35 ms·

The U.S. Isn’t Prepared for the Next Recession

167 points by TimJRobinson 9y ago

bitmadness 9y ago
Lol... Like we were prepared for the last one
cm2187 9y ago
At the current pace of rate rise and the announced pace of withdrawal of QE, it's going more than 5 years before the monetary policy returns to normal. I doubt the current cycle will last that much longer. That will leave the Fed with little tools to react, other than even more QE.
Shivetya 9y ago
the stimulus they claim is not wanton spending by the Federal government but transfer payments. Those include extensions of unemployment, food stamps, and other assistance programs. It also includes, contrary to how we think but government thinks, tax rate cuts and tax holidays. the real threat isn't the US still, it is that Europe still is more likely to tip and negative interest rates over there are a serious drag. Just ask Japan how long the malaise was because of bad fiscal policy and attempts to prop up on government money was
- apexalpha 9y ago
  Just a few countries in Europe are in bad weather though, the Germanic core of the European economy is in good shape and Eastern Europe is rapidly catching up. Maybe it's misplaced, but I am pretty optimistic.
  - digi_owl 9y ago
    I would not be. The reason Greece got such harsh treatment was because their government took over much of the private debt at the outset of the crisis to avoid mass bankruptcies. Thing is that much of that debt was issued by German banks. Thus if Greece defaults, German banking is in for a rough time. Never mind that the German economy hinges on maintaining massive exports, while domestic wages have been deliberately held back.
- alphaalpha101 9y ago
  Your entire comment rests on the assumption that it's a bad thing to deficit spend. But it isn't. It's how literally all economies function.
cylinder 9y ago
It's all riding on the faith of the rest of the world in the US. Watch the USD. Once it plunges, it's over. Won't be able to print money anymore. Until then they can print away a lot of problems.
- digi_owl 9y ago
  More like riding on the world's need for oil, as oil is by decree traded in USD.
  - jacobush 9y ago
    Yes, the US went from backing USD by gold to oil quite some time ago. The exchange rate is not quite fixed, but it’s upheld by the US military against anyone who would try to exchange oil for anything but USD.
    - jacobush 9y ago
      Oh, down vote, no voice. What started the Iraq war? Russia and Iraq wanted to create a new exchange dominated in Euro. Try that shit again and see how far you go.
      - konart 9y ago
        Russia has exchanges in local currency with several countries already. No problem with that. And that Iraq shit won't happen this easily anymore.
        jacobush 9y ago
        But do they have any of “our” countries?
  - JumpCrisscross 9y ago
    > oil is by decree traded in USD This is patently false. OPEC quotes oil in U.S. dollars, because people tend to have U.S. dollars lying around as a result of the massive American consumer base (as well as deep and open financial system), but e.g. North Sea oil is sold for pounds sterling and Bakken shale oil is sold for loonies. Oil is quoted, future and spot, in every major currency FX traders can think up. Wall Street would love if crude were quoted in more currencies. It would mean FX revenue. Sadly for it the world has some sense.
DanielBMarkham 9y ago
The U.S. has gotten progressively worse and worse at handling recessions, and yes, it's in no spot to handle the next one. But this is nothing new. It's been heading this way for a long time. You could have ran this same article a year ago before the current administration took over. I don't want to mention politics, but politics plays a big role here. When your party is in power, life is good and spending is easy. When your party is out of power, hard times are coming and we should prepare. The state of the nation doesn't flip around that quickly. Instead it's all about long-term trends like debt and interest rates. But by viewing all public policy through a partisan lens, it allows folks to always blame the "other guys". It is a dysfunctional political system that's led to a dysfunctional financial system. I think the U.S. might have another decade or two, but one day, being the world's reserve currency ain't going to cut it any more. That day is going to suck.
- tonyedgecombe 9y ago
  Democracy does seem to have a problem delivering fiscal responsibility, it's too easy to put it off for the next government.
  - jacobush 9y ago
    The problem is larger than fiscal. It’s about long term thinking in general. We have no common cause, vision or “myth” to gather round.
    - rralian 9y ago
      I was thinking this the other day actually. That we are generally best served when people extrapolate their interests for the long term. And this is a big part of religion and faith. But they don't always help people value the collective long-term interest.
    - ams6110 9y ago
