21 ms·

Why a global recession is inevitable in 2023

127 points by madmanweb 4y ago

hunglee2 4y ago
'inevitable' yet precedes to list examples in geopolitics, economy and energy which are all the result of choices made by human beings. Let us not use language which describes economic recessions as force majeure - they are the result of human acts, human decisions, perhaps more strategic and pre-planned than comprised publishers like the Economist would have us believe
- cj 4y ago
  > comprised publishers like the Economist I was under the impression that the economist was one of the last remaining high quality print magazines in existence. Curious what makes you think they’re compromised? (And if you’re aware of any similar publications that aren’t compromised?) Edit: just noticed the quote says “comprised” rather than compromised. Disregard this comment if that wasn’t a typo
  - nuc1e0n 4y ago
    The Economist remains uncompromised in my view. Maybe out of touch though. Another reason for more vigourous debate. I still think all these troubles are just engineering problems to be solved. I relish the task.
    - jjeaff 4y ago
      I think most honest economists would tell you that economists have never been very good at predicting the future. They can do a pretty good job of explaining the why of the past and how markets work, but there are too many factors, either known or unknown that always come into play. But people really want predictions, which is why you get headlines like this one.
      - nuc1e0n 4y ago
        Well they are a company that needs to sell magazines/newspapers. Good for them I say. I think predictions can still be useful even if they are wrong.
- rwmj 4y ago
  This is extremely nitpicking. Obviously human factors cause recessions, have you noticed that economics is entirely about human affairs? The Economist doesn't need to state this explicitly.
  - AmericanChopper 4y ago
    Economics is specifically the study of resource allocation decisions. That’s literally all an economy is, the sum of all resource allocation decisions.
- eli_gottlieb 4y ago
  The business cycle is inevitable under capitalism.
- brookst 4y ago
  I am pretty sure they are using inevitable to mean “given where we are today” and not “could never have been avoided by different past choices going back to the Big Bang”.
paulpauper 4y ago
Hasn't it been inevitable every years? It seems like the media writes this headline every year. Anyone can find reasons for recession if you look hard enough. Who knows. I am not selling stocks.
- guax 4y ago
  If they keep calling it every year they'll eventually be right.
  - brookst 4y ago
    The year of Linux on the desktop!
- guerrilla 4y ago
  It's not just the media, but a lot of very heavy value investors, like Jeremy Grantham, believe that it has been inevitable the entire time. They maintain that we are in a bubble of sorts and that it must correct eventually.
- stocknoob 4y ago
  As the saying goes, economists have predicted 8 of the last 3 recessions.
  - yyyk 4y ago
    ...And Nouriel Roubini is famous for predicting 8000000000*10^(uncountable infinity) of the last 3 recessions.
    - slashdev 4y ago
      With a nickname like Dr Doom, what else would you expect? The guy seems like he would be fun at parties.
  - lyu07282 4y ago
    Listening to economists predictions on the economy is like listening to theologians, the least likely to know anything truthful about religion.
fumblebee 4y ago
https://archive.ph/YcqHG https://archive.ph/YcqHG
ianai 4y ago
Remains to be seen how Powell and the current Fed perceive their joint mandate of low inflation/low unemployment. By indicators, the labor market is still resembling hermit crabs leaving shells empty anytime a shell gets filled with a crab. But I thought the market was overweighted in 2017/2018 and the Fed wouldn't raise rates until 2022. As the economist stated here or elsewhere in this group of articles, the effects of raised rates take a year to take effect. It’s also economic dogma that the labor market reaches equilibrium after all the other markets. Me, I’d raise rates no higher than 5.5% for a quarter or two. There’s every reason to not jerk so hard on the economy that the economy reacts wildly. I hope they're not seeking additional runway for a future regime of lowering rates. The time for that is a time that looks like 2017-2019-not a time compounded by fall out from pandemic, war, threats of war, and increased uncertainty. Ceteris paribus. A wild reaction at this point looks like more people leaving the labor market than entering, I suspect. Edit-economics in general may point to a recession. But this particular Fed has yet to convince me that they’re about their joint mandate of low unemployment and low inflation. They bought actual stocks (correction:bonds) during the Pandemic-a sure high point of departure from the past.
