Predicting Next Recession • Hacker News Board

Re: Predicting Next Recession

#31

Post by hogFeast » Sat, Nov 23, 2019, 5:02 PM UTC

H8crilA wrote: post #3

viburnum wrote: post #2

Most 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…

It happened in 1958 (it may have been '56, my memory is poor), and 1920-1. In the case of the Fed, the last central banker to take this approach was Martin in the 1960s ("leaning against the wind")...and his legacy ended up being inflation.

You are basically correct but these factors are essentially structural. For example: is the central bank independent from the govt? How much oversight is there over policy decisions? Etc. In the West, it has been politically impossible to actually do this.

Your understanding of early 1990s Britain is not correct. The UK was forced to raise rates because of the ERM and rising inflation. The govt ran the BoE so it should be quite obvious that they had no desire to slow the economy down but were forced to do so.

Re: Predicting Next Recession

#32

Post by aguyfromnb » Sat, Nov 23, 2019, 5:03 PM UTC

burlesona wrote: post #28

aguyfromnb wrote: post #11

Earlier quoted context omitted.

> intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work This is the top comment, while someone calling it a conspiracy theory is down-voted. That is sad. The Fed was founded in 1913. The US had recessions in 1785, 1789, 1796, 1802, 1807, 1812, 1815, 1822, 1825, 1828, 1833, 1836, 1839, 1845, 1847, 1853, 1857, 1860, 1865, 1869, 1873, 1882, 1887, 1890, 1893…

Also note how few of those made any real impact on the people of the time or were noteworthy enough that the average person has heard of them. I think the current finance era may come to be viewed in the same light as the fire-fighting practices of the past century. Always working to prevent the little fires leaves the forest unhealthy and sets up an eventual inferno that no one can control.

>Also note how few of those made any real impact on the people of the time or were noteworthy enough that the average person has heard of them.

Indeed. That's the norm with recessions. It just so happens that the last one, the one we all remember (2008) was...really bad. It will affect people's perceptions for the rest of their lives, much like the Great Depression.

Re: Predicting Next Recession

#33

Post by puranjay » Sat, Nov 23, 2019, 5:04 PM UTC

Around the last recession, I had this distinct feeling: that this exuberance is a little too irrational. The press was constantly talking about how great the economy was, and people I knew around me were splurging on things they could in no way afford.

I used to trade domain names at that time, mostly to fund my college. Everyone in my industry was talking about how the value of certain domains will 10x in the next 5 years and other irrational projections.

Maybe its that experience, but I've since maintained a personal theory that a serious recession hits when people least expect it. When there is too much easy credit in the system and business optimism isn't grounded in any fundamentals, that's when you should fear a recession.

Not when everyone is telling you that a recession is just around the corner. Because then you're already more careful in your decision making

Not sure how much of this is founded on economics of course

Re: Predicting Next Recession

#34

Post by hogFeast » Sat, Nov 23, 2019, 5:05 PM UTC

rapsey wrote: post #7

H8crilA wrote: post #3

Earlier quoted context omitted.

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.

They didn't. That is a misconception borne out of reading our methods of economic policy onto a different context. The MoF, not the BoJ, controlled not only monetary policy but pretty much all aspects of the economy (they even directed lending by banks at the level of individual loans). This changed in the late 90s but through to the early 90s, it was all the MoF.

Re: Predicting Next Recession

#35

Post by noitsnot » Sat, Nov 23, 2019, 5:12 PM UTC

michalu wrote: post #25

During the height of the bitcoin bubble I had my gym coach leave job and become "crypto investor" ... Katy Perry changed her nails to each look like one of the popular coins. And yes I did have an uber driver talk to me about crypto. The mainstream media were shilling Ripple at its highest price ever. Today, all the same people talk about coming recession. I was lucky to have my first job in finance during the credit…

A handful of countries have cut interest rates because the global economy is slowing down. India, China, U.S., Mexico, Brazil, etc.

Re: Predicting Next Recession

#36

Post by hogFeast » Sat, Nov 23, 2019, 5:18 PM UTC

aguyfromnb wrote: post #11

viburnum wrote: post #2

Most 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.

> intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work This is the top comment, while someone calling it a conspiracy theory is down-voted. That is sad. The Fed was founded in 1913. The US had recessions in 1785, 1789, 1796, 1802, 1807, 1812, 1815, 1822, 1825, 1828, 1833, 1836, 1839, 1845, 1847, 1853, 1857, 1860, 1865, 1869, 1873, 1882, 1887, 1890, 1893…

This makes no sense. The initial implementation of the Fed (until power was moved to Washington in 1934) was ineffective. The recession of 1920 (it was called a depression, and the drop in prices was one of the most severe in history) was caused by Fed policy, as was the Great Depression. The Fed has always had a huge role in the economy (and that role has changed substantially over time). What they do effects the cycle. You don't need to make wildly general conclusions.

It is also very odd to call all of the periods you mention recessions...they weren't. Some of them were specific banking panics that had no effect on the real economy. The purpose of the Fed, which was effective eventually, was to alleviate the disruption caused by the agricultural cycle (which caused gold to flow in/out changing the monetary base. But there was no real mandate for economic stability, that isn't why the Fed was created, and that idea would have made no sense to central bankers until very recently (probably the 1980s, although for different reasons over time).

Re: Predicting Next Recession

#37

Post by chiefalchemist » Sat, Nov 23, 2019, 5:21 PM UTC

The issue I have with historic based models is that today's "global economy" is not enough like the past. If the USA goes into a recession, chances are that's - more and more - the reflection of some other economy(s). And of course, vice versa.

The biggest impact on the econony - via the spending minds of the masses - is how the mainstream media plays the strenght of the economy in the context of the USA's 2020 election. The middle to the left will be pulling out the stops to look for bad Trump-sourced economic news. That could become self-fulfilling.

Re: Predicting Next Recession

#38

Post by DennisP » Sat, Nov 23, 2019, 5:21 PM UTC

michalu wrote: post #25

During the height of the bitcoin bubble I had my gym coach leave job and become "crypto investor" ... Katy Perry changed her nails to each look like one of the popular coins. And yes I did have an uber driver talk to me about crypto. The mainstream media were shilling Ripple at its highest price ever. Today, all the same people talk about coming recession. I was lucky to have my first job in finance during the credit…

It's hard to imagine a stock market crash coming when everyone already expects it, but it's quite easy to imagine a recession coming when everyone expects it.

If people expect stocks to crash, then the expected "crash" is probably already priced in. If people expect a recession, then the reduction in economic activity is something of a self-fulfilling prophecy.

Re: Predicting Next Recession

#39

Post by helpPeople » Sat, Nov 23, 2019, 5:24 PM UTC

michalu wrote: post #25

During the height of the bitcoin bubble I had my gym coach leave job and become "crypto investor" ... Katy Perry changed her nails to each look like one of the popular coins. And yes I did have an uber driver talk to me about crypto. The mainstream media were shilling Ripple at its highest price ever. Today, all the same people talk about coming recession. I was lucky to have my first job in finance during the credit…

My hypothesis is that we are experiencing high inflation and that's the recession.

And before anyone says "fed reserve 2 percent", the federal reserve is known to lie.

Re: Predicting Next Recession

#40

Post by ra1n85 » Sat, Nov 23, 2019, 5:32 PM UTC

michalu wrote: post #25

During the height of the bitcoin bubble I had my gym coach leave job and become "crypto investor" ... Katy Perry changed her nails to each look like one of the popular coins. And yes I did have an uber driver talk to me about crypto. The mainstream media were shilling Ripple at its highest price ever. Today, all the same people talk about coming recession. I was lucky to have my first job in finance during the credit…

>It's hard to imagine recession come when everyone expects it.

Especially when those in power are doing everything they can to prevent it. The Federal reserve has a trading floor and participates as a proxy for the government in the markets. There is also the rumored Plunge Protection Team. We actually have markets pricing in the likelihood of further quantitative easing 11 years after it was first done to address a prior crash. And for it all, we have only really accomplished concentrating wealth and increasing income inequality.

None of the above really appears sound. I expect things to change, mainly because I think the above cannot continue indefinitely.