5 ms·

Bank of America says the recession is already here

61 points by spking 7y ago

hammock 7y ago
Maybe the markets will start to flatten out now?
- davidw 7y ago
  My guess is that the markets won't settle down until we have a handle on the public health crisis.
- baron_harkonnen 7y ago
  Not even close. I think everyone knows things will get worse, but at this point there are too many unknowns to quantify that. The market will remain stable for a few days, but there will continually be more data that will cause the market to continue to drop. We still haven't seen any country match China as far as total cases. Once Italy gets to 80k and then 160k 4 days later a new wave of anxiety will pass through people.
  - brummm 7y ago
    When did Italy lock down the country? Last week? So then next week should hopefully be their peak.
    - davidw 7y ago
      Hopefully. People are still allowed to go to work, and there are a number of people not respecting the rules. Everyone keeps hoping to see the numbers dip, but they aren't yet.
    - baron_harkonnen 7y ago
      Hopefully you're right and this is why the market is stable for now. Maybe it will happen that Italy will stabilize. I don't think there are any epidemologists right now who don't think that Italy will reach 80k cases and 160k as well, but the distance between 80k cases and 160k might be much longer than I mention. But this brings its own uncertainty. If we succeed in not overwhelming the medical system then everyone will remain on lockdown longer which will have it's own unique economic impact. The point I'm making is that it most certainly will get much worse, but exactly how and what that means is very uncertain right now so virtually impossible to price correctly.
  - arriu 7y ago
    Italy has more reported total deaths than China at this point. Spain is also catching up fast.
boulos 7y ago
Huh! I was about to say "no, we have to see two quarters of decline". Except, NBER no longer uses that rule and hasn't for a decade: > The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. For more information, see the latest announcement from the NBER's Business Cycle Dating Committee, dated 9/20/10. [1] https://www.nber.org/cycles.html https://www.nber.org/cycles.html
- charwalker 7y ago
  In some areas it is still technically 2 quarters of negative growth however manufacturing has been in a recession for a few quarters now using this definition. It is ongoing but previously limited to specific sectors that were hard hit by tariffs and other policy decisions.
tathougies 7y ago
The current recession (which we are undoubtedly technically in) is mainly due to governments everywhere mandating that the economy go into recession due to a public health emergency. Once that's done, business will almost certainly bounce back. Of course the economy is in a recession when all world governments have essentially mandated that it do so.
- dgritsko 7y ago
  Is that entirely true, though? At least some folks are losing their jobs, and at least some businesses are not able remain solvent. The effects from these events can't simply be reverted once the emergency is "done" (if we can even hope to be able to use the term "done" at some point), and it seems like they will almost certainly have at least some long-term negative impact. "How much" and "how long" remains to be seen.
  - tathougies 7y ago
    Given that the government is being generous with a stimulus, and that most banks will see the writing on the wall which is that these businesses are not insolvent due to lack of demand, but rather the fact that demand was legislated away, only to be reintroduced in (hopefully) a few months), most banks and financial institutions will almost certainly salivate at the thought of almost guaranteed loan yields if they have the funds to wait it out. And banks of course certainly do have the funds to wait it out.
- twomoretime 7y ago
  >The current recession (which we are undoubtedly technically in) is mainly due to government's everywhere mandating... Unlikely. The writing has been on the wall for a while. The inverted yield curve and the long overdue 7 year cycle, among other indicators suggest that the virus was just a trigger. And we'll see it was a trigger for much more - the world has been an increasingly overstuffed powder keg for years. Do you know that Turkey and Greece are inching toward war over the refugee situation, and Greece already has support from multiple European Nations in shutting down migration? Imagine how many nations will be pulled in if one of the saber rattling incidents actually turns deadly... COVID-19 is the chaos that is about to shake loose every crack in the global socioeconomic system. Imagine how the geopolitical landscape is about to change when billions of Indians and Africans are exposed to the virus...
jsnider3 7y ago
Have we considered rescheduling?
twomoretime 7y ago
