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A recession is inevitable if one looks at the state of average people and certain economic facts. Eventually a domino will fall. 1. Consumer debt is at an all

A recession is inevitable if one looks at the state of average people and certain economic facts. Eventually a domino will fall. 1. Consumer debt is at an all time high. 2. Consumer savings rates are lower than the mid 2000's and ~35% of adults could not handle a $400 emergency. 3. Inflation is eating already low wage growth. 4. Soaring rental prices for homes 5. High home prices 6. business consolidation and Ch. 11's are up 63% Sources: https://www.americanbanker.com/news/consumer-debt-is-at-an-all-time-high-should-banks-be-worried https://www.americanbanker.com/news/consumer-debt-is-at-an-a... https://www.businessinsider.com/rental-prices-are-soaring-around-the-us-2018-7 https://www.businessinsider.com/rental-prices-are-soaring-ar... https://www.businessinsider.com/chapter-11-bankruptcies-are-up-63-from-a-year-ago-2018-4 https://www.businessinsider.com/chapter-11-bankruptcies-are-...

geezerjay 8y ago
> and ~35% of adults could not handle a $400 emergency. That is observed in the US, but in some european countries the outlook is even more bleak. Sovereign and consumer debt is skyrocketing and governments are considering growth rates below 2% to be an economic boom.
gdubs 8y ago
There's been a flashing indicator light in the subprime auto loan sector for a while now: https://www.bloomberg.com/news/articles/2018-02-02/never-mind-defaults-debt-backed-by-subprime-auto-loans-is-hot https://www.bloomberg.com/news/articles/2018-02-02/never-min...
nostromo 8y ago
A number of your indicators are signs of a booming economy. Rents go up when people can afford higher rents. Consumers take out loans and save less when unemployment is low and they feel safe in their job prospects. Inflation was below healthy rates for a number of years, and is now where the Fed likes it. Wages aren't booming, but they're up, and up more than inflation. Chapter 11s were at the same level in 2011 -- were you predicting a recession then too? There are also reasons to be optimistic, for example, US corporate earnings are way up -- 2018 is up 20% over 2016 alone -- that's huge. https://tradingeconomics.com/united-states/corporate-profits https://tradingeconomics.com/united-states/corporate-profits I think that the article is right: while the US seems very healthy, there are lots of international issues that could form the next recession (China specifically).
- Diggity 8y ago
  Speaking from this space, everyone I see on my end is paying higher rents but it is eating into their ability to save and forcing them to consume less. Wage increases exist but are coupled with moves to riskier companies.
- zeroname 8y ago
  > Rents go up when people can afford higher rents. Only if supply is capped artificially, e.g. in major cities where it's almost impossible to build. > Consumers take out loans and save less when unemployment is low and they feel safe in their job prospects. Other reasons to take out loans: The wealth effect (currently fully in force), cheap loans (record low interest), easy loans (no risk assessment), outright stupid loans (US student loans) or loans that are necessary to make ends meet. All signs of a market overheating. > Chapter 11s were at the same level in 2011 -- were you predicting a recession then too? There was no reason to predict it when it had already just happened.
  - nwah1 8y ago
    It goes up regardless of building restrictions in a booming economy, but restrictions can make it worse. This is called the Law of Rent. Land prices function like monopoly prices, and rise whenever the value obtainable from the location rises compared to the best available rent-free alternative. Seeing how there's usually no rent-free alternatives, prices tend towards the entire value obtainable from the location for an average consumer. For instance, the value of the location may be money and time saved on commuting. You'll generally find that the money and time you save on commuting about equals the higher land rents, netting out to no monetary benefit between the two options.
    - zeroname 8y ago
      The Law of Rent is about the cost of leasing the land from the owner of the land. This is not the relationship between tenant and the owner of the real estate. It's not the tenant who is looking for maximum productivity from the land, it's the real estate owner renting out places to live. A tall tower housing more people paying individually lower rent is more productive than a small house housing a single affluent person. Unless building is restricted artificially, supply increases until demand is met fully, which leads to price competition and ultimately rents that are as low as they can be.
wafflesraccoon 8y ago
Slight correction here. According to the Report on the Economic (2015), only 31% of the people responded stated that they could not cover the expense. It should also be noted that 46% of the total respondents said that they would have a hard time paying the $400. Page 22: https://www.federalreserve.gov/2015-report-economic-well-being-us-households-201605.pdf https://www.federalreserve.gov/2015-report-economic-well-bei...
iamaelephant 8y ago
This is a very American perspective. The article is talking about a global recession.
rb808 8y ago
Recessions are a normal part of the economic cycle. In most developed countries there is one every 6-10 years, so of course one is inevitable.
- lihaciudaniel 8y ago
  Can you elaborate why?
hyperpape 8y ago
So, it appears that this has a bit to do with how you slice things. A few days ago, a commenter published several debt related indicators which are far better than they were prior to the 2008 crash: https://news.ycombinator.com/item?id=18177141 https://news.ycombinator.com/item?id=18177141. I think it might be a product of low interest rates, but I'm not entirely sure.

geezerjay 8y ago

> and ~35% of adults could not handle a $400 emergency. That is observed in the US, but in some european countries the outlook is even more bleak. Sovereign and consumer debt is skyrocketing and governments are considering growth rates below 2% to be an economic boom.

gdubs 8y ago

There's been a flashing indicator light in the subprime auto loan sector for a while now: https://www.bloomberg.com/news/articles/2018-02-02/never-mind-defaults-debt-backed-by-subprime-auto-loans-is-hot https://www.bloomberg.com/news/articles/2018-02-02/never-min...

nostromo 8y ago

A number of your indicators are signs of a booming economy. Rents go up when people can afford higher rents. Consumers take out loans and save less when unemployment is low and they feel safe in their job prospects. Inflation was below healthy rates for a number of years, and is now where the Fed likes it. Wages aren't booming, but they're up, and up more than inflation. Chapter 11s were at the same level in 2011 -- were you predicting a recession then too? There are also reasons to be optimistic, for example, US corporate earnings are way up -- 2018 is up 20% over 2016 alone -- that's huge. https://tradingeconomics.com/united-states/corporate-profits https://tradingeconomics.com/united-states/corporate-profits I think that the article is right: while the US seems very healthy, there are lots of international issues that could form the next recession (China specifically).

Diggity 8y ago
Speaking from this space, everyone I see on my end is paying higher rents but it is eating into their ability to save and forcing them to consume less. Wage increases exist but are coupled with moves to riskier companies.
zeroname 8y ago
> Rents go up when people can afford higher rents. Only if supply is capped artificially, e.g. in major cities where it's almost impossible to build. > Consumers take out loans and save less when unemployment is low and they feel safe in their job prospects. Other reasons to take out loans: The wealth effect (currently fully in force), cheap loans (record low interest), easy loans (no risk assessment), outright stupid loans (US student loans) or loans that are necessary to make ends meet. All signs of a market overheating. > Chapter 11s were at the same level in 2011 -- were you predicting a recession then too? There was no reason to predict it when it had already just happened.
- nwah1 8y ago
  It goes up regardless of building restrictions in a booming economy, but restrictions can make it worse. This is called the Law of Rent. Land prices function like monopoly prices, and rise whenever the value obtainable from the location rises compared to the best available rent-free alternative. Seeing how there's usually no rent-free alternatives, prices tend towards the entire value obtainable from the location for an average consumer. For instance, the value of the location may be money and time saved on commuting. You'll generally find that the money and time you save on commuting about equals the higher land rents, netting out to no monetary benefit between the two options.
  - zeroname 8y ago
    The Law of Rent is about the cost of leasing the land from the owner of the land. This is not the relationship between tenant and the owner of the real estate. It's not the tenant who is looking for maximum productivity from the land, it's the real estate owner renting out places to live. A tall tower housing more people paying individually lower rent is more productive than a small house housing a single affluent person. Unless building is restricted artificially, supply increases until demand is met fully, which leads to price competition and ultimately rents that are as low as they can be.

wafflesraccoon 8y ago

Slight correction here. According to the Report on the Economic (2015), only 31% of the people responded stated that they could not cover the expense. It should also be noted that 46% of the total respondents said that they would have a hard time paying the $400. Page 22: https://www.federalreserve.gov/2015-report-economic-well-being-us-households-201605.pdf https://www.federalreserve.gov/2015-report-economic-well-bei...

iamaelephant 8y ago

This is a very American perspective. The article is talking about a global recession.

rb808 8y ago

Recessions are a normal part of the economic cycle. In most developed countries there is one every 6-10 years, so of course one is inevitable.

lihaciudaniel 8y ago
Can you elaborate why?

hyperpape 8y ago

So, it appears that this has a bit to do with how you slice things. A few days ago, a commenter published several debt related indicators which are far better than they were prior to the 2008 crash: https://news.ycombinator.com/item?id=18177141 https://news.ycombinator.com/item?id=18177141. I think it might be a product of low interest rates, but I'm not entirely sure.