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It’s Official: This Is Now the Longest Economic Expansion in US History
- rhacker 7y agoMoney is strange, right? It literally doesn't exist yet it can run out and cause entire nations to go into chaos. Since it is literally a sociological experiment, are we going to get to the point where we fine tune the allotment such that we disable down-turns? It's almost as if we simply just get angsty all at once, see a global therapist and the economy recovers.
- YinglingLight 7y agoPersuasion is the most powerful force in the world. You can literally create money out of nothing, if you can persuade the masses of an optimistic future.
- b_tterc_p 7y agoIt doesn’t run out. It just gets stuck.
- jcims 7y agoI'm sure someone has come up with a better analogy, but dollars are like electrons, they only do work when they move. I was looking at some other HN thread a while back and there was someone talking about how a subscription model works much better for investors because the regularity of returns worked best with expectations from the investors. And it occurred to me at that time that this electric analogy might extend to impedance matching between investor and investee...with the best matched networks operating the most efficiently. (And of course, if you can develop an investment model that matches underserved opportunities you might find a way to make some money.)
- basilgohar 7y agoUpvoting because, to be honest, the moving electrons/moving dollars analogy works really well for me, and especially I think that's a useful analogy. For a society, in general, dollars sitting idle in a bank account instead of being spent on something constructive or services where someone is getting paid for work or something of utility is being built/created are not, from my perspective, useful to that society. Sure, someone's balance sheet might be achieving larger-and-larger numbers, and that serves their own purposes, but not those of greater society.
- Anon1096 7y agoIf you think money is just sitting in a bank account then you misunderstand how the economy works. Money in a bank gets reinvested by the bank and funds loans, mortgages, and credit. The only money that isn't moving is dollars literally stuffed under a mattress and what the bank keeps on hand to fulfill reserve requirements.
- b_tterc_p 7y agoSort of. Banks want to loan out money. But when consumer spending drops, they loan out less. In a recession there is more risk, so it’s harder to find profitable loans to make. The money does get stuck.
- cheez 7y agoBefore the 2008 GFC, Bernanke said something like recessions are in the past. Or that they had "solved" economics.
- m0llusk 7y agoIt is not possible to disable downturns. It sounds different if framed as the longest economic bender in history. The hangover is likely to be brutal. Alternatively one might argue that what is happening is a kind of bifurcation. The wealthy and well measured get an ongoing expansion while the poor, shiftless, and unrecorded fall through the cracks at alarming rates. We didn't have homeless families in significant numbers when I grew up and now they are pervasive. That is pretty poor real performance for a best ever economy.
- not_a_cop75 7y agoBy that same logic, you might also argue it's not possible to stifle success. The very formation of the central bank was (besides self enrichment) made to stabilize the economy. So in that sense you're quite wrong.
- sjg007 7y agoRight, the fix would be some form of govt regulation to break the bifurcation or maybe more social net support.
- whb07 7y agoit was the government that caused this in the first place. I always wonder why people suggest this, when the "cure" to the ailment is more of the disease.
- sjg007 7y agoRandian economics is not a solution.
- whb07 7y agoAll this "growth" is largely driven by the debt and grand wisdom of the Fed's monetary policy. Those closest to the money printing press get undiluted gains and by the time that money circulates back down to the general population, they are robbed from their wealth by devaluing the currency. Furthermore, looking at the money supply, the banks aren't actually distributing and lending out that capital like they should. Long story short this is a direct causation of government policy.
- sjg007 7y agoSure, it’s a herd effect. Investors pull their money and consumers spend less. This reinforces itself until the govt injects money via a stimulus or bailout.
- fxj 7y agoMoney is just a promise. You promise that you do something for somebody and in exchange you get money which you can convert to another promise. In the end it depends on the reliability of the people who use it whether money exists or dissolves into a broken promise. At the moment the promises are high. We will see whether they can be fulfilled. https://www.investopedia.com/terms/t/trumpflation.asp https://www.investopedia.com/terms/t/trumpflation.asp
- dahart 7y agoMoney is strange, indeed. But disabling downturns might be something we don’t want. From the article: “Recessions are a healthy, necessary part of the economic cycle. They keep investors, businesses, and households disciplined. They remove overcapacity and make room for innovation and evolution. The US has endured 42 recessions and five depressions since the 1780s. The US economy recovered from every single one, returning to growth within an average of roughly one and a half years. That includes the 39 recessions and depressions that proceeded the establishment of the Federal Reserve in 1913, and the 20 that occurred when the US had no central bank at all. The eras of the most robust growth in American history have been punctuated by frequent recessions, not long stretches without them.” I like the analogy of getting ansgty all at once and seeing the therapist. I probably wouldn’t characterize down-turns as money running out, though. This might be what you meant, but the money doesn’t run out per se, recessions are more like angst leading to shyness, it’s less activity rather than less money. If the money actually ran out, I imagine the chaos might be a lot bigger than we’ve ever seen.
