who knows. I am not selling stocks.

Yes. And it’s actually correct. I’ve thought that US financial system and US dollar would fall since I was roughly 13. The problem is that at some point central banks and governments will be unable to avoid hyperinflation due to debt accumulation. They will be forced to print. Additionally, the debt is inevitable when politicians are bought and paid for and therefore incentivized to provide lucrative contracts to don…

Japan has had 0% interest for decades. It doesn't appear that there is actually an interest based time bomb if we entertain the idea of zero or even negative interest rates. It is only a problem when you insist on positive interest because if the exponential nature of compound interest.

Re: Why a global recession is inevitable in 2023

#236

Post by lamontcg »

dh2022 wrote: post #193
lamontcg wrote: post #155

Earlier quoted context omitted.

Yeah that is exactly what I think needs to happen in a perfect world. Allow a wage-price spiral of about 6% a year, which would raise long rates, allow short rates to increase eventually without a recession and that would cut off the cheap money supply. Asset prices would fall in real terms because of persistently higher rates across the yield curve. In nominal terms they would be able to maintain more of their price…

"Allow a wage-price spiral of about 6% a year, " - Fed cannot create this wage-spiral. Fed only controls interest rates. From 2009-2016 interest rates were below 0.2% - and wages did not move. Only employers can create this type of wage spiral - and I do not think they will do this. Employers are now looking into automation as much as possible to replace labor (supermarket checkouts, at fast foods order kiosks, onlin…

> From 2009-2016 interest rates were below 0.2% - and wages did not move.

From 2009-2016 the unemployment rate fell from 10% to 4.7%, it is now at 3.5%

> Only employers can create this type of wage spiral

They don't create a wage spiral, they would naturally want to pay people less, they don't wake up one morning and give people raises without a reason.

And the reason is the jobs overhang. When you have twice as many jobs per job seeker then employers are FORCED to pay more just by supply and demand laws.

That only happens though when unemployment is near its lower bound (which we seem to have empirically determined is around 3.5% at least for our economy right now).

Re: Why a global recession is inevitable in 2023

#237

Post by imtringued »

Zaskoda wrote: post #77
BirAdam wrote: post #55

Earlier quoted context omitted.

Yes. And it’s actually correct. I’ve thought that US financial system and US dollar would fall since I was roughly 13. The problem is that at some point central banks and governments will be unable to avoid hyperinflation due to debt accumulation. They will be forced to print. Additionally, the debt is inevitable when politicians are bought and paid for and therefore incentivized to provide lucrative contracts to don…

> On another note, there is inherent instability in debt-based economics From an adequate distance, fraction reserve banking looks a whole lot like a ponzi scheme.

You mean any banking scheme where creditors decide when debts are paid.

Re: Why a global recession is inevitable in 2023

#239

Post by imtringued »

xapata wrote: post #62
ajross wrote: post #15

Earlier quoted context omitted.

Well, yeah, in fact the point is stronger. Economies are feedback systems and oscillate. Recessions are inevitably predicted every few years because recessions simply are inevitable every few years. And yeah, it seems likely (though obviously not certain) that we're due for another. There's nothing particularly notable here. Speculation markets got overheated[1], now they're correcting and as a side effect money ends…

I'm not sure oscillation is a good metaphor. It could be a random walk, which might appear periodic, but is not.

It is not a metaphor if you think the Fed is applying control theory to regulate the economy.

But some people take it too far and think if there was no Fed there wouldn't be any oscillation. That is not true. Bitcoin also "oscillates".

Oscillations happen because of a time lag that leads to an overshooting of the target which then leads to overshooting on the way back and so on.

The economy never becomes perfectly stable but there is no rule that the oscillation can't be smoothed out until it is no longer a problem. We aren't that far yet.

Re: Why a global recession is inevitable in 2023

#240

Post by SantalBlush »

Izkata wrote: post #180
dragonwriter wrote: post #173

Earlier quoted context omitted.

> The low unemployment rate indicates we’re likely either in or about to start a recession. Sure, I mean, we might only be ~4 years from a recession (see 1966). It's true that, as recession is defined roughly as the period of decline from an economic peak, they usually start during a period of low unemployment, but that doesn't mean low unemployment signals being in a recession. Most low unemployment periods are outs…

Take a look at the comment I was responding to, as well as some others on this page: It's a common misconception that the unemployment rate spikes ( spikes , not fluctuates slightly higher ) before recessions. It doesn't.

>It's a common misconception that the unemployment rate spikes (spikes, not fluctuates slightly higher) before recessions

I'm not talking about using the unemployment rate as a leading indicator, which is what you're describing here.

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