5 ms·

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

by spodek 9y ago

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.
FussyZeus 9y ago
Economies bounce. Boom and Bust cycles have been with us since the beginnings. The lack of regulation though and the rolling back of financial policies in the last few years have created an environment where a whole lot of people are in a whole lot of risk that they themselves aren't entirely responsible for, and haven't agreed to. If the next Bust goes as badly as some are saying, that could be the death knell of Fiat currency. This isn't the first time it's been mismanaged to a degree bordering on straight insanity, and it probably won't be the last either.
- mcguire 9y ago
  "...the death knell of Fiat currency." Could someone enlighten me as top the end game? I mean, after the world economy collapses into a sink hole big enough to destroy the confidence in all national currencies?
- pault 9y ago
  How would a commodity backed currency fare better than fiat in an economic depression?
speby 9y ago
Maybe but that also assumes economies can actually be prepared for recessions. For starters, that means knowing what pieces of the economy are in a state that could trigger massive sell-offs and value destruction. Remember that the housing bubble that led up to 2008 wasn't well-known. Granted, there were economists who were publicly saying a recession was imminent (and they weren't wrong), however they were outnumbered compared to those who were saying otherwise. How does one get prepared in those situations? Tin foil hat, perhaps, and then pray?
- mcguire 9y ago
  The first line of defense has been to lower interest rates. That can't happen currently. A second line is to increase government spending. That seems unlikely. The article notes that we have been reducing back-ups like food stamps and Medicaid. It would take time and political will to restore those.
- mywittyname 9y ago
  Save money. Which is, I believe, the crux of this article's argument: people do not have enough cash on hand to weather the storm.
  - peoplewindow 9y ago
    Yes, but that's a direct consequence of Fed policy from the last two recessions. What we really need is to get the Fed out of monetary policy entirely.
    - mywittyname 9y ago
      I'm not sure I agree. The personal savings rate in the US is directly correlated with age. With Boomers having the highest rate of savings and Millennials having the lowest. Additionally, it fell from over 7% in 2013 (where it spiked briefly above 10%) to just 3% today. But during that time, there's been no real change in Federal Reserve policies. https://tradingeconomics.com/united-states/personal-savings https://tradingeconomics.com/united-states/personal-savings If I had to bet, I'd say stagnant wages are the cause.

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

by 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.

FussyZeus 9y ago

Economies bounce. Boom and Bust cycles have been with us since the beginnings. The lack of regulation though and the rolling back of financial policies in the last few years have created an environment where a whole lot of people are in a whole lot of risk that they themselves aren't entirely responsible for, and haven't agreed to. If the next Bust goes as badly as some are saying, that could be the death knell of Fiat currency. This isn't the first time it's been mismanaged to a degree bordering on straight insanity, and it probably won't be the last either.

mcguire 9y ago
"...the death knell of Fiat currency." Could someone enlighten me as top the end game? I mean, after the world economy collapses into a sink hole big enough to destroy the confidence in all national currencies?
pault 9y ago
How would a commodity backed currency fare better than fiat in an economic depression?

speby 9y ago

Maybe but that also assumes economies can actually be prepared for recessions. For starters, that means knowing what pieces of the economy are in a state that could trigger massive sell-offs and value destruction. Remember that the housing bubble that led up to 2008 wasn't well-known. Granted, there were economists who were publicly saying a recession was imminent (and they weren't wrong), however they were outnumbered compared to those who were saying otherwise. How does one get prepared in those situations? Tin foil hat, perhaps, and then pray?

mcguire 9y ago
The first line of defense has been to lower interest rates. That can't happen currently. A second line is to increase government spending. That seems unlikely. The article notes that we have been reducing back-ups like food stamps and Medicaid. It would take time and political will to restore those.
mywittyname 9y ago
Save money. Which is, I believe, the crux of this article's argument: people do not have enough cash on hand to weather the storm.
- peoplewindow 9y ago
  Yes, but that's a direct consequence of Fed policy from the last two recessions. What we really need is to get the Fed out of monetary policy entirely.
  - mywittyname 9y ago
    I'm not sure I agree. The personal savings rate in the US is directly correlated with age. With Boomers having the highest rate of savings and Millennials having the lowest. Additionally, it fell from over 7% in 2013 (where it spiked briefly above 10%) to just 3% today. But during that time, there's been no real change in Federal Reserve policies. https://tradingeconomics.com/united-states/personal-savings https://tradingeconomics.com/united-states/personal-savings If I had to bet, I'd say stagnant wages are the cause.