What recession? Market is dropping 1-2 times faster than it did in 1928. The entire economy is about to shut down for two months - the world over. Treasury Secretary predicting up to 20% unemployment, and I bet they were being conservative to prevent even more of a panic, because in the last 20s we also had 20% unemployment. This isn't a recession. It's a depression. The US is about to experience true hardship for the first time in decades.
- davidw 7y ago
  I'm not real optimistic about things, but... maybe things will come back to life quickly if we get a handle on the actual problem?
  - bob33212 7y ago
    Yes, once we have a decent treatment/mitigation/herd immunity for the virus we will be able to pick things right back up where they were. The only difference will be that the value of the dollar is going to get cut by 50%. Expect massive inflation as we bailout everyone.
    - MaxBarraclough 7y ago
      > the value of the dollar is going to get cut by 50% Against what? Aren't all currencies going through a similar hardship?
    - mdorazio 7y ago
      That's not how it works. Inflation and dollar value vs. other currencies is only loosely tied to bailout-type measures. See, for example, the mostly non-existent inflation following the financial crash bailouts last time. Also see current strengthening of the dollar vs. other currencies because it's a safehaven.
    - jandrewrogers 7y ago
      It is significantly more complicated than this. Have you looked at foreign exchange rates lately? Other currencies are getting crushed relative to the USD because of COVID-19.
mywittyname 7y ago
Certain sectors of the US economy (mining, agriculture, manufacturing) have already been in and out of recessions for a few years now. These sector recessions have largely been hidden from the public because the banking sector is so much larger and has growth that outpaces the losses from the other sectors. So when you look at total GDP, the US economy was growing. But when you break GDP down into specific industries, you'll see that many of them have been struggling for a few years. The US BEA website has some great tools for exploring industry-specific economic output. Everyone wants to blame COVID-19 for the economic mess that's unfolding. But in reality, the trade war we went through with China hurt sectors of the American economy a lot. The country has been in a precarious position throughout 2018. It was just overlooked due to the performance of the financial industry, which is now beginning to wane. Edit: not => now
- dhagz 7y ago
  Yeah, I really think COVID-19 is the straw that broke the camel's back, so-to-speak.
sharadov 7y ago
Recession is a weak word for this pandemonium that we are experiencing. We need to coin a new word for this.
- r00fus 7y ago
  Nothing new needed - this tune has been played before: Depression.
- pmoriarty 7y ago
  It's going to be the Great Depression of the 21st Century. Only unlike the American Great Depression that happened about 100 years ago, it will be world-wide.
  - AnimalMuppet 7y ago
    What is your basis for calling the 1929 crash "the American Great Depression"? It began with Creditanstalt in Austria, and affected far more than the US. And what is your basis for saying that it wasn't worldwide?
- AnimalMuppet 7y ago
  In fact "recession" is the new word. Previous downturns were called depressions. But after the Great Depression, they wanted a word that said "a downturn, but not like that", and they invented "recession".
elliotec 7y ago
How has this not been painfully obvious to everyone in the world for weeks? I really don't understand why it is taking so long for people to accept this.
- twomoretime 7y ago
  The west has grown fat after decades of easy living. The reaction thus far from the public has convinced me that the vast majority of people are helpless and ignorant. This virus was an obvious threat in early January - long before the WHO was turning a blind eye to China's censorship.
- totalZero 7y ago
  Wishful thinking and false optimism.
Johnny555 7y ago
Since the last time we've seen an economic disruption like this has been decades, if not a century ago (the World Wars and the Great Depression come to mind), I don't think our modern definitions of "recession" or economic response really apply to this current situation. Government should be focused on keeping people healthy, fed and sheltered first, then focus on how to help businesses recover. For example, airlines are effectively shut down right now, only carrying a fraction of their normal passenger load, so there's not much that can be done to revive them until people can fly again.
Priem19 7y ago
I wonder how Bitcoin is going to fare during all of this.
- Priem19 7y ago
  Why the down votes? Bitcoin was invented for times like these. E.g. criminal banks receiving bailouts, and governments printing money. You can't keep printing money to solve problems...
  - D2187645 7y ago
    Bitcoin and cryptocurrency markets were shocked last week when the bitcoin price briefly plunged to under $4,000 per bitcoin, sparking fears of a crypto wipeout. The sudden fall was led by Seychelles-based bitcoin and cryptocurrency exchange BitMEX, with the bitcoin price dropping to a low of $3,600 on the exchange before it was closed for "maintenance."

61 points by spking 7y ago

hammock 7y ago

Maybe the markets will start to flatten out now?

davidw 7y ago
My guess is that the markets won't settle down until we have a handle on the public health crisis.
baron_harkonnen 7y ago
Not even close. I think everyone knows things will get worse, but at this point there are too many unknowns to quantify that. The market will remain stable for a few days, but there will continually be more data that will cause the market to continue to drop. We still haven't seen any country match China as far as total cases. Once Italy gets to 80k and then 160k 4 days later a new wave of anxiety will pass through people.
- brummm 7y ago
  When did Italy lock down the country? Last week? So then next week should hopefully be their peak.
  - davidw 7y ago
    Hopefully. People are still allowed to go to work, and there are a number of people not respecting the rules. Everyone keeps hoping to see the numbers dip, but they aren't yet.
  - baron_harkonnen 7y ago
    Hopefully you're right and this is why the market is stable for now. Maybe it will happen that Italy will stabilize. I don't think there are any epidemologists right now who don't think that Italy will reach 80k cases and 160k as well, but the distance between 80k cases and 160k might be much longer than I mention. But this brings its own uncertainty. If we succeed in not overwhelming the medical system then everyone will remain on lockdown longer which will have it's own unique economic impact. The point I'm making is that it most certainly will get much worse, but exactly how and what that means is very uncertain right now so virtually impossible to price correctly.
- arriu 7y ago
  Italy has more reported total deaths than China at this point. Spain is also catching up fast.

boulos 7y ago

Huh! I was about to say "no, we have to see two quarters of decline". Except, NBER no longer uses that rule and hasn't for a decade: > The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. For more information, see the latest announcement from the NBER's Business Cycle Dating Committee, dated 9/20/10. [1] https://www.nber.org/cycles.html https://www.nber.org/cycles.html

charwalker 7y ago
In some areas it is still technically 2 quarters of negative growth however manufacturing has been in a recession for a few quarters now using this definition. It is ongoing but previously limited to specific sectors that were hard hit by tariffs and other policy decisions.

tathougies 7y ago

The current recession (which we are undoubtedly technically in) is mainly due to governments everywhere mandating that the economy go into recession due to a public health emergency. Once that's done, business will almost certainly bounce back. Of course the economy is in a recession when all world governments have essentially mandated that it do so.

dgritsko 7y ago
Is that entirely true, though? At least some folks are losing their jobs, and at least some businesses are not able remain solvent. The effects from these events can't simply be reverted once the emergency is "done" (if we can even hope to be able to use the term "done" at some point), and it seems like they will almost certainly have at least some long-term negative impact. "How much" and "how long" remains to be seen.
- tathougies 7y ago
  Given that the government is being generous with a stimulus, and that most banks will see the writing on the wall which is that these businesses are not insolvent due to lack of demand, but rather the fact that demand was legislated away, only to be reintroduced in (hopefully) a few months), most banks and financial institutions will almost certainly salivate at the thought of almost guaranteed loan yields if they have the funds to wait it out. And banks of course certainly do have the funds to wait it out.
twomoretime 7y ago
>The current recession (which we are undoubtedly technically in) is mainly due to government's everywhere mandating... Unlikely. The writing has been on the wall for a while. The inverted yield curve and the long overdue 7 year cycle, among other indicators suggest that the virus was just a trigger. And we'll see it was a trigger for much more - the world has been an increasingly overstuffed powder keg for years. Do you know that Turkey and Greece are inching toward war over the refugee situation, and Greece already has support from multiple European Nations in shutting down migration? Imagine how many nations will be pulled in if one of the saber rattling incidents actually turns deadly... COVID-19 is the chaos that is about to shake loose every crack in the global socioeconomic system. Imagine how the geopolitical landscape is about to change when billions of Indians and Africans are exposed to the virus...

jsnider3 7y ago

Have we considered rescheduling?

twomoretime 7y ago

What recession? Market is dropping 1-2 times faster than it did in 1928. The entire economy is about to shut down for two months - the world over. Treasury Secretary predicting up to 20% unemployment, and I bet they were being conservative to prevent even more of a panic, because in the last 20s we also had 20% unemployment. This isn't a recession. It's a depression. The US is about to experience true hardship for the first time in decades.

davidw 7y ago
I'm not real optimistic about things, but... maybe things will come back to life quickly if we get a handle on the actual problem?
- bob33212 7y ago
  Yes, once we have a decent treatment/mitigation/herd immunity for the virus we will be able to pick things right back up where they were. The only difference will be that the value of the dollar is going to get cut by 50%. Expect massive inflation as we bailout everyone.
  - MaxBarraclough 7y ago
    > the value of the dollar is going to get cut by 50% Against what? Aren't all currencies going through a similar hardship?
  - mdorazio 7y ago
    That's not how it works. Inflation and dollar value vs. other currencies is only loosely tied to bailout-type measures. See, for example, the mostly non-existent inflation following the financial crash bailouts last time. Also see current strengthening of the dollar vs. other currencies because it's a safehaven.
  - jandrewrogers 7y ago
    It is significantly more complicated than this. Have you looked at foreign exchange rates lately? Other currencies are getting crushed relative to the USD because of COVID-19.

mywittyname 7y ago

Certain sectors of the US economy (mining, agriculture, manufacturing) have already been in and out of recessions for a few years now. These sector recessions have largely been hidden from the public because the banking sector is so much larger and has growth that outpaces the losses from the other sectors. So when you look at total GDP, the US economy was growing. But when you break GDP down into specific industries, you'll see that many of them have been struggling for a few years. The US BEA website has some great tools for exploring industry-specific economic output. Everyone wants to blame COVID-19 for the economic mess that's unfolding. But in reality, the trade war we went through with China hurt sectors of the American economy a lot. The country has been in a precarious position throughout 2018. It was just overlooked due to the performance of the financial industry, which is now beginning to wane. Edit: not => now

dhagz 7y ago
Yeah, I really think COVID-19 is the straw that broke the camel's back, so-to-speak.

sharadov 7y ago

Recession is a weak word for this pandemonium that we are experiencing. We need to coin a new word for this.

r00fus 7y ago
Nothing new needed - this tune has been played before: Depression.
pmoriarty 7y ago
It's going to be the Great Depression of the 21st Century. Only unlike the American Great Depression that happened about 100 years ago, it will be world-wide.
- AnimalMuppet 7y ago
  What is your basis for calling the 1929 crash "the American Great Depression"? It began with Creditanstalt in Austria, and affected far more than the US. And what is your basis for saying that it wasn't worldwide?
AnimalMuppet 7y ago
In fact "recession" is the new word. Previous downturns were called depressions. But after the Great Depression, they wanted a word that said "a downturn, but not like that", and they invented "recession".

elliotec 7y ago

How has this not been painfully obvious to everyone in the world for weeks? I really don't understand why it is taking so long for people to accept this.

twomoretime 7y ago
The west has grown fat after decades of easy living. The reaction thus far from the public has convinced me that the vast majority of people are helpless and ignorant. This virus was an obvious threat in early January - long before the WHO was turning a blind eye to China's censorship.
totalZero 7y ago
Wishful thinking and false optimism.

Johnny555 7y ago

Since the last time we've seen an economic disruption like this has been decades, if not a century ago (the World Wars and the Great Depression come to mind), I don't think our modern definitions of "recession" or economic response really apply to this current situation. Government should be focused on keeping people healthy, fed and sheltered first, then focus on how to help businesses recover. For example, airlines are effectively shut down right now, only carrying a fraction of their normal passenger load, so there's not much that can be done to revive them until people can fly again.

Priem19 7y ago

I wonder how Bitcoin is going to fare during all of this.

Priem19 7y ago
Why the down votes? Bitcoin was invented for times like these. E.g. criminal banks receiving bailouts, and governments printing money. You can't keep printing money to solve problems...
- D2187645 7y ago
  Bitcoin and cryptocurrency markets were shocked last week when the bitcoin price briefly plunged to under $4,000 per bitcoin, sparking fears of a crypto wipeout. The sudden fall was led by Seychelles-based bitcoin and cryptocurrency exchange BitMEX, with the bitcoin price dropping to a low of $3,600 on the exchange before it was closed for "maintenance."