“Recession is when your neighbor loses his job. Depression is when you lose yours." --Ronald Reagan
How we will know when a recession is coming?
31–40 of 128 posts
Re: How we will know when a recession is coming?
#32Out of curiosity, how reliable are all of the metrics we use for measuring economic health? For instance, how reliable is the unemployment rate when it is a highly political number with lots of incentives to misrepresent (ie the chronically unemployed are excluded from the count)? Beyond that, how much are these indicators just fudged or straight-up lied about? Everybody is happy to agree with me when I say that Chin…
The unemployment rate is definitely not the whole picture and is kind of a BS metric.
I think you'll find the Labor Force Partcipation Rate gives a more accurate assessment of what you're looking for.
"Make-Believe America: Why the US Unemployment Rate Doesn’t Indicate Economic Recovery"
https://www.foreignpolicyjournal.com/2018/03/08/make-believe...
Re: How we will know when a recession is coming?
#33“Recession is when your neighbor loses his job. Depression is when you lose yours." --Ronald Reagan
Harry S Truman originally said it, Ronald Reagan added on an additional part.
"Recovery is when Jimmy Carter loses his job"
Re: How we will know when a recession is coming?
#34Maybe the recession will never come? What are we going to do now without the recession? In a way, that thing was a solution.
Impossible. Ray Dalio explains the business cycle and why recessions are inevitable with our credit based system https://youtu.be/PHe0bXAIuk0
Re: How we will know when a recession is coming?
#35Earlier quoted context omitted.
The markets watch the BLS numbers like crazy and compare them to estimates from private sources that come from a wide range of methodologies. Frequently the big moves in the markets are not triggered by the bare numbers but from the difference between the expectation and the numbers. If there was a systematic fudging of those numbers lots and lots of people would notice.
You're right, but what if revealing the discrepancies wouldn't be beneficial to the company? Many people knew about the subprime mortgages before the 2008 recession and no-one came forward, although some shorted it.
Lots of people gave warnings. I was reading warnings about it in the Economist for years.
It was a damned complex system and so is the economy. A lot of stuff is only fully obvious in hindsight.
You also have the problem of knowing who to listen to. Many people are warning about many things right now. Some are prescient, some are wrong. How to judge?
2008 could have been better predicted and better prevented, but it's false to say no one warned.
Re: How we will know when a recession is coming?
#36Why does it have to be just a recession with rebound a few years later? I’d argue many are thinking too positive following 2008 where everything will go back to normal and prices will rally to all time highs. The US economy almost blew up into a full blown depression in 2008. The Fed swooped in to save the day. Can the Fed do that again indefinitely with not only US but potential problems worldwide? The global econom…
> Can the Fed do that again ...?
I mean they don't have much to give do they? Unless we're doing negative interest rates this time.
Re: How we will know when a recession is coming?
#37I watched a Ted talk sometime ago about how they've discovered a method to genetically modify mosquitoes to eradicate entire populations of mosquitoes from an area (I think it was it made them mos babies die due to genetic engineering). I couldn't find it now but it seemed like a massive success at the time almost eliminating all mosquitoes from the a city in Brazil (iirc). Anyone know what happened to it? If that we…
I believe you're on the wrong post.
Re: How we will know when a recession is coming?
#38I worry a lot less about a market correction then I do a political "correction" affecting the markets. We're so polarized. You can sense a desperation among those who took out an exceptionally high amount of student debt and have no realistic way of repaying it. Risk of medical bankruptcy is also extremely high. Among other things, these types of occurrences make people desperate, and desperate people are willing to try desperate solutions, such as radical wealth redistribution, or government/centrally planned economies (socialism), or ...? Ask yourself how 50% of the country might feel if we removed from power (either constitutionally or other means) our democratically elected president?
Re: How we will know when a recession is coming?
#39All these indicators are guesses at best, but out of curiosity I checked the current Bureau of Labor Statistics numbers [1]: Prior 12 months lowest unemployment rate: 3.6% (in April & May 2019). Prior 3 months average (June/July/August 2019): 3.7%. So according to this metric we are not in a recession. [1]: https://www.bls.gov/web/empsit/cpseea03.htm
Typically a recession is defined by having at least 2 quarters of decreased GDP growth, so it is often a lagging indicator. By the time we definitively know we are in a recession...we've already been in it for 6 months. That is to say that I'm not sure how good of an indicator a rolling average of unemployment is, especially in a gig-economy sort of market. But I agree, using indicators to predict a recession is basically an educated guess, with little emphasis on the educated part.
Re: How we will know when a recession is coming?
#40Earlier quoted context omitted.
The markets watch the BLS numbers like crazy and compare them to estimates from private sources that come from a wide range of methodologies. Frequently the big moves in the markets are not triggered by the bare numbers but from the difference between the expectation and the numbers. If there was a systematic fudging of those numbers lots and lots of people would notice.
You're right, but what if revealing the discrepancies wouldn't be beneficial to the company? Many people knew about the subprime mortgages before the 2008 recession and no-one came forward, although some shorted it.
I worked in that industry during that time period and its just not true that no one came forward. As early as 2003 Warren Buffett straight up called them “weapons of financial destruction”. In 2005, the World Bank released a report suggesting that the derivatives the banks were holding could cause a financial crisis.
I remember the day the yield curve inverted in 2005 because I was working for a company that made risk assessment software for MBS. Our call center blew up as the reports started showing how risky balance sheets were.
It’s a nice story that Michael Lewis writes in “The Big Short” about how only a few people made money shorting the crisis but a) its largely not true and b) its more the fact that shorting isn’t nearly as easy as HN seems to think it is.