- fxj 7y agoRunning out of money is what happens when a company goes bankrupt. Which happens more often during recessions.
- josephdviviano 7y agoYes Japan is a perfect example. Having low rates for a long time has given rise to a lot of companies that are frankly non-competitive and would fail immediately if interest rates were raised. Consumers do not win because the quality of these companies are low. https://asia.nikkei.com/Economy/Loose-lending-keeps-Japan-s-zombies-shambling-along https://asia.nikkei.com/Economy/Loose-lending-keeps-Japan-s-...
- astazangasta 7y agoThis is idiotic. We don't need a recession to clear detritus from the economy, that should be the result of routine investment. We get recessions because the economy as a whole overcommits to speculation because investors have too much money and too little sense. This is unnecessary, as thw Great Moderation shows. https://en.m.wikipedia.org/wiki/Great_Moderation https://en.m.wikipedia.org/wiki/Great_Moderation
- blts 7y agoMoney is quite simple - it is the accumulation of value of individual work. The same way batteries store electricity - money store value of work. The same way batteries exchange stored electricity to perform work, money is exchanging stored value to work of others that we desire.
- Excel_Wizard 7y agoThe Labor Theory of Value is a fun toy model, but it isn't very accurate.
- Nasrudith 7y agoYeah even putting aside demand (just because someone spent 50 years making one really good vase doesn't mean 50 years of pottery wouldn't be better even if the potter had to dredge all of the clay themselves instead of using apprentices or hired servants) it has been obviously broken since the Industrial revolution at least but had predecessor cases that pointed out it wasn't true. Aquaducts or irrigation canals alone snap it in half. It goes from "effort to haul X ammount of water Y distance by N people" to "and it just flows after this constant work".
- blts 7y agoYou mistakenly equate effort with value.
- randallsquared 7y agoThey're explicitly arguing against equating effort (labor) with value.
- yehaaa 7y agoWhy? A 100 dollar bill, is a reciept that promises to buy you 100 dollars worth of value. Previously that value was tied to gold, but now it’s a more flexible notion.
- asmodeus666 7y ago
- sausman 7y agoI’m not sure all types of money have this characteristic, but debt-based money in a fractional reserve banking system certainly seems to. The banks are perpetually insolvent because the time structure of their assets (loans) doesn’t match the time structure of their liabilities (“deposits”). At any time a bank run can bring them and the entire economy down. Sure, the government guarantees their deposits, but AFAIK they don’t provide anywhere near enough insurance. Not to mention the moral hazard it creates for banks to act recklessly. It’s been a while since I read up on the topic, but the origins of fractional-reserve banking sound a lot like fraud that got blamed on the hard money that exposed it. (https://www.amazon.com/dp/1933550287 https://www.amazon.com/dp/1933550287)
- empath75 7y ago> It literally doesn't exist yet it can run out and cause entire nations to go into chaos. Since it is literally a sociological experiment, are we going to get to the point where we fine tune the allotment such that we disable down-turns? The idea isn't to disable them but make them less drastic. There will always be misallocations of resources that need to be corrected.
- ls612 7y agoThink of the economy like a forest and downturns like a forest fire. The downturns (fires) are a necessary part of the lifecycle of the economy (forest) since they remove inefficient or incompetent companies and reallocate their resources for better uses (burn away the driest and dead wood and fertilize the ground for new saplings)
- rjtavares 7y agoAnd like forest fires, sometimes people suffer and even get killed dy downturns. We should try to avoid that instead of the fire itself.
- jganetsk 7y ago> yet it can run out and cause entire nations to go into chaos. Since it is literally a sociological experiment, are we going to get to the point where we fine tune the allotment such that we disable down-turns? Yes. Money comes into existence ex nihilo. There are trillions of USD in existence today, but the dollar has only existed since 1792. They came into existence by the power of the government printing press. We can "run out" in the sense that we don't have sufficient dollars in circulation, which is a very severe problem, but the solution can be summarized in a simple way: have the government create more money. And how does the government create more money? By spending it into existence. https://www.vox.com/future-perfect/2019/4/16/18251646/modern-monetary-theory-new-moment-explained https://www.vox.com/future-perfect/2019/4/16/18251646/modern...
