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Do people remember the "taper tantrum" or the correction in 2016? A curve inverted then (2016) too, and there was a lot of market volatility. There were even

Do people remember the "taper tantrum" or the correction in 2016? A curve inverted then (2016) too, and there was a lot of market volatility. There were even calls that "we're due for a recession!" https://blogs.wsj.com/moneybeat/2016/02/03/the-yield-curve-inverted/ https://blogs.wsj.com/moneybeat/2016/02/03/the-yield-curve-i... Then in 2017 and 2018 we saw record profits, low unemployment, and general economic gains all around.

peteradio 7y ago
All while taking on massive governmental debt.
- vkou 7y ago
  This is false. [1] The federal debt/gdp ratio has hardly changed in the past few years. The state + local government debt/gdp ratio has declined substantially over the last few years. The government, as a whole, is paying its debts down (Or not expanding them, as the economy expands around it.) If there's too much money sloshing around, it's not because Uncle Sam opened the checkbooks. It's because interest rates are near-zero. [1] https://www.usgovernmentdebt.us/state_debt https://www.usgovernmentdebt.us/state_debt
jfengel 7y ago
Well, "record profits, low unemployment, and general economic gains" are precisely what happens before a recession. That's not to say that they're indicators of an immediate recession, but that's just the nature of the boom and bust cycle. If the profits were low and unemployment were high, then we're already in a recession. They always do well when the economy is overheating, and gains are driven by paper rather than real-world value. At some point people chicken out, cash in their paper gains, and you have a bust. And then the cycle repeats. That cycle has happened dozens of times, and at some point in the cycle people start saying, "No, this time we've figured out how to keep things even, the gains are all real, and we'll never have a bust again." And then there's a bust... though when, exactly, is hard to forecast. Just beware of "this time it's different" talk: maybe this time it is, but it has a lousy track record.
the-dude 7y ago
This reminds me of a 'myth' I have heard about ICEs ( internal combustion engines ) : the minutes before they blow, they run really really nice.
- EpicEng 7y ago
  "everything works until it doesn't". That's true, but not terribly useful advice.

peteradio 7y ago

All while taking on massive governmental debt.

vkou 7y ago
This is false. [1] The federal debt/gdp ratio has hardly changed in the past few years. The state + local government debt/gdp ratio has declined substantially over the last few years. The government, as a whole, is paying its debts down (Or not expanding them, as the economy expands around it.) If there's too much money sloshing around, it's not because Uncle Sam opened the checkbooks. It's because interest rates are near-zero. [1] https://www.usgovernmentdebt.us/state_debt https://www.usgovernmentdebt.us/state_debt

jfengel 7y ago

Well, "record profits, low unemployment, and general economic gains" are precisely what happens before a recession. That's not to say that they're indicators of an immediate recession, but that's just the nature of the boom and bust cycle. If the profits were low and unemployment were high, then we're already in a recession. They always do well when the economy is overheating, and gains are driven by paper rather than real-world value. At some point people chicken out, cash in their paper gains, and you have a bust. And then the cycle repeats. That cycle has happened dozens of times, and at some point in the cycle people start saying, "No, this time we've figured out how to keep things even, the gains are all real, and we'll never have a bust again." And then there's a bust... though when, exactly, is hard to forecast. Just beware of "this time it's different" talk: maybe this time it is, but it has a lousy track record.

the-dude 7y ago

This reminds me of a 'myth' I have heard about ICEs ( internal combustion engines ) : the minutes before they blow, they run really really nice.

EpicEng 7y ago
"everything works until it doesn't". That's true, but not terribly useful advice.