      Common rallying causes have been systematically dismantled. You can't be patriotic because our history isn't perfect. You can't be religious because it might offend someone. God and country have been the common denominators of our culture and they are no longer seen as relevant, and there is nothing else to replace them. It seems like we are more interested in finding and emphasizing all the ways we are different from each other rather than rallying around anything we might have in common.
spodek 9y ago
Doesn't a recession happening mean we were unprepared? If we were prepared to handle it, wouldn't we, and then avoid it?
- sharemywin 9y ago
  it's not binary. without the safety features economy spirals even more out of control.
- SomeStupidPoint 9y ago
  I tend to think of it as: we go into a recession but not a depression because automatic + manual safety checks were deployed. It's actually hugely troubling how much has been cut from government safety nets, because it seems liable to send the next recession into a depression and completely wipe out the very base who voted for those laws -- the poor South and the industrialized Midwest. I don't think rural America will survive the next depression with the social safety nets gutted: they've literally cut their own parachute lines, so they're going to crash not just fall. But hey -- they saved a few years on taxes, right? Oh... wait... that was billionaires. Nevermind.
  - mcguire 9y ago
    But they won't go away when they (we?) crash. And they will likely want to double down on those voting patterns.
    - SomeStupidPoint 9y ago
      Those regions are already evaporating, on the brink of collapse because of their policies: Their kids leave then don't come back and slowly, family by family, whole groups are forced to abandon the region; they're net emigration regions, especially when you count rural versus urban (eg, the pattern becomes clear when you look at Georgia minus Atlanta). Their migrated children tend to be more liberal, as urban populations are in general. Starvation is a wonderful motivator to change social order, and help mix society. Now, I'm not even arguing this is a good thing, but I'm pretty powerless to do much when I consistently vote to help those regions develop new industry and they consistently vote to overrule that. So, I hope they enjoy what they voted for: they won the debate, now they can have their prize.
Gustomaximus 9y ago
What they addressed at the end of the article is the key point to me. There are reduced nations left to fuel the worlds economic engine in a recession. Previously events like 2008 we had India, Middle Eastern and Chinese economies doing massive development, so while the western countries went to recovery mode, the could benefit and hold themselves a bit better from these other nations growth. Today if we hit a trade/financial crisis its likely to spread across the major global economies. African areas and India seem to have ongoing growth potential but I dont see them coming to the rescue. And should a major economy like US have a crisis this could have a global impact compounded further by; 1) The massive global debts being accumulated at personal and state levels pretty much everywhere. This is setting ourselves up for potential contagious failure of our systems. Not just inter country finance but imagine there was significant defaults and how that would spread to pension funds and back into the economy. Small business lending etc. Our globalised and finance heavy economies dont have adequate circuit breakers. Further 2) I suspect developed nations urbanisation will make any significant downturn harder on the masses than previous recessions. In the 1920's you had 30%+ of people on farms. Now you have something like 2%. Back then people could more easily tighten belts and become increasingly self sufficient over a few hard years. Today it would be a significantly more difficult position for the government to manage, both by volume of people that would need full support and back to their indebtedness. This could spell real trouble if the wheels fall off. And given history, the wheels will fall off occasionally. Anyway, I'm not trying to scare or convince people to buy bunkers. I do feel we should demand better long term governance from politicians vs this 'whats gets me in next term' politics we see today. With the tribalism and instant gratification of today's politics it doesn't seem to offer the best hope. But really who knows...
- FussyZeus 9y ago
  Going along with everything you've said, the fact that the wealthy now control such a vast share of assets and capital is a super not-good thing in the event of a hard recession. Honestly our situation now looks so much like the Roaring 20's, a certain segment of the population getting a shitload of everything, while everyone else goes hungry (and famously, the roaring 20's tapered off nicely and we all came out better- oh no wait, it was the Great Depression and we had to participate in a World War to get out of it). Income Inequality and Lack of Social Mobility are a cancerous tumor growing inside the United States and many other developed countries too. This shit is a powder keg and the wealthy need to realize that if they keep pushing to get that next dollar, eventually all their money isn't going to keep the pitchforks at bay.
