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One thing that make that statement less impactful is that we now have tools to prevent recessions. So maybe in those five a recession were coming but correct ac

One thing that make that statement less impactful is that we now have tools to prevent recessions. So maybe in those five a recession were coming but correct action was taken and it was all good.

lazybreather 4y ago
"In economics a prediction itself can alter the object of the prediction. Hence, for certain kinds of ecomomic phenomenon, forecasting can be a logical impossibility." - Kaushik Basu. I think recession definitely falls under this category. And calling out a recession while we are already in it is not really a prediction.
adamsmith143 4y ago
>One thing that make that statement less impactful is that we now have tools to prevent recessions. Such as? We seem to be pulling all possible levers and are still barreling into a recession at full speed.
- kmonsen 4y ago
  What? This is a created recession as I see it. If we wanted to avoid this recession we would reduce the loan rate and increase the money supply. Not saying that would be smart.
- dragonwriter 4y ago
  > We seem to be pulling all possible levers and are still barreling into a recession at full speed. The Fed is pulling fairly hard (but far from maximally hard, because there is considerable concern about policy overshoot) on the anti-inflation monetary policy levers. Those are also the ones that cause, rather than fight, recessions. They are doing this because pulling hard on the anti-recession levers due to the hard and fast COVID recession lead to an equally hard and fast rebound with skyrocketing inflation. Congress is basically sitting on its hands on major fiscal policy levers, having returned to a basic neutral stance after fairly heavy anti-recession stimulus during the COVID recession. (If we really wanted to manage inflation while avoiding recession, we’d probably want Congress taking more targeted anti-inflation fiscal action aimed at the specific sectors driving overall inflation, so that the Fed could take a lighter hand on broad-focus anti-stimulative measures; if we just wanted to avoid recession in the near term period, we’d focus on stimulus and damn the torpedoes of inflation; but I don't think that would be wise.) We are very, very far from pulling all possible levers to prevent a recession.
- mancerayder 4y ago
  The solution is austerity, but no one wants to cut spending and risk losing votes. Large spending packages contributed to inflation and were partly a calculated giveaway by both parties.
reedf1 4y ago
Recessions are built into the system. They eliminate market inefficiencies and are the culling element in a system designed to efficiently allocate capital. They are small bush fires that cause minor damage but are ultimately healthy for the forest. Without recessions credit risk becomes meaningless and is never tested - everything is endlessly going up so there is no leverage risk. People take on progressively riskier bets, zombie companies survive on loans, asset prices increase beyond reason because "you can't lose". The system is incapable of monotonic growth and market intervention to take the sting out of recessions means the trees burn down not just the underbrush.
- kmonsen 4y ago
  I’m saying we can prevent them (or perhaps as you are alluding to make a bigger one in the future instead), not that we should. Clearly the last years have shown that low rates, tax cuts and helicopter money does at least postpone recessions.
- VictorPath 4y ago
  This is one of the most inane things I've read on HN in years, and that is a lot of competition. Bush fires happening in forests throughout history happened due to lighting strikes and what have you, at least before modern times. Random natural events. Economic activity is a considered, thought out socialized activity - the central societal activity. You're advocating the necessity of unnecessary problems due to other unnecessary problems - recessions are needed due to market inefficiencies, misallocated capital (cryptocurrency companies?), risky credit, leverage risk, riskier bets, zombie companies survive on loans, asset prices increase beyond reason, and a system incapable of monotonous growth. Your cure for this is all the maladies of a recession - higher unemployment, GDP actually shrinking etc. You list out many of the maladies of the current state of the relations of production and your solution is more maladies. This thinking is at best insular, unimaginative, limited and provincial. It is only tautological within a very limited view, where your solution for all the maladies you list out is self inflicting the malady of negative GDP growth and the maladies surrounding that.
lamontcg 4y ago
> we now have tools to prevent recessions. We have nothing that didn't exist in 2001 or 2008 or 2020. It is kind of weird to see Millennials whose economic awareness starts roughly in 2008 think that economics is fundamentally different now than it was 20 years ago. There is something fundamentally different now than 2009-2020 -- but it is that the Boomers are retiring, COVID took people out of the workforce, and reduced immigration means that there's now fewer job seekers than jobs. This is causing sticky wage increases that have policymakers worried. They want to keep workers in check and contain wage inflation, so will throw on the brakes. The levers that they have are crude and the only real way to do this is to create pain which drops the number of job openings. The current commodities inflation surge isn't even that out of line with the past. We had higher oil prices in 2008 before the bust, we also had similar prices, particularly on an inflation-adjusted basis in 2014 at the height of the last commodities boom (which did not end with a recession). And the current commodities boom is clearly associated with the pandemic. Two years ago we had negative oil prices. It is wild to see all the people in this thread not understanding the cyclical nature of commodities prices and the very clear bullwhip effects that are unfolding right now. I've been predicting that since everyone expects inflation that just on contrarian logic alone the bulk of the people have to be wrong and that we're due for a strong recessionary crash / depression. That logic seems to keep on getting better. The fact that people believe the Fed can land the economy softly, without a recession, and get inflation under control is also pretty wild though.
- kmonsen 4y ago
  I think you are putting a lot of emphasis on the word now and assuming I’ma lot younger than you. Anyway, can they feed fight inflation and avoid a recession? Who knows but it seems if they have to choose they are choosing a recession. A string crash/recession definitely seems like a real possibility.
mym1990 4y ago
There are absolutely no available tools to prevent recessions. There are tools to a) blunt the trauma while in a recession or b) kick the can down the road. Recessions are an integral part of the business cycle.
- kmonsen 4y ago
  Perhaps, not sure if there is wide agreement on that. Anyway, preventing and postponing both messes with predictions.
  - mym1990 4y ago
    Preventing a recession would imply that one can see into the future and accurately predict when the next one will happen. This isn’t like watching someone about to get hit by a car and then saving their life by pushing them to safety. Even if you did have hypothetical tools to do so, how would you know you prevented one anyways?
    - kmonsen 4y ago
      Let’s separate the two first. Clearly we can move the start date for recession by changing interest rates and pumping money into the economy. I think you agree on this? If so that would mess with predictions which is what I said. Can recessions be prevented. I think it is believed they can. The theory is juice the economy on hard times and pump the brakes in good times. This the depends on two things, ability to know what is good and bad times which I personally depends to some extent on predicting the future. I think it also depends on being able to use the brakes in good times which we did not do, the Trump tax cuts clearly should not have happened if this was the goal. So even though I believe in the Keynesian model I agree with you that it might not work in practice. But it is mostly working right now, although clearly not 100%. But I think the evidence is quite clear that the timing and severity of a recession can be influenced by monetary policy, and if you agree with that you probably agree that predictions of recession are not going to work 100% even if there was a clear way of predicting them.

