23 ms·

Everyone serious knew that a trade war would set a recession in motion, and that it would be a trade war the US would lose because of the directionality of the

Everyone serious knew that a trade war would set a recession in motion, and that it would be a trade war the US would lose because of the directionality of the trade. The thought has always been that the president was using a high leverage negotiating strategy (see https://www.newyorker.com/news/news-desk/for-trump-diplomacy-is-quite-literally-a-four-letter-word https://www.newyorker.com/news/news-desk/for-trump-diplomacy..., for example) to extract maximal concessions from PRC. But in the end, most of the people involving in mid and long range investment decisions thought that they could model him as a rational actor. What we are seeing is the investment community's realization this might not be true. You can look for many recent examples of shifts in investment activity (https://www.autoblog.com/2019/08/13/ford-gm-preparing-for-economic-downturn/ https://www.autoblog.com/2019/08/13/ford-gm-preparing-for-ec...).

tlogan 7y ago
And things will be worse because China is also heading into recession. You know, you need sell all these products to somebody... And when US consumer stops buying new iPhones (or what ever) combined with recession then situation is going be really really tough. So this will be worse that 2008. Much worse. Back in 2008, China was growing and helping to ease the recession. I do not think China's economy will grow during this cycle.
- throwaway5752 7y ago
  The Fed does not have the tools at its disposal that it did in 2008, they have been exhausted. The leadership on either side of the 2008 transition was much better at every level. Also, 2008 was a balance sheet depression that was more tractable to fix with monetary approaches. What is happening, right now, is literally what happened in the Great Depression (with the concurrent reemergence of nationalism) and is what led to two back-to-back world wars https://www.dartmouth.edu/~dirwin/Eichengreen-IrwinJEH.pdf https://www.dartmouth.edu/~dirwin/Eichengreen-IrwinJEH.pdf
  - adventured 7y ago
    > The Fed does not have the tools at its disposal that it did in 2008, they have been exhausted. That hasn't been exhausted even in the slightest. The Fed has the exact same tool at its disposal as it did in 2008: it controls the global reserve currency and can run an annual trillion dollar QE program for years as necessary, forcing the rest of the world to partially foot the bill of that QE program to the benefit of the US economy. The Fed took rates to zero for seven years and utilized multiple QE rounds to reinflate the economy and asset prices. The same exact approach is at its disposal heading into the next recession.
    - throwaway5752 7y ago
      Maybe I'm a crazy for taking the state of the fed funds rate, the budget deficit, and the Fed's balance sheet into account? We can print money, but so far the USD hasn't reflected any sort of consequence for that. They can do a QE program, but will other actors accept the implicit loss on their treasury holdings? I can think of one major player there that is a lot less likely to do so now.
      - dageshi 7y ago
        What can the chinese do exactly? Sell all their USD treasuries? Sure, but what do they do with the money then? The only other currency big enough to absorb those kind of flows is the euro which would spike the euro exchange rate with the dollar to extremely painful levels for the EU, probably causing a deep recession in the EU but doing nothing to the US.
        HillaryBriss 7y ago
        > Sell all their USD treasuries? Last I read they were only holding about 1 trillion in USD treasuries. Selling all of that would not inflict much damage on the US economy or government. If there's one superior skill the US Treasury and US Fed have it's selling/buying even more massive amounts of debt than that. Markets are used to it. So, a $1 trillion dollar bond sale event might hurt for a short while, but it wouldn't really be all that heavy.
- vpribish 7y ago
  much worse than 2008 how? Global debt markets nearly collapsed and the single largest investment of american consumers crashed. You are making a really bold claim there and it looks like cheap catastrophizing.
  - adventured 7y ago
    I think the next recession will be modest compared to 2008, comparatively shallow in all regards (including job losses). The recovery is going to involve drawn-out weak economic performance, elaborate growth stagnation, that will frustrate central banks as they attempt to stimulate and reinflate. We'll see aggressive front-run Fed & global central bank action. As opposed to 2007-2009, which frequently saw the Fed running from behind to catch up to a very severe implosion. The Fed regularly utilizing QE programs the last time around was quite novel. This time it'll be used very early on and aggressively as a normalized tool of fighting a recession (for better or worse). The recession will be weak, the recovery will be weak. The repeating behavior and stacking debt is resulting in lower dynamism in all regards. We've already seen all of this: Japan showed us exactly how it works, why (government debt), and how it cycles toward increased stagnation, perma low rates and low inflationary pressure. The overly dramatic doom predictions are merely making the perceived easy call, and piggyback riding on what happened in 2008. A repeat, much less something worse, is not what we're going to see at all.
  - dv_dt 7y ago
    If you read Ray Dalio, he seems think think the next recession will be a "debt supercycle" which could be worse than 2008. (this could be him plugging his hedge fund, but he's semi retired, and really has no more money needed to make personally) Note also that recessions have been growing longer each cycle. IMHO it's related to the bottom 99% having been getting paid smaller and smaller portions of wealth, and so a base resiliency of economies become weaker each cycle.
    - tunesmith 7y ago
      It's hard to follow his reasoning sometimes. Sometimes it seems like he's saying that we already went through the debt supercycle, or the end of the long-term debt cycle and we've already gone through the reflation period. But other times it sounds like he's saying the real "big one" is still about to happen, rather than just another recession.
- dageshi 7y ago
  It certainly won't be worse than 2008. 2008 was a financial crisis, core parts of the banking system were suspect, nobody knew who they could trust or who was solvent and worse nobody had a clue how to solve it for a dangerously long period of time. The financial system is not in that same position this time and as for China, China's growth is largely kept to china itself and guarded jealously, China did little or nothing to ease the 2008 financial crisis for the west.
  - throwaway5752 7y ago
    The structural deficits in the US economy are financed - at low rates, at least - by trade deficits and currency surpluses with our trade partners. Recent tax policy changes have drastically increased the size of the US budget deficit. This was probably going to come to a head at some point anyway for a lot of reasons, but I disagree with you this won't be as bad as 2008.
  - hasitchanged 7y ago
    > core parts of the banking system were suspect, nobody knew who they could trust Serious question - how has that changed? It looks to me like since about 2009 banks have been trying very hard to get back to the same shenanigans they were pulling before 2008, and are mostly succeeding. They were given the message that, "Hey - you're too big to fail. Uncle Sam's got your back, and there will be no consequences for the people at the top. Do whatever you need to do!"
    - intuitionist 7y ago
      The incentives still aren’t great, it’s true. But a lot of things are better. The Volcker rule discourages investment banks from making big directional bets with shareholder money, and the Fed stress tests force them to regularly consider and mitigate downside risks. Both of these things are gameable but at the same time have real effects. Also, like, Lehman Brothers collapsed in 2008, and Bear Stearns and Merrill Lynch both got sold at fire sale prices. Shareholders don’t want those risks, and even if managers are too insulated from financial consequences of a collapse they probably care about reputational risks as well.
- streetcat1 7y ago
  It would not be worse than 2008. since what happen in 2008 is known, by definition it is already prepared for and backed into global risk assessments. It can only get worse if there is something that was NOT present in 2008 will manifest itself.
  - throwanem 7y ago
    A parallel recession in China, for example.
    - streetcat1 7y ago
      Sure. But this might also be baked in. In 2008, you had a major failure (within days) of Lehaman Brothers and some major financial institutions, all were a complete surprise. A recession in china (controlled recession) might actually be a good thing overall.
- dionian 7y ago
  Which would indicate that US will have a massive amount of leverage to renegotiate trade
- AlexCoventry 7y ago
  > you need sell all these products to somebody. I've heard that the US mostly sells stuff to itself, i.e., trade is a relatively small component of its GDP. I haven't looked into it, yet, though.
- zanny 7y ago
  > So this will be worse that 2008. 2008 was bad because the collective banks of the US realized trillions in mortgages were money on the books that wasn't real and was never going to be real. The correction involved resetting said books and taking a few banks and a trillion dollars of US taxpayer money along the way. What is the correction this time? All it would really be is a run on confidence in global financial markets. This has happened many, many times (and did happen in 2008 but it was a response to the insolvency of banks). It happened in 2000, it happened in 1993, it happened in 1980, etc. If its just a correction in overvalued stocks, futures, and a contraction in loans and interest rates thats just a normal recession. We're due to have one, they happen all the time, and since there shouldn't be an influx of millions of displaced / homeless suddenly because this isn't the result of mass foreclosures on defaulting home loans it shouldn't be as disruptive this time. A lot of theoretical stock value gets wiped out, some people lose a lot of money, and then you get to start the cycle over again with rates back under 1% and the DOW down a a few thousand points from its current cresting highs.
  - TuringNYC 7y ago
    It is very hard to speculate about future crises since often the causes are only obvious in hindsight...but...here I go speculating anyway :-) Firstly, I totally agree with you on 2008 - bank failure driven recessions are always worse than regular recessions, so 2008 already takes a lead. However, there is another aspect -- the 2008 crisis was controlled by a combination of controlling interest rates and other QE measures. We're now still in ZIRP (zero interest rate policy) so one of our key tools for combating a crisis is gone (it is like being at the bottom of the hill and realizing you are already on low gear.) Of course, we have other QE as well as fiscal tools, but lowering rates wont be one of them.
    - war1025 7y ago
      Seems like maybe it wasn't the best idea to use a "one time use" tool to battle the recession since we know they come on a more of less predictable basis over the long term...
      - 7y ago
- xster 7y ago
  I get your general sentiment. I'm just not sure why everyone keeps using the iPhone example. China's value-add part in the iPhone building process is about 1%. Having iPhone built with China's manufacturing efficiency is a lot more about Apple's bottom line (as demonstrated by its ability to lobby Trump to delay the tariffs until after the holiday sales) than China.
  - starky 7y ago
    It isn't about the iPhone though, but rather it is used as a generic example of the type of product built in China that is exported internationally. Being involved in that sector, there have been cracks forming ever since the first round of tariffs were implemented. None of my Chinese vendors are particularly busy, and I'm getting more cold messages than ever from vendors in China. My vendors outside of China are all talking about how they are growing. I was visiting a manufacturer in SEA at the end of May and they had at least 3 or 4 containers full of machines they had just received to open up a new section of factory.
- suyash 7y ago
  There is an old adage "When the US Sneezes, the world catches cold" so recession was hit other countries specially China more badly than the US.
frandroid 7y ago
> investment community's realization this might not be true Took them a while to see what everyone else can see in plain daylight...
- hnModsRDanger 7y ago
  To be fair, many industries have incentive to predict good markets. Automotive, luxury, finance, etc... None of these benefit from recessions. These people need to sell you, that you will have a job tomorrow.
roymurdock 7y ago
My question is what is the point of the trade war. What does trump get from initiating/escalating it, or who is directing him to do it. Seems to be a net negative for all sectors of the economy.
- cjrp 7y ago
  > What does trump get from initiating/escalating it Kudos from his base, enhances his "tough guy" image, helps his 2020 campaign.
  - roymurdock 7y ago
    I've heard that argument but it's wrecking parts of the ag sector, hurting manufacturing (big parts of his base), and will probably push all consumer prices up. I guess if his base can't put 2 and 2 together that prices are rising due to his tariffs it almost makes sense. But I don't think it's that simple, he's clearly a coin operated guy so which coin is operating him to escalate this trade war?
    - magduf 7y ago
      >I guess if his base can't put 2 and 2 together that prices are rising due to his tariffs it almost makes sense. His base really can't put 2 and 2 together. You seem to think it's obvious that tariffs will cause prices to rise, but you seriously underestimate just how stupid these people are.
      - SkyBelow 7y ago
        If your explanation requires assuming that both very powerful politicians and their supports, constituting tens of millions of people, are all incompetent, then perhaps you need to consider an explanation that doesn't require such assumptions.
        magduf 7y ago
        I'm not assuming the politicians are incompetent. Usually, they aren't, they're just working towards different goals then their constituents or what they promised them. If you really think the average voter is competent at economic matters, I have a bridge to sell you...
