7 ms·

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 s

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.
quotemstr 7y ago
I'm in the "worse than 2008" camp, mostly due to the reasons the OP gives. Another consideration is that our current expansion has been a very long one, and the longer an expansion goes on, the more fraudulent cruft accumulates, the cruft beings things like assets not marked to actual market value, money-losing businesses subsidized in various ways, and sometimes outright Madoff-like fraud. This cruft appears financially viable from the outside but collapses when stressed, and nobody really knows how much of it is out there.
- dageshi 7y ago
  There isn't anything like the housing bubble right now. There's nothing that really allows people who shouldn't be able to borrow lots of money to borrow lots of money like housing did last time. What you're describing is just the normal stuff that happens in all recessions. And as much as we had a long boom, we also had quite a long painful recovery from 2008, it wasn't the same as normal recovery which explains why it's been so long since the last recession.
  - kingnothing 7y ago
    There's the looming student debt crisis, which is absolutely allowing lots of people to borrow money they shouldn't be able to get. People are graduating college well into six figures of debt with nearly worthless degrees that pay little more than minimum wage. Even worse, the government guarantees that debt is not dischargeable in bankruptcy, leaving no way out for the underwater borrowers.
    - rland 7y ago
      The student loan thing is more of a big weight dragging on the middle class. It’s not like anything is going to implode — the debt isn’t dischargeable. Instead, it’s just going to drag on and on for decades, preventing the lower classes from building wealth or having kids. (In many ways, that’s a lot worse)
  - jsnider3 7y ago
    > There isn't anything like the housing bubble right now. What do you think about the carbon bubble?
wonderwonder 7y ago
Just my opinion but I think it will be worse than 2008 for normal people. Companies that are cash rich due to the tax cuts will use the recession as an excuse to execute deep labor cuts and boost their stock price. There is no longer a reason for executives to even pretend to care about employees as the one time bonus / stock buy backs after the tax cuts proved. Wells Fargo has already proven that the same rules that were in place in 2008 that allowed those that caused the collapse to escape unpunished are still there. Assuming the current administration is in power, government assistance programs will be greatly cut leading to desperation on the part of the nations 40% that cannot afford a $400 emergency. Household debt, especially student loan debt is far above what it was when the 2008 recession hit making people even less prepared to handle a financial collapse. "Student loan debt hit $1.486 trillion, according to credit data from the New York Federal Reserve. By comparison, student loan at the height of the financial crisis was $611 billion and has been mostly rising since" Assuming the ACA case makes it through the courts before the recession is over, health care will likely be stripped from millions of those worse equipped to handle it. Many of the homes that were affordable a decade ago have now been bought by mega renters and are rented out at high rates. People who lose their jobs will be unable to afford rents that are only increasing nation wide. I think large companies and banks will weather it relatively well. We will likely invade a middle eastern country to distract the proletariat. https://www.marketwatch.com/story/us-consumer-debt-is-now-breaching-levels-last-reached-during-the-2008-financial-crisis-2019-06-19 https://www.marketwatch.com/story/us-consumer-debt-is-now-br...
- godtoldmetodoit 7y ago
  We need Andrew Yang, or somebody else to pick up the UBI idea, now. There's no time to slow play this and do a bunch of studies. We have enough data, somebody just needs to do it.
  - wonderwonder 7y ago
    I agree, I think we are reaching a tipping point where the economy so favors those with established wealth and corporations that UBI is going to become a necessity. It does not have to be a lot of money, just enough to provide people with a small cushion so they can take small risks to better themselves or afford the basics. I think something overlooked by many is that without the small cushion of having family to fall back on if everything went bad or a nest egg, many of today's entrepreneurs would not exist. Risk for those whom failure means living on the street is generally avoided, especially for people with kids. A UBI would allow them to try and compete or at least live life without waking up terrified every day.
tunesmith 7y ago
Ray Dalio's model asserts that 2008 was the end of a 75-100 year cycle - the collapse and then reflation of the long term debt cycle. And that the upcoming recession (whenever it happens) is more about short-term debt cycles, that happen every 8-10 years. That doesn't mean a recession can't be really bad, though. Particularly when our normal tools for handling recessions are constrained, like interest rates already being low. We're also still dealing with the greater inequality effects from the 2008 debt monetization, which is partly (according to that model) responsible for the greater populism political effects of that (like Trump's election, who ran as a populist in 2016).