One thing that make that statement less impactful is that we now have tools to prevent recessions. So maybe in those five a recession were coming but correct action was taken and it was all good.

lazybreather 4y ago

"In economics a prediction itself can alter the object of the prediction. Hence, for certain kinds of ecomomic phenomenon, forecasting can be a logical impossibility." - Kaushik Basu. I think recession definitely falls under this category. And calling out a recession while we are already in it is not really a prediction.

adamsmith143 4y ago

>One thing that make that statement less impactful is that we now have tools to prevent recessions. Such as? We seem to be pulling all possible levers and are still barreling into a recession at full speed.

kmonsen 4y ago
What? This is a created recession as I see it. If we wanted to avoid this recession we would reduce the loan rate and increase the money supply. Not saying that would be smart.
dragonwriter 4y ago
> We seem to be pulling all possible levers and are still barreling into a recession at full speed. The Fed is pulling fairly hard (but far from maximally hard, because there is considerable concern about policy overshoot) on the anti-inflation monetary policy levers. Those are also the ones that cause, rather than fight, recessions. They are doing this because pulling hard on the anti-recession levers due to the hard and fast COVID recession lead to an equally hard and fast rebound with skyrocketing inflation. Congress is basically sitting on its hands on major fiscal policy levers, having returned to a basic neutral stance after fairly heavy anti-recession stimulus during the COVID recession. (If we really wanted to manage inflation while avoiding recession, we’d probably want Congress taking more targeted anti-inflation fiscal action aimed at the specific sectors driving overall inflation, so that the Fed could take a lighter hand on broad-focus anti-stimulative measures; if we just wanted to avoid recession in the near term period, we’d focus on stimulus and damn the torpedoes of inflation; but I don't think that would be wise.) We are very, very far from pulling all possible levers to prevent a recession.
mancerayder 4y ago
The solution is austerity, but no one wants to cut spending and risk losing votes. Large spending packages contributed to inflation and were partly a calculated giveaway by both parties.

reedf1 4y ago

Recessions are built into the system. They eliminate market inefficiencies and are the culling element in a system designed to efficiently allocate capital. They are small bush fires that cause minor damage but are ultimately healthy for the forest. Without recessions credit risk becomes meaningless and is never tested - everything is endlessly going up so there is no leverage risk. People take on progressively riskier bets, zombie companies survive on loans, asset prices increase beyond reason because "you can't lose". The system is incapable of monotonic growth and market intervention to take the sting out of recessions means the trees burn down not just the underbrush.

kmonsen 4y ago
I’m saying we can prevent them (or perhaps as you are alluding to make a bigger one in the future instead), not that we should. Clearly the last years have shown that low rates, tax cuts and helicopter money does at least postpone recessions.
VictorPath 4y ago
This is one of the most inane things I've read on HN in years, and that is a lot of competition. Bush fires happening in forests throughout history happened due to lighting strikes and what have you, at least before modern times. Random natural events. Economic activity is a considered, thought out socialized activity - the central societal activity. You're advocating the necessity of unnecessary problems due to other unnecessary problems - recessions are needed due to market inefficiencies, misallocated capital (cryptocurrency companies?), risky credit, leverage risk, riskier bets, zombie companies survive on loans, asset prices increase beyond reason, and a system incapable of monotonous growth. Your cure for this is all the maladies of a recession - higher unemployment, GDP actually shrinking etc. You list out many of the maladies of the current state of the relations of production and your solution is more maladies. This thinking is at best insular, unimaginative, limited and provincial. It is only tautological within a very limited view, where your solution for all the maladies you list out is self inflicting the malady of negative GDP growth and the maladies surrounding that.

lamontcg 4y ago

> we now have tools to prevent recessions. We have nothing that didn't exist in 2001 or 2008 or 2020. It is kind of weird to see Millennials whose economic awareness starts roughly in 2008 think that economics is fundamentally different now than it was 20 years ago. There is something fundamentally different now than 2009-2020 -- but it is that the Boomers are retiring, COVID took people out of the workforce, and reduced immigration means that there's now fewer job seekers than jobs. This is causing sticky wage increases that have policymakers worried. They want to keep workers in check and contain wage inflation, so will throw on the brakes. The levers that they have are crude and the only real way to do this is to create pain which drops the number of job openings. The current commodities inflation surge isn't even that out of line with the past. We had higher oil prices in 2008 before the bust, we also had similar prices, particularly on an inflation-adjusted basis in 2014 at the height of the last commodities boom (which did not end with a recession). And the current commodities boom is clearly associated with the pandemic. Two years ago we had negative oil prices. It is wild to see all the people in this thread not understanding the cyclical nature of commodities prices and the very clear bullwhip effects that are unfolding right now. I've been predicting that since everyone expects inflation that just on contrarian logic alone the bulk of the people have to be wrong and that we're due for a strong recessionary crash / depression. That logic seems to keep on getting better. The fact that people believe the Fed can land the economy softly, without a recession, and get inflation under control is also pretty wild though.

kmonsen 4y ago
I think you are putting a lot of emphasis on the word now and assuming I’ma lot younger than you. Anyway, can they feed fight inflation and avoid a recession? Who knows but it seems if they have to choose they are choosing a recession. A string crash/recession definitely seems like a real possibility.

mym1990 4y ago

There are absolutely no available tools to prevent recessions. There are tools to a) blunt the trauma while in a recession or b) kick the can down the road. Recessions are an integral part of the business cycle.

kmonsen 4y ago
Perhaps, not sure if there is wide agreement on that. Anyway, preventing and postponing both messes with predictions.
- mym1990 4y ago
  Preventing a recession would imply that one can see into the future and accurately predict when the next one will happen. This isn’t like watching someone about to get hit by a car and then saving their life by pushing them to safety. Even if you did have hypothetical tools to do so, how would you know you prevented one anyways?
  - kmonsen 4y ago
    Let’s separate the two first. Clearly we can move the start date for recession by changing interest rates and pumping money into the economy. I think you agree on this? If so that would mess with predictions which is what I said. Can recessions be prevented. I think it is believed they can. The theory is juice the economy on hard times and pump the brakes in good times. This the depends on two things, ability to know what is good and bad times which I personally depends to some extent on predicting the future. I think it also depends on being able to use the brakes in good times which we did not do, the Trump tax cuts clearly should not have happened if this was the goal. So even though I believe in the Keynesian model I agree with you that it might not work in practice. But it is mostly working right now, although clearly not 100%. But I think the evidence is quite clear that the timing and severity of a recession can be influenced by monetary policy, and if you agree with that you probably agree that predictions of recession are not going to work 100% even if there was a clear way of predicting them.