- api 7y agoIs it real growth or just inflation showing up primarily in asset prices? At the street level it looks as if some recovery has occurred, but you certainly can't compare it to the "roaring 90s." The average person has not felt much of this.
- tryptophan 7y agoBoth contribute to higher prices. Corporate profits are up a ton too, over the past 5 years.
- yehaaa 7y agoHow much of the expansion comes from borrowed money though?
- mmargerum 7y agoWonder how long it would continue if we stopped injecting a trillion dollars a year into the system.
- dalbasal 7y agoI think that GDP (and therefore inflation) don't actually measure what they used to. You can measure the number of cars being produced and houses built. It doesn't really matter how you quantity value the value of a 1999 vw golf relative to the 2019 model. Once iphones, Google, Spotify & such get thrown into the mix... GDP just doesn't tell us much about how economic output has changed over the last 20 years. For the average person, I think we need to think in different terms. Housing, education, transport, consumables and manufactured goods & services. Generally I feel the trend (in Europe, at least) has been to big gains in the latter categories and stagnation/negative growth in the former. Housing affordability has gotten worse. Transport has gotten more expensive. Education has gotten more expensive (both for students and in total) and is "worse" in terms of leading to predictable career/income outcomes... a key decision-driver of education choices. Meanwhile consumables (food, washing detergent) have gotten cheaper. Manufactured goods (furniture/iphones) have gotten way better/cheaper. Services are a mixed bag (financial services dragging the whole category down). These categories are generally not fungible. No reductions in the price of food or iPhones (not even free) will help make housing more affordable. GDP... I'm not sure what it really measures anymore. It's become totally abstract. Meaningful within models but not indicative of anything about the world. I think it had meaning 40 years ago, but the etherealization of the economy ate it. All that said... Uniquely low GDP growth relative to high S&P returns. Picketty is probably going nuts.. in soft spoken French.
- ttoinou 7y agoI'm not sure what it really measures anymore What makes you think it has been at least once meaningful ?
- dalbasal 7y ago..the stuff it measured. Deltas in manufacturing volume. More steel = more GDP. More refrigerators = more GDP. There were always ambiguities. More lawyer fees = more GDP? Questionable. But... The portion of simple more=more economic outputs has really shrunk relative to the ambiguous ones where more<>more or price=0 or whatnot.
- bryanlarsen 7y ago
- pessimizer 7y agoOf course a less deceptive way to refer to it is as the slowest recovery from a recession in US history.
- logfromblammo 7y agoUsername checks out. Though to be even more pessimistic, the finance wizards have finally rediscovered how to create a permanent recession at the bottom of the economy, and a permanent expansion at the top, so as to multiplex the business cycle over the class gradient, rather than over time. Reagan economics yields to Antoinette economics.
- apo 7y agoQuantitative easing is a powerful drug. During the 2008 crisis, most observers didn't even seriously consider the possibility that the Fed could buy long-term treasuries and mortgage securities. Those who did vastly underestimated the scale on which the Fed would eventually do so. But QE is also highly addictive. The next downturn will most likely take place within the next 18 months. It's going to catch a lot of dumb money flat-footed, and that means big declines in the stock market - something that has now become simply not acceptable politically. There's one more piece of candy in the jar though: negative interest rates. Where the Fed decides to go with short term rates isn't really that important anymore. Far more important is how it begins to lay the groundwork for negative rates. Because negative interest rates will transform the grossly distorted world economy into something completely unrecognizable.
- helen___keller 7y ago>negative interest rates will transform the grossly distorted world economy into something completely unrecognizable Can you elaborate on this? I thought Japan had negative interest rates for quite a while
- sdfsaf 7y agoAnd they've been economically dying for almost 30 years.
- Descartes1 7y agoNegative rates are nothing other than a complete failure of the financial system. If we go there it's the beginning of a very dark, very oppressive era. Crypto and metals will shoot the moon. And shadow economies will sprout under every rock.
- thatfrenchguy 7y agoBetween the stock market going much higher than the actual growth, the post-2008 inequality issues, the student debt disaster, the high risk from oil companies being valued trillions of dollars and everyone being in passive investing, I’m fascinated to see what the next crisis will be.
- RickJWagner 7y agoI read somewhere the record belongs to Australia, with a 27 year expansion. In that light, the US economy could go quite a while longer. I hope it does.
- bradknowles 7y agoIt’s only the longest expansion in history, if you define expansion to being grabbed by the pussy and kicked in the teeth.