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.

quotemstr 7y ago

I'm in the "worse than 2008" camp, mostly due to the reasons the OP gives. Another consideration is that our current expansion has been a very long one, and the longer an expansion goes on, the more fraudulent cruft accumulates, the cruft beings things like assets not marked to actual market value, money-losing businesses subsidized in various ways, and sometimes outright Madoff-like fraud. This cruft appears financially viable from the outside but collapses when stressed, and nobody really knows how much of it is out there.

dageshi 7y ago
There isn't anything like the housing bubble right now. There's nothing that really allows people who shouldn't be able to borrow lots of money to borrow lots of money like housing did last time. What you're describing is just the normal stuff that happens in all recessions. And as much as we had a long boom, we also had quite a long painful recovery from 2008, it wasn't the same as normal recovery which explains why it's been so long since the last recession.
- kingnothing 7y ago
  There's the looming student debt crisis, which is absolutely allowing lots of people to borrow money they shouldn't be able to get. People are graduating college well into six figures of debt with nearly worthless degrees that pay little more than minimum wage. Even worse, the government guarantees that debt is not dischargeable in bankruptcy, leaving no way out for the underwater borrowers.
  - rland 7y ago
    The student loan thing is more of a big weight dragging on the middle class. It’s not like anything is going to implode — the debt isn’t dischargeable. Instead, it’s just going to drag on and on for decades, preventing the lower classes from building wealth or having kids. (In many ways, that’s a lot worse)
- jsnider3 7y ago
  > There isn't anything like the housing bubble right now. What do you think about the carbon bubble?

wonderwonder 7y ago

Just my opinion but I think it will be worse than 2008 for normal people. Companies that are cash rich due to the tax cuts will use the recession as an excuse to execute deep labor cuts and boost their stock price. There is no longer a reason for executives to even pretend to care about employees as the one time bonus / stock buy backs after the tax cuts proved. Wells Fargo has already proven that the same rules that were in place in 2008 that allowed those that caused the collapse to escape unpunished are still there. Assuming the current administration is in power, government assistance programs will be greatly cut leading to desperation on the part of the nations 40% that cannot afford a $400 emergency. Household debt, especially student loan debt is far above what it was when the 2008 recession hit making people even less prepared to handle a financial collapse. "Student loan debt hit $1.486 trillion, according to credit data from the New York Federal Reserve. By comparison, student loan at the height of the financial crisis was $611 billion and has been mostly rising since" Assuming the ACA case makes it through the courts before the recession is over, health care will likely be stripped from millions of those worse equipped to handle it. Many of the homes that were affordable a decade ago have now been bought by mega renters and are rented out at high rates. People who lose their jobs will be unable to afford rents that are only increasing nation wide. I think large companies and banks will weather it relatively well. We will likely invade a middle eastern country to distract the proletariat. https://www.marketwatch.com/story/us-consumer-debt-is-now-breaching-levels-last-reached-during-the-2008-financial-crisis-2019-06-19 https://www.marketwatch.com/story/us-consumer-debt-is-now-br...

godtoldmetodoit 7y ago
We need Andrew Yang, or somebody else to pick up the UBI idea, now. There's no time to slow play this and do a bunch of studies. We have enough data, somebody just needs to do it.
- wonderwonder 7y ago
  I agree, I think we are reaching a tipping point where the economy so favors those with established wealth and corporations that UBI is going to become a necessity. It does not have to be a lot of money, just enough to provide people with a small cushion so they can take small risks to better themselves or afford the basics. I think something overlooked by many is that without the small cushion of having family to fall back on if everything went bad or a nest egg, many of today's entrepreneurs would not exist. Risk for those whom failure means living on the street is generally avoided, especially for people with kids. A UBI would allow them to try and compete or at least live life without waking up terrified every day.

tunesmith 7y ago

Ray Dalio's model asserts that 2008 was the end of a 75-100 year cycle - the collapse and then reflation of the long term debt cycle. And that the upcoming recession (whenever it happens) is more about short-term debt cycles, that happen every 8-10 years. That doesn't mean a recession can't be really bad, though. Particularly when our normal tools for handling recessions are constrained, like interest rates already being low. We're also still dealing with the greater inequality effects from the 2008 debt monetization, which is partly (according to that model) responsible for the greater populism political effects of that (like Trump's election, who ran as a populist in 2016).