nameisu 9y ago
what will happen to bitcoin in recession?
subterfudge44 9y ago
The doomsday articles should be taken with a pinch of salt. Economy by itself has a very good recuperative power because people like to trade and get themselves into better situation. The real thing that worries me more about recession is that a person like Trump might simply try to "fix it" and in the process claiming more power to himself which will make things worse. It is undeniable that Bush's "fix terrorism" and Obama's "fix economy" has proved to be a disaster to both safety and economy.
emodendroket 9y ago
It seems like the main takeaway here is "the social safety net has been deliberately weakened, and now in a downturn people will be more hurt." Well, yes, but in some sense that's the point of weakening the social safety net.
- humanrebar 9y ago
  > ...in some sense that's the point of weakening the social safety net. It sounds like you're saying people want to hurt poor people. Did you mean that or do you care to elaborate?
  - emodendroket 9y ago
    Well, sure, my claim here is that without the threat of being unemployed and destitute it's hard to maintain labor discipline. "Political Aspects of Full Employment" is probably the classic essay outlining the case for this claim.
  - eli_gottlieb 9y ago
    >It sounds like you're saying people want to hurt poor people. Well, let me quote some recent news: >Speaking to National Review editor Rich Lowry at an event hosted by the conservative magazine, House Speaker Paul Ryan made the case for the American Health Care Act by presenting it as a once-in-a-lifetime opportunity to cut Medicaid spending. >“We’ve been dreaming of this since I’ve been around,” Ryan says, before interrupting himself to clarify exactly how big of an opportunity this is, “since you and I were drinking out of kegs.” https://www.vox.com/policy-and-politics/2017/3/17/14960358/paul-ryan-medicaid-keg https://www.vox.com/policy-and-politics/2017/3/17/14960358/p... Yes, the current Speaker of the United States House of Representatives wants to hurt poor people. He's been dreaming of it since he was doing keg-stands in college. He said so.
    - mac01021 9y ago
      > the current Speaker of the United States House of Representatives wants to hurt poor people. No. He wants the government to spend less of his money. Maybe he doesn't care whether that means poor people get hurt, but it's not the same thing.
Systemic33 9y ago
Here's an intersting question; Would an economic recession be a boost for Bitcoin, or would it be dragged down? My intuition tells me that Bitcoin would see a surge, as it becomes a stronger pillar of monetary value that crosses country borders, similar to the dollar, but not tied to the US.
- zanny 9y ago
  Given five years of data on bitcoin prices I think it is a false flag to think any macroeconomic force correlates to bitcoin. Bitcoin is centralized enough, and independent enough, that the real motivator of bitcoin price is the whims of a handful of people who control most of the economy, whatever those whims may be. Often those whims can correlate to shockwaves in the economy or the policies of the US and China trying to stomp out miners or trading but fundamentally they aren't reflective of broad market ideas the way most major stocks are. Bitcoin is much more centralized than traded stocks because its economy is so small and the barrier to entry so high. People keep trying to find the trends in bitcoin, but the active pursuit of trends is what motivates the dominant whales to avoid being predictable.
- moduspol 9y ago
  That is my feeling as well. I think we got a taste of what will happen with economic certainty in 2008: they'll print more money. And in a situation like that, people will want something with the supply algorithmically constrained like Bitcoin. If nothing else: Even if Bitcoin's "value" stays constant, its value in terms of USD will rise as inflation occurs. I'm not sure what rational case one can make that it would lose value as faith in the US economy gets weaker.
- chiph 9y ago
  I expect the coin markets to take a hit as well. In a recession, people stop spending to preserve their cash and ride it out. I would expect the weaker coin exchanges to go under for lack of trading activity. As word of this spreads, fewer people will be buying coins for fear of having their coins held by a soon-to-go-under exchange. Lack of demand will then drive exchange rates down.
cubano 9y ago
Isn't prepared to do what exactly? Does The Atlantic think people are just going to lay down and die when it comes? People will deal with it the way they always have of course, by modifying their behaviors to align with current financial realities. I really don't understand the point of article like this.
- 3pt14159 9y ago