- cosmojg 4y ago
  > They bought actual stocks during the Pandemic-a sure high point of departure from the past. Is this true? I'm pretty sure the wildest thing they did was purchase corporate bonds via ETFs.
  - ianai 4y ago
    Buybacks were rampant through this era. Difference without a distinction.
    - gruez 4y ago
      >Difference without a distinction. No, you're just playing fast and loose with facts. The fed also financed the federal government through treasury purchases, and the federal government sent out stimulus checks to americans, some of which bought crypto/meme stocks, but it would be disingenuous to write a screed about how bad the fed is because they bought "crypto/meme stocks" using the aforementioned reasoning.
koboll 4y ago
If it was truly 'inevitable' it would be priced in
- guerrilla 4y ago
  Something being inevitable and everyone knowing that it's inevitable and everyone acting on that knowledge are three distinct things.
  - drstewart 4y ago
    So which is it? And how have you acted look it?
- xdavidliu 4y ago
  if that were a real dollar bill, someone would've picked it up by now.
- simonh 4y ago
  Firstly pricing it in doesn't to stop it happening. Even if it did, nobody knows which stocks, commodities, etc will be impacted by how much when. Then again assuming The Economist is correct not everyone necessarily believes this and so won’t factor it into their behaviour.
- diogenescynic 4y ago
  Isn't the S&P 500 down like ~22% YTD?
  - LaurensBER 4y ago
    Down -22% and PE ratios still hover around 19ish indicating that the market is expecting a soft landing. If I remember correctly the market is expecting earnings of the SP500 to _grow_ by 5% next year
  - nuc1e0n 4y ago
    Who cares? It's all funny money anyway.
lvl102 4y ago
I am pretty sure the Economist cover has been repeatedly mocked as counter-indicator for many years now.
- notlukesky 4y ago
  The Economist is the Cramer of publications. To get to the truth do the anti-Cramer.
- simonh 4y ago
  I can see how someone who only read the covers and article titles, and didn’t read any of the actual content could come to that conclusion.
- julienchastang 4y ago
  Yeah, the article is a lot of FUD as usual. One sentence I have learned you can completely ignore in life is "Economist predict...". That said, I am sure that at some point there will be a global recession and a bad one, but it never plays out in the manner experts envision. Moreover, there is reason for optimism, at least in the long term. Look at the tremendous advancements playing out in the AI/ML arena and its implication for drug discovery, medicine, you name it. As for personal finances, be fully diversified across a suite of index funds and have a sizable nest egg. "Markets can stay irrational longer than you can stay solvent" is the old adage.
netman21 4y ago
Signs I look for of an impending recession: Stagnation. Inflation is a sign of a booming economy. Unemployment. I see help wanted signs everywhere Huge building projects abandoned. Here in SE Michigan I am seeing active construction sites everywhere. The Economist runs headlines like "Are Recessions a Thing of the Past?
- senda 4y ago
  I have the same thoughts. However I would say, why are there so many endless help wanted signs? Probably because the jobs don't provide enough income to be sustainable. I think the system currently is wabbling as employers are failing to keep rate with inflation in regards to pay. This will cause a bottleneck in regards to growth/performance for many businesses and ultimately be their downfall.
  - dingusdew 4y ago
    This is absolutely the case. Federal minimum wage is $7.25 an hour. There is literally not anywhere in the country where you can pay for a studio apartment at that pay. Better hope you can scrape together five roommates in a three bedroom. People have figured out that the cost of going to low-wage jobs like that is more than it is worth. The number of parents who realized they actually brought more money home by one parent quitting their job and taking care of the kids instead of paying for childcare while they work is high. A lot of folks, after COVID, and seeing that business owners literally didn't give one fuck if they died on the job or not, decided that maybe living their life was more important than grinding at a job that will happily send you to your death to make a buck.
    - jjeaff 4y ago
      I think the $600/week unemployment boost was really a catalyst for a lot of this too. It finally gave so many low wage workers just a minute to breathe and reflect and not worry about their next paycheck. And those few weeks of breathing room was enough to sort of break people out of the rat race and give them time to reevaluate what they want to do. Poverty is very mentally taxing and it can make a huge difference if you have a minute to stop and plan out your life a little bit.
fnordpiglet 4y ago
This is from 11/18. A lot has changed in the last 1.5 months. Truss tax cuts, cited in the article, are not not on the table. Inflation has moderated. Etc.
- JKCalhoun 4y ago
  Good points. But so too can a lot change in the next 1.5 months. Or 12.
cm2187 4y ago
The economist is blaming it all on Ukraine but the reality is that rate increases will likely be the primary driver for the recession, at least in the US. And those rates hikes (and roll off of the Fed B/S) are a response to inflation. And as much as the economist or Biden would like to pin inflation on Putin, the reality is that the inflation started a year earlier than the Ukraine war, and is the result of money printing and mass covid subsidies. Ukraine is only making the matter worse. It is important to recognise the causes because a lot of governments, in the US and Europe are running inflationary policies of mass subsidies in response to inflation, making the matter worse.
- brookst 4y ago
  I knows that’s a theory, but I haven’t see any more evidence that inflation is due to monetary policy than I have that it is due to Ukraine. Lots of philosophical arguments that it must be, but no evidence. Correlation, causation, all of that. Have you seen evidence of causality that goes beyond theory? (I’m not necessarily disagreeing, just saying it often seems like a faith-based view)
  - cm2187 4y ago
    The fact that the inflation predates the war in ukraine by several months should be evidence that Ukraine isn't the primary reason. That at least shouldn't be in dispute. I am not sure what sort of evidence you would expect. Every time you print money you create inflation. Even the post 2008 QE created massive asset inflation that wasn't captured in the main CPI, but the logic still stands.
    - jjeaff 4y ago
      While money supply is one of the factors, most economists don't seem to think it is the largest factor nor the most important. The world supply chain is still catching up from covid shutdowns. The auto industry is a perfect example of this. There are still waitlists for many new vehicles. Which has also caused increases in the used market. Now that supply chains are finally starting to catch up, we are already seeing prices fall in the used market, despite overall inflation.
theCrowing 4y ago
We are going to blame teachers and poor people again like in 2008, right?
- deleted 4y ago
  [deleted]
cj 4y ago
Stupid question: Are recessions a healthy part of a normal economic ebb and flow? (Over the long-term) I suppose an extremely long recession/depression (e.g. 5-10 years) would obviously be bad. But are recessions that last 1-2 years really something to panic over at a macro level? My (less than informed) assumption is high growth followed by a slight contraction/recession isn’t objectively bad if it helps an economy consolidate and become more efficient during the period of contraction before the next upswing.
- deleted 4y ago
  [deleted]
- jonahx 4y ago
  > Are recessions a healthy part of a normal economic ebb and flow? (Over the long-term) Ray Dalio discusses this in his video here: https://www.youtube.com/watch?v=PHe0bXAIuk0&t=483s https://www.youtube.com/watch?v=PHe0bXAIuk0&t=483s And basically the answer he gives is "yes".
  - rcarr 4y ago
    I look at recessions as being analogous with a bodybuilding cut cycle. You go through a bulking cycle to build muscle and to do so you consume a calorie surplus. Because it's difficult to tailor your macros precisely, you most likely put on a bit of fat at the same time. So after a period of bulking you undertake a cut cycle, where you burn off all the fat you don't want. In economic terms, in the bulk cycle there's lots of resources sloshing around so it's easy to start a business, get finance and grow. Then in the cut cycle, the businesses that prove their value remain and we collectively dispense of the ones that don't. Whilst it is healthy for the overall group, it's not much comfort for the individual humans on the losing end and we should probably do more to help them rebuild their lives afterwards.
    - