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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 buy

by 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.
    - adventured 7y ago
      The Fed can replace / deal with China's treasury holdings relatively easily at this point, especially given the strength of the dollar. While $15t in global paper is yielding nothing or worse, the US is still yielding something and is still largely regarded as entirely safe by investors. China is no longer a threat to the treasury market re selling, even though more aggressive selling on their part would definitely cause some real short-term turmoil. They can rock the boat, they can't tip it over and the Fed would stabilize things quickly in reaction. Over the next ten years the public US debt will hit $32 trillion give or take (possibly closer to $35t; I'm expecting a +$3.5t deficit in just two years in the next recession), about 1.2x to 1.3x GDP at that point. China's share of that $32-$35 trillion will be a mere 3% or lower. By the day their position becomes less meaningful (at this point the US Government is running up enough new public debt to equal China's treasury holdings every year, and that's before the recession blows out the deficit).
      - sremani 7y ago
        What exactly is wrong with this comment for the kind of downvotes? At personal level, I find adventure one of the most level headed and dispassionate commentators esp. about Finance/Business/Geopolitics. The whole China treasure holdings argument is at the best paper tiger. The argument is debunked by every respectable finance commentator.
  - cestith 7y ago
    Oil prices are lower and the euro is looking good as a second reserve currency.
    - ethbro 7y ago
      That's a big chunk of pie to remove without some turmoil. If Brexit were behind us, no doubt. But that's a lot of uncertainty tainting the euro. https://upload.wikimedia.org/wikipedia/commons/thumb/5/5f/2015_GDP_%28nominal%29_in_EU.svg/1280px-2015_GDP_%28nominal%29_in_EU.svg.png https://upload.wikimedia.org/wikipedia/commons/thumb/5/5f/20...
  - pessimizer 7y ago
    > The Fed took rates to zero for seven years And it can't do that as effectively again. Treasury bonds were at 8% back then, now they're at 4%.
  - Ericson2314 7y ago
    IMO QE is insanely regressive because of most people's non participation in the financial system, and thus is a "supply side wolf in keynsian clothing". Looking at all the unprofitable startups and other investment vehicles of the current cycle, combined with uneven increases in productivity and tenuous shitty jobs being the bulk of job growth shows how we've clearly don't have the demand and the money isn't trickling down enough to make it. With interest rates near zero, and the old monitarist avenues generally exhausted with this procyclic hangover, we have nothing left to do but the real ask fiscal shit jobs guarantee or UBI. Hopefully people realize work sucks and it would be nice if computers were used to their full potential so we get UBI instead and then we can write expert systems and reduce meanial labor and other useful shit.
- cr0sh 7y ago
  > 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 Note: I understand that "yield curve inversion" does not mean "recession, depression, war" is inevitable or likely - only that these things are indicators at best. That said and understood... Either our society is the dumbest there is (in aggregate - but possibly in general, too - with small pockets of intelligence, just not enough - and they are under constant attack) - or "someone" (not saying an individual or a group - or even planned for that matter) is wanting us to "go to war" - which if the past is any example, could very well be - or turn into - "the final war" (hah - who am I kidding - any survivors would probably battle each other with sticks and stones). It's like were either really, really stupid in some regard - or there is this almost innate need by some portion of the species (or at least our American society) that desires and needs mass death and tragedy on a worldwide scale. If either is true, it points to a vast failing of our own making. The sad thing? I can see it, others see it or have seen it; heck, those who were leaders and/or have been in "large-scale combat" have seen it up close and personal and don't want it. This isn't a new observation at all; it is thousands of years old: "War is Hell" is a recent colloquial form of the message, and nobody (sane?) wants it. So why, why, why do we keep doing it? Seriously - why? I'm not expecting an answer; the possibilities and such are vast, likely rooted in various philosophical reasonings, etc - but seriously - all we have to do is...stop. Stop doing it. Stop being...dumb. Education, even from an early age, does not seem to work - or at least, it doesn't seem to work on everyone. Many internalize the message, the idea, that "violence is bad" - and try their very best to avoid it. The "reptilian brain" keeps trying to reassert itself - but with some minor effort, we can avoid the issue mostly. I'm not sure what its going to take for it to really stop. The Star Trek universe was built on the idea that humans had to first go through a massively devastating war before they would finally stop. Nice idea, but I think even that wouldn't be enough. We seem to be a species that constantly performs a "tragedy of the commons" experiment - and ultimately this need for "war" won't be won until only 0 to 1 humans are left. Even with only a single human around, I'm sure it would find a way to war...
  - flycaliguy 7y ago
    This is the best we can do. We aren't perfect but perfect is the enemy of good.
- quotemstr 7y ago
  The great depression was after one of those wars. I think you can make a case that the global economic and social excesses of the 1920s led to a hard crash, the rise of aggressive ideological movements, and, eventually, the second world war. The first world war was something else entirely, the last gasp of the old "Concert of Europe" balance of power stuff. After the first world war, the world was a completely different place and different rules applied.
  - aalleavitch 7y ago
    All of these things were the result of the second industrial revolution.
  - Ericson2314 7y ago
    The 20s weren't great economically in Europe. In Germany the 30s were better economically I'm afraid to say.
    - quotemstr 7y ago
      Weimar Germany had a bout of hyperinflation early on, but between 1924 and 1929, the country was stable and prosperous.
- paganel 7y ago
  Back in 2008, just after the Lehman collapse had happened and when money-market funds had gone bellow 0 (I think in late October), I predicted that there was a very great chance to have a world war in the next decade because of that ongoing crisis. Fortunately it looks like I was wrong, but it also looks that “liberal democracy” is on its way out in many former bastions of said democracy. I fear that a new nasty recession right now will throw us out directly into a war, we’re at the 1937-1938 moment when almost all of Europe had gone the wrong way in the previous decade (politically speaking).
  - 0xffff2 7y ago
    War with whom over what exactly? Maybe it's just a failure of imagination on my part, but I really can't picture a scenario that leads to another world war, even in today's relatively unstable political climate.
    - paganel 7y ago
      I don't know, just war. > but I really can't picture a scenario that leads to another world war, even in today's relatively unstable political climate. Ten years ago I bet almost no-one was picturing the late-1980s anti-nuclear treaties going the way of the Dodo bird. Or a land war in Europe (Ukraine is indeed in Europe). Or German politicians being shot for their political beliefs. Or British politicians being shot for their political beliefs. Ten years ago I wasn't seeing US soldiers and their trucks almost every time I take the highway in order to visit my parents in the countryside (I live in an Eastern-European country and NATO member, a geo-political stone's thrown away from Russia). Ten years ago Russia wasn't testing a nuclear-fueled rocket.
      - 0xffff2 7y ago
        How do any of those meaningfully point to a war though? Again a war between whom? Assuming you're talking about the US pulling out of the INF treaty, that's not really a meaningful change. The Russians and various other countries were already largely ignoring it. Russia's territorial shenanigans are what really cemented the idea that we're not fighting a major super-power to super-power war ever again. The West has largely let it happen, and while I don't understand why, at this point it's hard to see why that would change. US troops have been in Europe for a long time. Whether you saw them more or less in the past, troop levels there haven't changed that much.
- ianai 7y ago
  Dates for WW1: 7/28/1914-11/11/1918 Dates for WW2: 9/1/1939-9/2/1945 Dates for Great Depression: 10/29/1929 to 1939
  - throwaway5752 7y ago
    I know when major historical events happened, thanks. Sorry if I did not state my case clearly enough. What I was saying was the underlying currents in the economy and politics are similar to the ones that led to those 3 events separately, not necessarily in the causal order in which they happened.
    - aalleavitch 7y ago
      Right, all three of these things were a direct result of the second industrial revolution, as was the rise of communism. The first industrial revolution was punctuated with the American civil war. The second industrial revolution was punctuated with the great depression and World War 2. Just imagine what the digital revolution is going to be punctuated with. We are in for a hell of a bumpy ride.
      - eclipxe 7y ago
        Memes and shitposts?
        aalleavitch 7y ago
        Memes and shitposts were funny right up until they started motivating mass murders.
        ianai 7y ago
        Good connection. The world wars can also be perceived as points where humanity invented new, more “wholesale” ways of murdering ourselves. Their end is also punctuated with the creating of the atomic bomb. We’ve just started to uncover the ways to use the internet as a weapon and haven’t invented any real countervailing forces to it.
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.

by tlogan 7y ago

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.
  - adventured 7y ago
    The Fed can replace / deal with China's treasury holdings relatively easily at this point, especially given the strength of the dollar. While $15t in global paper is yielding nothing or worse, the US is still yielding something and is still largely regarded as entirely safe by investors. China is no longer a threat to the treasury market re selling, even though more aggressive selling on their part would definitely cause some real short-term turmoil. They can rock the boat, they can't tip it over and the Fed would stabilize things quickly in reaction. Over the next ten years the public US debt will hit $32 trillion give or take (possibly closer to $35t; I'm expecting a +$3.5t deficit in just two years in the next recession), about 1.2x to 1.3x GDP at that point. China's share of that $32-$35 trillion will be a mere 3% or lower. By the day their position becomes less meaningful (at this point the US Government is running up enough new public debt to equal China's treasury holdings every year, and that's before the recession blows out the deficit).
    - sremani 7y ago
      What exactly is wrong with this comment for the kind of downvotes? At personal level, I find adventure one of the most level headed and dispassionate commentators esp. about Finance/Business/Geopolitics. The whole China treasure holdings argument is at the best paper tiger. The argument is debunked by every respectable finance commentator.
- cestith 7y ago
  Oil prices are lower and the euro is looking good as a second reserve currency.
  - ethbro 7y ago
    That's a big chunk of pie to remove without some turmoil. If Brexit were behind us, no doubt. But that's a lot of uncertainty tainting the euro. https://upload.wikimedia.org/wikipedia/commons/thumb/5/5f/2015_GDP_%28nominal%29_in_EU.svg/1280px-2015_GDP_%28nominal%29_in_EU.svg.png https://upload.wikimedia.org/wikipedia/commons/thumb/5/5f/20...
- pessimizer 7y ago
  > The Fed took rates to zero for seven years And it can't do that as effectively again. Treasury bonds were at 8% back then, now they're at 4%.
- Ericson2314 7y ago
  IMO QE is insanely regressive because of most people's non participation in the financial system, and thus is a "supply side wolf in keynsian clothing". Looking at all the unprofitable startups and other investment vehicles of the current cycle, combined with uneven increases in productivity and tenuous shitty jobs being the bulk of job growth shows how we've clearly don't have the demand and the money isn't trickling down enough to make it. With interest rates near zero, and the old monitarist avenues generally exhausted with this procyclic hangover, we have nothing left to do but the real ask fiscal shit jobs guarantee or UBI. Hopefully people realize work sucks and it would be nice if computers were used to their full potential so we get UBI instead and then we can write expert systems and reduce meanial labor and other useful shit.
cr0sh 7y ago
> 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 Note: I understand that "yield curve inversion" does not mean "recession, depression, war" is inevitable or likely - only that these things are indicators at best. That said and understood... Either our society is the dumbest there is (in aggregate - but possibly in general, too - with small pockets of intelligence, just not enough - and they are under constant attack) - or "someone" (not saying an individual or a group - or even planned for that matter) is wanting us to "go to war" - which if the past is any example, could very well be - or turn into - "the final war" (hah - who am I kidding - any survivors would probably battle each other with sticks and stones). It's like were either really, really stupid in some regard - or there is this almost innate need by some portion of the species (or at least our American society) that desires and needs mass death and tragedy on a worldwide scale. If either is true, it points to a vast failing of our own making. The sad thing? I can see it, others see it or have seen it; heck, those who were leaders and/or have been in "large-scale combat" have seen it up close and personal and don't want it. This isn't a new observation at all; it is thousands of years old: "War is Hell" is a recent colloquial form of the message, and nobody (sane?) wants it. So why, why, why do we keep doing it? Seriously - why? I'm not expecting an answer; the possibilities and such are vast, likely rooted in various philosophical reasonings, etc - but seriously - all we have to do is...stop. Stop doing it. Stop being...dumb. Education, even from an early age, does not seem to work - or at least, it doesn't seem to work on everyone. Many internalize the message, the idea, that "violence is bad" - and try their very best to avoid it. The "reptilian brain" keeps trying to reassert itself - but with some minor effort, we can avoid the issue mostly. I'm not sure what its going to take for it to really stop. The Star Trek universe was built on the idea that humans had to first go through a massively devastating war before they would finally stop. Nice idea, but I think even that wouldn't be enough. We seem to be a species that constantly performs a "tragedy of the commons" experiment - and ultimately this need for "war" won't be won until only 0 to 1 humans are left. Even with only a single human around, I'm sure it would find a way to war...
- flycaliguy 7y ago
  This is the best we can do. We aren't perfect but perfect is the enemy of good.
quotemstr 7y ago
The great depression was after one of those wars. I think you can make a case that the global economic and social excesses of the 1920s led to a hard crash, the rise of aggressive ideological movements, and, eventually, the second world war. The first world war was something else entirely, the last gasp of the old "Concert of Europe" balance of power stuff. After the first world war, the world was a completely different place and different rules applied.
- aalleavitch 7y ago
  All of these things were the result of the second industrial revolution.
- Ericson2314 7y ago
  The 20s weren't great economically in Europe. In Germany the 30s were better economically I'm afraid to say.
  - quotemstr 7y ago
    Weimar Germany had a bout of hyperinflation early on, but between 1924 and 1929, the country was stable and prosperous.
paganel 7y ago
Back in 2008, just after the Lehman collapse had happened and when money-market funds had gone bellow 0 (I think in late October), I predicted that there was a very great chance to have a world war in the next decade because of that ongoing crisis. Fortunately it looks like I was wrong, but it also looks that “liberal democracy” is on its way out in many former bastions of said democracy. I fear that a new nasty recession right now will throw us out directly into a war, we’re at the 1937-1938 moment when almost all of Europe had gone the wrong way in the previous decade (politically speaking).
- 0xffff2 7y ago
  War with whom over what exactly? Maybe it's just a failure of imagination on my part, but I really can't picture a scenario that leads to another world war, even in today's relatively unstable political climate.
  - paganel 7y ago
    I don't know, just war. > but I really can't picture a scenario that leads to another world war, even in today's relatively unstable political climate. Ten years ago I bet almost no-one was picturing the late-1980s anti-nuclear treaties going the way of the Dodo bird. Or a land war in Europe (Ukraine is indeed in Europe). Or German politicians being shot for their political beliefs. Or British politicians being shot for their political beliefs. Ten years ago I wasn't seeing US soldiers and their trucks almost every time I take the highway in order to visit my parents in the countryside (I live in an Eastern-European country and NATO member, a geo-political stone's thrown away from Russia). Ten years ago Russia wasn't testing a nuclear-fueled rocket.
    - 0xffff2 7y ago
      How do any of those meaningfully point to a war though? Again a war between whom? Assuming you're talking about the US pulling out of the INF treaty, that's not really a meaningful change. The Russians and various other countries were already largely ignoring it. Russia's territorial shenanigans are what really cemented the idea that we're not fighting a major super-power to super-power war ever again. The West has largely let it happen, and while I don't understand why, at this point it's hard to see why that would change. US troops have been in Europe for a long time. Whether you saw them more or less in the past, troop levels there haven't changed that much.
ianai 7y ago
Dates for WW1: 7/28/1914-11/11/1918 Dates for WW2: 9/1/1939-9/2/1945 Dates for Great Depression: 10/29/1929 to 1939
- throwaway5752 7y ago
  I know when major historical events happened, thanks. Sorry if I did not state my case clearly enough. What I was saying was the underlying currents in the economy and politics are similar to the ones that led to those 3 events separately, not necessarily in the causal order in which they happened.
  - aalleavitch 7y ago
    Right, all three of these things were a direct result of the second industrial revolution, as was the rise of communism. The first industrial revolution was punctuated with the American civil war. The second industrial revolution was punctuated with the great depression and World War 2. Just imagine what the digital revolution is going to be punctuated with. We are in for a hell of a bumpy ride.
    - eclipxe 7y ago
      Memes and shitposts?
      - aalleavitch 7y ago
        Memes and shitposts were funny right up until they started motivating mass murders.
        ianai 7y ago
        Good connection. The world wars can also be perceived as points where humanity invented new, more “wholesale” ways of murdering ourselves. Their end is also punctuated with the creating of the atomic bomb. We’ve just started to uncover the ways to use the internet as a weapon and haven’t invented any real countervailing forces to it.

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.