  There are systemic shocks that you're sweeping under the rug. If most people in a state is underwater on their house and they declare bankruptcy there is a real economic erosion that occurs. Foreclosed houses get looted, depressed people stop working, already stressed state finances break under the burden of further aid applicants. By saying they'll just "modify their behaviours" you're essentially saying they'll just "go on welfare or become homeless on the street". Most of America is not ready for the next recession, and it is coming at the worst time, when Baby Boomers are starting to strain the retirement and healthcare systems.
  - ihsw2 9y ago
    Paradoxically, economic downturns disproportionately affect the economically advantaged. While the medium and lower classes' financial situations don't need to travel very far to reach the bottom, the rich (and super-rich) will see their income and wealth descend a steeper cliff much more violently. Skilled individuals can seek employment (at least until regional supply is exhausted) whereas wealth does not recover so quickly. What can take a generation to build up would be wiped out within a single fiscal year. War and economic recessions/depressions have a tendency to assiduously devour the rich. To be quite honest, war and economic depressions are the best way to reduce income inequality. The old adage of the tree of liberty needing to (regularly) be replenished by blood seems to apply.
- ProAm 9y ago
  > Does The Atlantic think people are just going to lay down and die when it comes? It's a definite possibility [1] [1] http://www.npr.org/sections/krulwich/2014/06/11/318885533/suicide-rate-in-u-s-and-europe-climbed-during-great-recession http://www.npr.org/sections/krulwich/2014/06/11/318885533/su...
rothbardrand 9y ago
This comment identifies parties responsible for actions, but these actions are taken by democrats and republicans alike, no president in my life time has failed to engage in these practices. This is not a political response. Recessions are not "just how economies work". Recessions and depressions are the product of the monetary shenanigans of the central bank, as laid out well in the Austrians Business Cycle Theory. The short overview is, easy money means government gets to spend and the money creation process includes showering those at the top - wall street banks and government connected entities-- with new money that they are expected to "invest" in the economy. The problem is this is malinvestment and distorts the markets. You can only do it so long and you invariably create bubbles. A recent example of this I have lived thru is the dotcom boom...when it went bust, interest rates were put below the cost of money, and banks were mandated to make bad loans (prudent underwriting of loans was considered "racist" by democrats in the late 1990s so CRA was changed, later analysis showed it wasn't correlated with race after all.) Then under Bush the spigots were really opened and suddenly you have very cheap money to buy houses with. Buying a house with cheap federal reserve money was a form of the carry trade--- where you buy an asset worth X and then pay it back with increasingly lowered value dollars. This resulted in the housing bubble and of course the housing crisis.... which was "fixed" with massive amounts of even more easy money. This money is now going into wall street again, this time into equities, and hedge funds and venture capital. It will eventually bust again. IF you don't have an easy money policy then interest rates follow the supply demand dynamics of a market, and it will self regulate. Even if you don't think it will perfectly regulate itself (and that's true) it will tend to, rather than get way out of whack. What we have now is an economy that is has gotten so out of whack and never been able to properly recover itself by unwinding the last two bubbles.
- mjburgess 9y ago
  Right, because there were no recessions and depressions before central banking. Oh Wait! They were more frequent and worse. The "government is the source of all economic problems" is a religious myth as wholesale as "satan is the source of all evil, god is the source of all good". > prudent underwriting of loans was considered "racist" by democrats is a myth. Conspicuously missing from this comment is anything about deregulation, nothing about Glass–Steagall. Only euphemistic suggestions that somehow people disagreeing with redlining (and other practices) somehow caused a crash. This view is only possible if you assume any behaviour people partake in a market is the right behaviour and so any adjustment to that must be bad (, and thefore ... euphemism euspemism... crash). No. It is possible to have a financial system which is regulated to minimize perverse financial practices. We should place blame on the legislators who fail to do so and the financiers who act recklessly. Not wink and nodd towards "prudence", by which we mean, a president asking for an end to racist policies is more severe than deregulating the banks.
liberte82 9y ago
Why don't we just flag this article too along with all the others, if it's too unpleasant to think about?

167 points by TimJRobinson 9y ago

Lol... Like we were prepared for the last one

At the current pace of rate rise and the announced pace of withdrawal of QE, it's going more than 5 years before the monetary policy returns to normal. I doubt the current cycle will last that much longer. That will leave the Fed with little tools to react, other than even more QE.

Shivetya 9y ago

the stimulus they claim is not wanton spending by the Federal government but transfer payments. Those include extensions of unemployment, food stamps, and other assistance programs. It also includes, contrary to how we think but government thinks, tax rate cuts and tax holidays. the real threat isn't the US still, it is that Europe still is more likely to tip and negative interest rates over there are a serious drag. Just ask Japan how long the malaise was because of bad fiscal policy and attempts to prop up on government money was

apexalpha 9y ago
Just a few countries in Europe are in bad weather though, the Germanic core of the European economy is in good shape and Eastern Europe is rapidly catching up. Maybe it's misplaced, but I am pretty optimistic.
- digi_owl 9y ago
  I would not be. The reason Greece got such harsh treatment was because their government took over much of the private debt at the outset of the crisis to avoid mass bankruptcies. Thing is that much of that debt was issued by German banks. Thus if Greece defaults, German banking is in for a rough time. Never mind that the German economy hinges on maintaining massive exports, while domestic wages have been deliberately held back.
alphaalpha101 9y ago
Your entire comment rests on the assumption that it's a bad thing to deficit spend. But it isn't. It's how literally all economies function.

cylinder 9y ago

It's all riding on the faith of the rest of the world in the US. Watch the USD. Once it plunges, it's over. Won't be able to print money anymore. Until then they can print away a lot of problems.

digi_owl 9y ago
More like riding on the world's need for oil, as oil is by decree traded in USD.
- jacobush 9y ago
  Yes, the US went from backing USD by gold to oil quite some time ago. The exchange rate is not quite fixed, but it’s upheld by the US military against anyone who would try to exchange oil for anything but USD.
  - jacobush 9y ago
    Oh, down vote, no voice. What started the Iraq war? Russia and Iraq wanted to create a new exchange dominated in Euro. Try that shit again and see how far you go.
    - konart 9y ago
      Russia has exchanges in local currency with several countries already. No problem with that. And that Iraq shit won't happen this easily anymore.
      - jacobush 9y ago
        But do they have any of “our” countries?
- JumpCrisscross 9y ago
  > oil is by decree traded in USD This is patently false. OPEC quotes oil in U.S. dollars, because people tend to have U.S. dollars lying around as a result of the massive American consumer base (as well as deep and open financial system), but e.g. North Sea oil is sold for pounds sterling and Bakken shale oil is sold for loonies. Oil is quoted, future and spot, in every major currency FX traders can think up. Wall Street would love if crude were quoted in more currencies. It would mean FX revenue. Sadly for it the world has some sense.

DanielBMarkham 9y ago

The U.S. has gotten progressively worse and worse at handling recessions, and yes, it's in no spot to handle the next one. But this is nothing new. It's been heading this way for a long time. You could have ran this same article a year ago before the current administration took over. I don't want to mention politics, but politics plays a big role here. When your party is in power, life is good and spending is easy. When your party is out of power, hard times are coming and we should prepare. The state of the nation doesn't flip around that quickly. Instead it's all about long-term trends like debt and interest rates. But by viewing all public policy through a partisan lens, it allows folks to always blame the "other guys". It is a dysfunctional political system that's led to a dysfunctional financial system. I think the U.S. might have another decade or two, but one day, being the world's reserve currency ain't going to cut it any more. That day is going to suck.