nosestuff 7y ago
I doubt the trade war has anything to do with that. That United States has been growing above potential for a long time, and that Europe has been unable to grow for many years, and that China has exhausted it's growth engines, have very little to do with threats of tariffs on a few electronics and grains.
empath75 7y ago
> the thought has always been that the president was using a high leverage negotiating strategy Whose thought? The people who didn't know that trump was an incompetent nutjob?
- polotics 7y ago
  It's not so easy to distinguish the drunken master from the drunk. They walk the same.
  - tempguy9999 7y ago
    Nicely put, but a real drunken master doesn't get repeatedly decked. Look at trump's financial record, that should have been quite enough (6 bankruptcies was it?) Those who were fooled, were fooled because they chose to be.
    - SkyBelow 7y ago
      Why should the number of bankruptcies matter if the person is still rich? It shows that they are using it as a tool, which might inform us we need to consider how bankruptcies work, but that doesn't make someone incompetent. If you want to see someone who is incompetent with money, look at lottery winners who within 5 years end up worse than before they won.
      - deleted 7y ago
        [deleted]
      - tempguy9999 7y ago
        I presume he became less rich by becoming bankrupt rather than more? If he could have been richer by not being bankrupt then that would indicate competence to me. Also daddy gave him $435 million IIRC. If everyone on HN had got that I suspect most of us would have done better.
      - jimmaswell 7y ago
        It's a bit different when someone is repeatedly bailed out by a richer parent.
davidw 7y ago
> What we are seeing is the investment community's realization this might not be true. As Rick Wilson says... "Everything Trump Touches Dies".
papito 7y ago
"Strategy".
ummonk 7y ago
and that it would be a trade war the US would lose because of the directionality of the trade I expect the US to lose the trade war simply because China will have the fortitude to outlast it, but why would the direction of trade favor China in the trade war? Shouldn't China have more to lose due to being a net exporter?
- noelsusman 7y ago
  Yeah China definitely has more to lose. The US will win if it goes on for long enough, but it's like chopping off your hand in order to chop off another guy's arm. You're technically winning, but you're also inflicting enormous pain on yourself. I also agree that in reality China has more ability to withstand pain and the US will blink first if it comes down to it.
- pfranz 7y ago
  Not that I'm confident or knowledgable enough to put money on any of this, but I believe it's assumed that the US has a privileged position in the world because of its relative stability (the US infrastructure wasn't ravaged during the World Wars) and has the world's Reserve Currency. If things were more "equatable" the US would have a less privileged position. That also means any losses will be difficult or impossible to get back.
paganel 7y ago
I wonder how the investors will model Matteo Salvini’s actions once he grabs full power in Italy. Afaik he had proposed a practically speaking parallel currency to the Euro a couple of months ago, which if it were to become true would practically kill the European currency. Italy is also too big to fail for the UE and they have one of the largest debs in the developed world (compared to GDP), not exactly the same as Japan’s but pretty consistent nonetheless.
- zilian 7y ago
  Don't consider us Europeansdead too quickly. A lot of Italians will unite against another «brexit» disaster.
JTbane 7y ago
> it would be a trade war the US would lose well, not just the US. China also loses, the whole world economy basically goes down too.
gomez9 7y ago
Yield curve inversion is way bigger than the trade war. Also the trade war directionality favors the USA.
- throwaway5752 7y ago
  Yield curve inversion is the symptom, not the cause.
- tunesmith 7y ago
  What is the reasoning behind "The trade war directionality favors the USA"?
  - gomez9 7y ago
    USA has a huge trade deficit with China. Chinese economy is much more dependent on the USA buying their goods than the other way around. They've already devalued their currency in order to stay competitive to American buyers, so in a sense they are directly paying for the tariffs.
baxtr 7y ago
I think his thought is to force an economic downturn in 2019 and then release the tension going into 2020 to have a smooth economy once the elections are due
scotty79 7y ago
> ...thought that they could model him as a rational actor That's more optimistic than 'let's assume spherical cow in vacuum'
DataWorker 7y ago
Or debt cycles exist.
Ambele 7y ago
Does this mean we can blame the stock market drop on the orange haired man in the office?

tlogan 7y ago

And things will be worse because China is also heading into recession. You know, you need sell all these products to somebody... And when US consumer stops buying new iPhones (or what ever) combined with recession then situation is going be really really tough. So this will be worse that 2008. Much worse. Back in 2008, China was growing and helping to ease the recession. I do not think China's economy will grow during this cycle.

throwaway5752 7y ago
The Fed does not have the tools at its disposal that it did in 2008, they have been exhausted. The leadership on either side of the 2008 transition was much better at every level. Also, 2008 was a balance sheet depression that was more tractable to fix with monetary approaches. What is happening, right now, is literally what happened in the Great Depression (with the concurrent reemergence of nationalism) and is what led to two back-to-back world wars https://www.dartmouth.edu/~dirwin/Eichengreen-IrwinJEH.pdf https://www.dartmouth.edu/~dirwin/Eichengreen-IrwinJEH.pdf
- adventured 7y ago
  > The Fed does not have the tools at its disposal that it did in 2008, they have been exhausted. That hasn't been exhausted even in the slightest. The Fed has the exact same tool at its disposal as it did in 2008: it controls the global reserve currency and can run an annual trillion dollar QE program for years as necessary, forcing the rest of the world to partially foot the bill of that QE program to the benefit of the US economy. The Fed took rates to zero for seven years and utilized multiple QE rounds to reinflate the economy and asset prices. The same exact approach is at its disposal heading into the next recession.
  - throwaway5752 7y ago
    Maybe I'm a crazy for taking the state of the fed funds rate, the budget deficit, and the Fed's balance sheet into account? We can print money, but so far the USD hasn't reflected any sort of consequence for that. They can do a QE program, but will other actors accept the implicit loss on their treasury holdings? I can think of one major player there that is a lot less likely to do so now.
    - dageshi 7y ago
      What can the chinese do exactly? Sell all their USD treasuries? Sure, but what do they do with the money then? The only other currency big enough to absorb those kind of flows is the euro which would spike the euro exchange rate with the dollar to extremely painful levels for the EU, probably causing a deep recession in the EU but doing nothing to the US.
      - HillaryBriss 7y ago
        > Sell all their USD treasuries? Last I read they were only holding about 1 trillion in USD treasuries. Selling all of that would not inflict much damage on the US economy or government. If there's one superior skill the US Treasury and US Fed have it's selling/buying even more massive amounts of debt than that. Markets are used to it. So, a $1 trillion dollar bond sale event might hurt for a short while, but it wouldn't really be all that heavy.
vpribish 7y ago
much worse than 2008 how? Global debt markets nearly collapsed and the single largest investment of american consumers crashed. You are making a really bold claim there and it looks like cheap catastrophizing.
- adventured 7y ago
  I think the next recession will be modest compared to 2008, comparatively shallow in all regards (including job losses). The recovery is going to involve drawn-out weak economic performance, elaborate growth stagnation, that will frustrate central banks as they attempt to stimulate and reinflate. We'll see aggressive front-run Fed & global central bank action. As opposed to 2007-2009, which frequently saw the Fed running from behind to catch up to a very severe implosion. The Fed regularly utilizing QE programs the last time around was quite novel. This time it'll be used very early on and aggressively as a normalized tool of fighting a recession (for better or worse). The recession will be weak, the recovery will be weak. The repeating behavior and stacking debt is resulting in lower dynamism in all regards. We've already seen all of this: Japan showed us exactly how it works, why (government debt), and how it cycles toward increased stagnation, perma low rates and low inflationary pressure. The overly dramatic doom predictions are merely making the perceived easy call, and piggyback riding on what happened in 2008. A repeat, much less something worse, is not what we're going to see at all.
- dv_dt 7y ago
  If you read Ray Dalio, he seems think think the next recession will be a "debt supercycle" which could be worse than 2008. (this could be him plugging his hedge fund, but he's semi retired, and really has no more money needed to make personally) Note also that recessions have been growing longer each cycle. IMHO it's related to the bottom 99% having been getting paid smaller and smaller portions of wealth, and so a base resiliency of economies become weaker each cycle.
  - tunesmith 7y ago
    It's hard to follow his reasoning sometimes. Sometimes it seems like he's saying that we already went through the debt supercycle, or the end of the long-term debt cycle and we've already gone through the reflation period. But other times it sounds like he's saying the real "big one" is still about to happen, rather than just another recession.
dageshi 7y ago
It certainly won't be worse than 2008. 2008 was a financial crisis, core parts of the banking system were suspect, nobody knew who they could trust or who was solvent and worse nobody had a clue how to solve it for a dangerously long period of time. The financial system is not in that same position this time and as for China, China's growth is largely kept to china itself and guarded jealously, China did little or nothing to ease the 2008 financial crisis for the west.
- throwaway5752 7y ago
  The structural deficits in the US economy are financed - at low rates, at least - by trade deficits and currency surpluses with our trade partners. Recent tax policy changes have drastically increased the size of the US budget deficit. This was probably going to come to a head at some point anyway for a lot of reasons, but I disagree with you this won't be as bad as 2008.
- hasitchanged 7y ago
  > core parts of the banking system were suspect, nobody knew who they could trust Serious question - how has that changed? It looks to me like since about 2009 banks have been trying very hard to get back to the same shenanigans they were pulling before 2008, and are mostly succeeding. They were given the message that, "Hey - you're too big to fail. Uncle Sam's got your back, and there will be no consequences for the people at the top. Do whatever you need to do!"
  - intuitionist 7y ago
    The incentives still aren’t great, it’s true. But a lot of things are better. The Volcker rule discourages investment banks from making big directional bets with shareholder money, and the Fed stress tests force them to regularly consider and mitigate downside risks. Both of these things are gameable but at the same time have real effects. Also, like, Lehman Brothers collapsed in 2008, and Bear Stearns and Merrill Lynch both got sold at fire sale prices. Shareholders don’t want those risks, and even if managers are too insulated from financial consequences of a collapse they probably care about reputational risks as well.
streetcat1 7y ago
It would not be worse than 2008. since what happen in 2008 is known, by definition it is already prepared for and backed into global risk assessments. It can only get worse if there is something that was NOT present in 2008 will manifest itself.
- throwanem 7y ago
  A parallel recession in China, for example.
  - streetcat1 7y ago
    Sure. But this might also be baked in. In 2008, you had a major failure (within days) of Lehaman Brothers and some major financial institutions, all were a complete surprise. A recession in china (controlled recession) might actually be a good thing overall.
dionian 7y ago
Which would indicate that US will have a massive amount of leverage to renegotiate trade
AlexCoventry 7y ago
> you need sell all these products to somebody. I've heard that the US mostly sells stuff to itself, i.e., trade is a relatively small component of its GDP. I haven't looked into it, yet, though.
zanny 7y ago
> So this will be worse that 2008. 2008 was bad because the collective banks of the US realized trillions in mortgages were money on the books that wasn't real and was never going to be real. The correction involved resetting said books and taking a few banks and a trillion dollars of US taxpayer money along the way. What is the correction this time? All it would really be is a run on confidence in global financial markets. This has happened many, many times (and did happen in 2008 but it was a response to the insolvency of banks). It happened in 2000, it happened in 1993, it happened in 1980, etc. If its just a correction in overvalued stocks, futures, and a contraction in loans and interest rates thats just a normal recession. We're due to have one, they happen all the time, and since there shouldn't be an influx of millions of displaced / homeless suddenly because this isn't the result of mass foreclosures on defaulting home loans it shouldn't be as disruptive this time. A lot of theoretical stock value gets wiped out, some people lose a lot of money, and then you get to start the cycle over again with rates back under 1% and the DOW down a a few thousand points from its current cresting highs.
- TuringNYC 7y ago
  It is very hard to speculate about future crises since often the causes are only obvious in hindsight...but...here I go speculating anyway :-) Firstly, I totally agree with you on 2008 - bank failure driven recessions are always worse than regular recessions, so 2008 already takes a lead. However, there is another aspect -- the 2008 crisis was controlled by a combination of controlling interest rates and other QE measures. We're now still in ZIRP (zero interest rate policy) so one of our key tools for combating a crisis is gone (it is like being at the bottom of the hill and realizing you are already on low gear.) Of course, we have other QE as well as fiscal tools, but lowering rates wont be one of them.
  - war1025 7y ago
    Seems like maybe it wasn't the best idea to use a "one time use" tool to battle the recession since we know they come on a more of less predictable basis over the long term...
    - 7y ago
xster 7y ago
I get your general sentiment. I'm just not sure why everyone keeps using the iPhone example. China's value-add part in the iPhone building process is about 1%. Having iPhone built with China's manufacturing efficiency is a lot more about Apple's bottom line (as demonstrated by its ability to lobby Trump to delay the tariffs until after the holiday sales) than China.
- starky 7y ago
  It isn't about the iPhone though, but rather it is used as a generic example of the type of product built in China that is exported internationally. Being involved in that sector, there have been cracks forming ever since the first round of tariffs were implemented. None of my Chinese vendors are particularly busy, and I'm getting more cold messages than ever from vendors in China. My vendors outside of China are all talking about how they are growing. I was visiting a manufacturer in SEA at the end of May and they had at least 3 or 4 containers full of machines they had just received to open up a new section of factory.
suyash 7y ago
There is an old adage "When the US Sneezes, the world catches cold" so recession was hit other countries specially China more badly than the US.

