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Is there any evidence that talking about a possible recession with your grandmother or uncle could actually cause a recession to happen? Are recessions like Tin

Is there any evidence that talking about a possible recession with your grandmother or uncle could actually cause a recession to happen? Are recessions like Tinker Bell, they only exist if you believe in them?

chris5745 7y ago
Have you ever heard about the Law of Attraction?
Mikeb85 7y ago
If everyone believes a recession is coming, they stop spending, causing a recession. On the flipside, the economy can be stimulated merely by sentiment; if everything thinks things will get better, they invest and spend. The concept is similar to the 'animal spirits' that Keynes spoke of.
curo 7y ago
Collective fear feeds a recession or depression. Banking panics are real and speculation of a prolonged recession of course deepens and lengthens it. FDR (in his 1933 inaugural address) certainly believed this to be true: "nothing to fear but fear itself."
- onlyrealcuzzo 7y ago
  Short-term fear can cause a sell off. You need long-term consistent fear to cause a recession (it's based on a quarter or year, depending on how you define it). You usually don't have consistent long-term fear without reason. It's usually the underlying problems that cause recessions. It's usually short-term fear that causes market crashes.
  - mrep 7y ago
    So much this. Every recession that I remember studying in my economics classes had an actual market failure acting as a trigger that caused widespread panic which resulted in a recession. The 2018 us stock market downturn comes to mind as a panic that didn't result in a recession because there was no actual market failure causing actual economic harm outside of pure speculation.
dodobirdlord 7y ago
For a country like the United States, recessions are at least somewhat like Tinker Bell. It's hard for external factors to seriously impact the US economy, as evidenced by the fact that growth is seriously slowing in China and several major EU nations are either in recession or very close to it, and the US economy is still growing. The major factors that influence the US economy are largely people's willingness to borrow, lend, and spend. If you can convince a large enough share of people that a recession is imminent it will actually happen as they pull their assets back from risky growth-fueling investments into low-risk low-growth investments. This will limit growth opportunities in the economy. If this gets bad enough it can impact the function of certain types of existing businesses that depend on capital markets for liquidity, and the economy can actually begin to contract.
- grey-area 7y ago
  For a country like the United States, recessions are at least somewhat like Tinker Bell. It's hard for external factors to seriously impact the US economy Multiple trade wars precipitated by the current president certainly impact the US economy (and the global one). The coming global downturn will be almost entirely self-inflicted, but it won't be down to gossip about a possible recession, it'll be down to massive trade barriers imposed by fiat. Trade wars are bad and hard to win.
  - ericd 7y ago
    We’ve been stacking tinder for a very long time with our monetary policy, as well as shifting demographics. The trade war might be the spark, but a spark on a clean forest floor doesn’t do much.
  - dodobirdlord 7y ago
    "It's hard" and "it's impossible" are very different beasts, and I said the former and not the latter. I think that the fact that the US economy is still growing despite disastrous trade policy and oncoming global downturn illustrates my point. Years of national and global scale economic mismanagement haven't yet managed to drive the US economy into recession. (Also, the Fed is pretty good at its job.) In comparison, during the financial crisis, issues with a particular asset class in the US economy within months causes a worldwide recession due to increased assessment of credit risk and corresponding tightening of lending that had to be mitigated with massive bailouts to prevent a death spiral. As a further example, during the financial crisis many banks in perfectly healthy condition were forced to take bailouts so as not to inflame the perception that certain banks could not be trusted.

chris5745 7y ago

Have you ever heard about the Law of Attraction?

Mikeb85 7y ago

If everyone believes a recession is coming, they stop spending, causing a recession. On the flipside, the economy can be stimulated merely by sentiment; if everything thinks things will get better, they invest and spend. The concept is similar to the 'animal spirits' that Keynes spoke of.

curo 7y ago

Collective fear feeds a recession or depression. Banking panics are real and speculation of a prolonged recession of course deepens and lengthens it. FDR (in his 1933 inaugural address) certainly believed this to be true: "nothing to fear but fear itself."

onlyrealcuzzo 7y ago
Short-term fear can cause a sell off. You need long-term consistent fear to cause a recession (it's based on a quarter or year, depending on how you define it). You usually don't have consistent long-term fear without reason. It's usually the underlying problems that cause recessions. It's usually short-term fear that causes market crashes.
- mrep 7y ago
  So much this. Every recession that I remember studying in my economics classes had an actual market failure acting as a trigger that caused widespread panic which resulted in a recession. The 2018 us stock market downturn comes to mind as a panic that didn't result in a recession because there was no actual market failure causing actual economic harm outside of pure speculation.

dodobirdlord 7y ago

For a country like the United States, recessions are at least somewhat like Tinker Bell. It's hard for external factors to seriously impact the US economy, as evidenced by the fact that growth is seriously slowing in China and several major EU nations are either in recession or very close to it, and the US economy is still growing. The major factors that influence the US economy are largely people's willingness to borrow, lend, and spend. If you can convince a large enough share of people that a recession is imminent it will actually happen as they pull their assets back from risky growth-fueling investments into low-risk low-growth investments. This will limit growth opportunities in the economy. If this gets bad enough it can impact the function of certain types of existing businesses that depend on capital markets for liquidity, and the economy can actually begin to contract.

grey-area 7y ago
For a country like the United States, recessions are at least somewhat like Tinker Bell. It's hard for external factors to seriously impact the US economy Multiple trade wars precipitated by the current president certainly impact the US economy (and the global one). The coming global downturn will be almost entirely self-inflicted, but it won't be down to gossip about a possible recession, it'll be down to massive trade barriers imposed by fiat. Trade wars are bad and hard to win.
- ericd 7y ago
  We’ve been stacking tinder for a very long time with our monetary policy, as well as shifting demographics. The trade war might be the spark, but a spark on a clean forest floor doesn’t do much.
- dodobirdlord 7y ago
  "It's hard" and "it's impossible" are very different beasts, and I said the former and not the latter. I think that the fact that the US economy is still growing despite disastrous trade policy and oncoming global downturn illustrates my point. Years of national and global scale economic mismanagement haven't yet managed to drive the US economy into recession. (Also, the Fed is pretty good at its job.) In comparison, during the financial crisis, issues with a particular asset class in the US economy within months causes a worldwide recession due to increased assessment of credit risk and corresponding tightening of lending that had to be mitigated with massive bailouts to prevent a death spiral. As a further example, during the financial crisis many banks in perfectly healthy condition were forced to take bailouts so as not to inflame the perception that certain banks could not be trusted.