tonyedgecombe 9y ago
Democracy does seem to have a problem delivering fiscal responsibility, it's too easy to put it off for the next government.
- jacobush 9y ago
  The problem is larger than fiscal. It’s about long term thinking in general. We have no common cause, vision or “myth” to gather round.
  - rralian 9y ago
    I was thinking this the other day actually. That we are generally best served when people extrapolate their interests for the long term. And this is a big part of religion and faith. But they don't always help people value the collective long-term interest.
  - ams6110 9y ago
    Common rallying causes have been systematically dismantled. You can't be patriotic because our history isn't perfect. You can't be religious because it might offend someone. God and country have been the common denominators of our culture and they are no longer seen as relevant, and there is nothing else to replace them. It seems like we are more interested in finding and emphasizing all the ways we are different from each other rather than rallying around anything we might have in common.

spodek 9y ago

Doesn't a recession happening mean we were unprepared? If we were prepared to handle it, wouldn't we, and then avoid it?

sharemywin 9y ago
it's not binary. without the safety features economy spirals even more out of control.
SomeStupidPoint 9y ago
I tend to think of it as: we go into a recession but not a depression because automatic + manual safety checks were deployed. It's actually hugely troubling how much has been cut from government safety nets, because it seems liable to send the next recession into a depression and completely wipe out the very base who voted for those laws -- the poor South and the industrialized Midwest. I don't think rural America will survive the next depression with the social safety nets gutted: they've literally cut their own parachute lines, so they're going to crash not just fall. But hey -- they saved a few years on taxes, right? Oh... wait... that was billionaires. Nevermind.
- mcguire 9y ago
  But they won't go away when they (we?) crash. And they will likely want to double down on those voting patterns.
  - SomeStupidPoint 9y ago
    Those regions are already evaporating, on the brink of collapse because of their policies: Their kids leave then don't come back and slowly, family by family, whole groups are forced to abandon the region; they're net emigration regions, especially when you count rural versus urban (eg, the pattern becomes clear when you look at Georgia minus Atlanta). Their migrated children tend to be more liberal, as urban populations are in general. Starvation is a wonderful motivator to change social order, and help mix society. Now, I'm not even arguing this is a good thing, but I'm pretty powerless to do much when I consistently vote to help those regions develop new industry and they consistently vote to overrule that. So, I hope they enjoy what they voted for: they won the debate, now they can have their prize.

Gustomaximus 9y ago

What they addressed at the end of the article is the key point to me. There are reduced nations left to fuel the worlds economic engine in a recession. Previously events like 2008 we had India, Middle Eastern and Chinese economies doing massive development, so while the western countries went to recovery mode, the could benefit and hold themselves a bit better from these other nations growth. Today if we hit a trade/financial crisis its likely to spread across the major global economies. African areas and India seem to have ongoing growth potential but I dont see them coming to the rescue. And should a major economy like US have a crisis this could have a global impact compounded further by; 1) The massive global debts being accumulated at personal and state levels pretty much everywhere. This is setting ourselves up for potential contagious failure of our systems. Not just inter country finance but imagine there was significant defaults and how that would spread to pension funds and back into the economy. Small business lending etc. Our globalised and finance heavy economies dont have adequate circuit breakers. Further 2) I suspect developed nations urbanisation will make any significant downturn harder on the masses than previous recessions. In the 1920's you had 30%+ of people on farms. Now you have something like 2%. Back then people could more easily tighten belts and become increasingly self sufficient over a few hard years. Today it would be a significantly more difficult position for the government to manage, both by volume of people that would need full support and back to their indebtedness. This could spell real trouble if the wheels fall off. And given history, the wheels will fall off occasionally. Anyway, I'm not trying to scare or convince people to buy bunkers. I do feel we should demand better long term governance from politicians vs this 'whats gets me in next term' politics we see today. With the tribalism and instant gratification of today's politics it doesn't seem to offer the best hope. But really who knows...

FussyZeus 9y ago
Going along with everything you've said, the fact that the wealthy now control such a vast share of assets and capital is a super not-good thing in the event of a hard recession. Honestly our situation now looks so much like the Roaring 20's, a certain segment of the population getting a shitload of everything, while everyone else goes hungry (and famously, the roaring 20's tapered off nicely and we all came out better- oh no wait, it was the Great Depression and we had to participate in a World War to get out of it). Income Inequality and Lack of Social Mobility are a cancerous tumor growing inside the United States and many other developed countries too. This shit is a powder keg and the wealthy need to realize that if they keep pushing to get that next dollar, eventually all their money isn't going to keep the pitchforks at bay.

nameisu 9y ago

what will happen to bitcoin in recession?

subterfudge44 9y ago

The doomsday articles should be taken with a pinch of salt. Economy by itself has a very good recuperative power because people like to trade and get themselves into better situation. The real thing that worries me more about recession is that a person like Trump might simply try to "fix it" and in the process claiming more power to himself which will make things worse. It is undeniable that Bush's "fix terrorism" and Obama's "fix economy" has proved to be a disaster to both safety and economy.

emodendroket 9y ago

It seems like the main takeaway here is "the social safety net has been deliberately weakened, and now in a downturn people will be more hurt." Well, yes, but in some sense that's the point of weakening the social safety net.

humanrebar 9y ago
> ...in some sense that's the point of weakening the social safety net. It sounds like you're saying people want to hurt poor people. Did you mean that or do you care to elaborate?
- emodendroket 9y ago
  Well, sure, my claim here is that without the threat of being unemployed and destitute it's hard to maintain labor discipline. "Political Aspects of Full Employment" is probably the classic essay outlining the case for this claim.
- eli_gottlieb 9y ago
  >It sounds like you're saying people want to hurt poor people. Well, let me quote some recent news: >Speaking to National Review editor Rich Lowry at an event hosted by the conservative magazine, House Speaker Paul Ryan made the case for the American Health Care Act by presenting it as a once-in-a-lifetime opportunity to cut Medicaid spending. >“We’ve been dreaming of this since I’ve been around,” Ryan says, before interrupting himself to clarify exactly how big of an opportunity this is, “since you and I were drinking out of kegs.” https://www.vox.com/policy-and-politics/2017/3/17/14960358/paul-ryan-medicaid-keg https://www.vox.com/policy-and-politics/2017/3/17/14960358/p... Yes, the current Speaker of the United States House of Representatives wants to hurt poor people. He's been dreaming of it since he was doing keg-stands in college. He said so.
  - mac01021 9y ago
    > the current Speaker of the United States House of Representatives wants to hurt poor people. No. He wants the government to spend less of his money. Maybe he doesn't care whether that means poor people get hurt, but it's not the same thing.

Systemic33 9y ago

Here's an intersting question; Would an economic recession be a boost for Bitcoin, or would it be dragged down? My intuition tells me that Bitcoin would see a surge, as it becomes a stronger pillar of monetary value that crosses country borders, similar to the dollar, but not tied to the US.

zanny 9y ago
Given five years of data on bitcoin prices I think it is a false flag to think any macroeconomic force correlates to bitcoin. Bitcoin is centralized enough, and independent enough, that the real motivator of bitcoin price is the whims of a handful of people who control most of the economy, whatever those whims may be. Often those whims can correlate to shockwaves in the economy or the policies of the US and China trying to stomp out miners or trading but fundamentally they aren't reflective of broad market ideas the way most major stocks are. Bitcoin is much more centralized than traded stocks because its economy is so small and the barrier to entry so high. People keep trying to find the trends in bitcoin, but the active pursuit of trends is what motivates the dominant whales to avoid being predictable.
moduspol 9y ago
That is my feeling as well. I think we got a taste of what will happen with economic certainty in 2008: they'll print more money. And in a situation like that, people will want something with the supply algorithmically constrained like Bitcoin. If nothing else: Even if Bitcoin's "value" stays constant, its value in terms of USD will rise as inflation occurs. I'm not sure what rational case one can make that it would lose value as faith in the US economy gets weaker.
chiph 9y ago
I expect the coin markets to take a hit as well. In a recession, people stop spending to preserve their cash and ride it out. I would expect the weaker coin exchanges to go under for lack of trading activity. As word of this spreads, fewer people will be buying coins for fear of having their coins held by a soon-to-go-under exchange. Lack of demand will then drive exchange rates down.

cubano 9y ago

Isn't prepared to do what exactly? Does The Atlantic think people are just going to lay down and die when it comes? People will deal with it the way they always have of course, by modifying their behaviors to align with current financial realities. I really don't understand the point of article like this.

3pt14159 9y ago
There are systemic shocks that you're sweeping under the rug. If most people in a state is underwater on their house and they declare bankruptcy there is a real economic erosion that occurs. Foreclosed houses get looted, depressed people stop working, already stressed state finances break under the burden of further aid applicants. By saying they'll just "modify their behaviours" you're essentially saying they'll just "go on welfare or become homeless on the street". Most of America is not ready for the next recession, and it is coming at the worst time, when Baby Boomers are starting to strain the retirement and healthcare systems.
- ihsw2 9y ago
  Paradoxically, economic downturns disproportionately affect the economically advantaged. While the medium and lower classes' financial situations don't need to travel very far to reach the bottom, the rich (and super-rich) will see their income and wealth descend a steeper cliff much more violently. Skilled individuals can seek employment (at least until regional supply is exhausted) whereas wealth does not recover so quickly. What can take a generation to build up would be wiped out within a single fiscal year. War and economic recessions/depressions have a tendency to assiduously devour the rich. To be quite honest, war and economic depressions are the best way to reduce income inequality. The old adage of the tree of liberty needing to (regularly) be replenished by blood seems to apply.
ProAm 9y ago
> Does The Atlantic think people are just going to lay down and die when it comes? It's a definite possibility [1] [1] http://www.npr.org/sections/krulwich/2014/06/11/318885533/suicide-rate-in-u-s-and-europe-climbed-during-great-recession http://www.npr.org/sections/krulwich/2014/06/11/318885533/su...

rothbardrand 9y ago

This comment identifies parties responsible for actions, but these actions are taken by democrats and republicans alike, no president in my life time has failed to engage in these practices. This is not a political response. Recessions are not "just how economies work". Recessions and depressions are the product of the monetary shenanigans of the central bank, as laid out well in the Austrians Business Cycle Theory. The short overview is, easy money means government gets to spend and the money creation process includes showering those at the top - wall street banks and government connected entities-- with new money that they are expected to "invest" in the economy. The problem is this is malinvestment and distorts the markets. You can only do it so long and you invariably create bubbles. A recent example of this I have lived thru is the dotcom boom...when it went bust, interest rates were put below the cost of money, and banks were mandated to make bad loans (prudent underwriting of loans was considered "racist" by democrats in the late 1990s so CRA was changed, later analysis showed it wasn't correlated with race after all.) Then under Bush the spigots were really opened and suddenly you have very cheap money to buy houses with. Buying a house with cheap federal reserve money was a form of the carry trade--- where you buy an asset worth X and then pay it back with increasingly lowered value dollars. This resulted in the housing bubble and of course the housing crisis.... which was "fixed" with massive amounts of even more easy money. This money is now going into wall street again, this time into equities, and hedge funds and venture capital. It will eventually bust again. IF you don't have an easy money policy then interest rates follow the supply demand dynamics of a market, and it will self regulate. Even if you don't think it will perfectly regulate itself (and that's true) it will tend to, rather than get way out of whack. What we have now is an economy that is has gotten so out of whack and never been able to properly recover itself by unwinding the last two bubbles.

mjburgess 9y ago
Right, because there were no recessions and depressions before central banking. Oh Wait! They were more frequent and worse. The "government is the source of all economic problems" is a religious myth as wholesale as "satan is the source of all evil, god is the source of all good". > prudent underwriting of loans was considered "racist" by democrats is a myth. Conspicuously missing from this comment is anything about deregulation, nothing about Glass–Steagall. Only euphemistic suggestions that somehow people disagreeing with redlining (and other practices) somehow caused a crash. This view is only possible if you assume any behaviour people partake in a market is the right behaviour and so any adjustment to that must be bad (, and thefore ... euphemism euspemism... crash). No. It is possible to have a financial system which is regulated to minimize perverse financial practices. We should place blame on the legislators who fail to do so and the financiers who act recklessly. Not wink and nodd towards "prudence", by which we mean, a president asking for an end to racist policies is more severe than deregulating the banks.

liberte82 9y ago

Why don't we just flag this article too along with all the others, if it's too unpleasant to think about?