frandroid 7y ago

> investment community's realization this might not be true Took them a while to see what everyone else can see in plain daylight...

hnModsRDanger 7y ago
To be fair, many industries have incentive to predict good markets. Automotive, luxury, finance, etc... None of these benefit from recessions. These people need to sell you, that you will have a job tomorrow.

roymurdock 7y ago

My question is what is the point of the trade war. What does trump get from initiating/escalating it, or who is directing him to do it. Seems to be a net negative for all sectors of the economy.

cjrp 7y ago
> What does trump get from initiating/escalating it Kudos from his base, enhances his "tough guy" image, helps his 2020 campaign.
- roymurdock 7y ago
  I've heard that argument but it's wrecking parts of the ag sector, hurting manufacturing (big parts of his base), and will probably push all consumer prices up. I guess if his base can't put 2 and 2 together that prices are rising due to his tariffs it almost makes sense. But I don't think it's that simple, he's clearly a coin operated guy so which coin is operating him to escalate this trade war?
  - magduf 7y ago
    >I guess if his base can't put 2 and 2 together that prices are rising due to his tariffs it almost makes sense. His base really can't put 2 and 2 together. You seem to think it's obvious that tariffs will cause prices to rise, but you seriously underestimate just how stupid these people are.
    - SkyBelow 7y ago
      If your explanation requires assuming that both very powerful politicians and their supports, constituting tens of millions of people, are all incompetent, then perhaps you need to consider an explanation that doesn't require such assumptions.
      - magduf 7y ago
        I'm not assuming the politicians are incompetent. Usually, they aren't, they're just working towards different goals then their constituents or what they promised them. If you really think the average voter is competent at economic matters, I have a bridge to sell you...

nosestuff 7y ago

I doubt the trade war has anything to do with that. That United States has been growing above potential for a long time, and that Europe has been unable to grow for many years, and that China has exhausted it's growth engines, have very little to do with threats of tariffs on a few electronics and grains.

empath75 7y ago

> the thought has always been that the president was using a high leverage negotiating strategy Whose thought? The people who didn't know that trump was an incompetent nutjob?

polotics 7y ago
It's not so easy to distinguish the drunken master from the drunk. They walk the same.
- tempguy9999 7y ago
  Nicely put, but a real drunken master doesn't get repeatedly decked. Look at trump's financial record, that should have been quite enough (6 bankruptcies was it?) Those who were fooled, were fooled because they chose to be.
  - SkyBelow 7y ago
    Why should the number of bankruptcies matter if the person is still rich? It shows that they are using it as a tool, which might inform us we need to consider how bankruptcies work, but that doesn't make someone incompetent. If you want to see someone who is incompetent with money, look at lottery winners who within 5 years end up worse than before they won.
    - deleted 7y ago
      [deleted]
    - tempguy9999 7y ago
      I presume he became less rich by becoming bankrupt rather than more? If he could have been richer by not being bankrupt then that would indicate competence to me. Also daddy gave him $435 million IIRC. If everyone on HN had got that I suspect most of us would have done better.
    - jimmaswell 7y ago
      It's a bit different when someone is repeatedly bailed out by a richer parent.

davidw 7y ago

> What we are seeing is the investment community's realization this might not be true. As Rick Wilson says... "Everything Trump Touches Dies".

papito 7y ago

"Strategy".

ummonk 7y ago

and that it would be a trade war the US would lose because of the directionality of the trade I expect the US to lose the trade war simply because China will have the fortitude to outlast it, but why would the direction of trade favor China in the trade war? Shouldn't China have more to lose due to being a net exporter?

noelsusman 7y ago
Yeah China definitely has more to lose. The US will win if it goes on for long enough, but it's like chopping off your hand in order to chop off another guy's arm. You're technically winning, but you're also inflicting enormous pain on yourself. I also agree that in reality China has more ability to withstand pain and the US will blink first if it comes down to it.
pfranz 7y ago
Not that I'm confident or knowledgable enough to put money on any of this, but I believe it's assumed that the US has a privileged position in the world because of its relative stability (the US infrastructure wasn't ravaged during the World Wars) and has the world's Reserve Currency. If things were more "equatable" the US would have a less privileged position. That also means any losses will be difficult or impossible to get back.

paganel 7y ago

I wonder how the investors will model Matteo Salvini’s actions once he grabs full power in Italy. Afaik he had proposed a practically speaking parallel currency to the Euro a couple of months ago, which if it were to become true would practically kill the European currency. Italy is also too big to fail for the UE and they have one of the largest debs in the developed world (compared to GDP), not exactly the same as Japan’s but pretty consistent nonetheless.

zilian 7y ago
Don't consider us Europeansdead too quickly. A lot of Italians will unite against another «brexit» disaster.

JTbane 7y ago

> it would be a trade war the US would lose well, not just the US. China also loses, the whole world economy basically goes down too.

gomez9 7y ago

Yield curve inversion is way bigger than the trade war. Also the trade war directionality favors the USA.

throwaway5752 7y ago
Yield curve inversion is the symptom, not the cause.
tunesmith 7y ago
What is the reasoning behind "The trade war directionality favors the USA"?
- gomez9 7y ago
  USA has a huge trade deficit with China. Chinese economy is much more dependent on the USA buying their goods than the other way around. They've already devalued their currency in order to stay competitive to American buyers, so in a sense they are directly paying for the tariffs.

baxtr 7y ago

I think his thought is to force an economic downturn in 2019 and then release the tension going into 2020 to have a smooth economy once the elections are due

scotty79 7y ago

> ...thought that they could model him as a rational actor That's more optimistic than 'let's assume spherical cow in vacuum'

DataWorker 7y ago

Or debt cycles exist.

Ambele 7y ago

Does this mean we can blame the stock market drop on the orange haired man in the office?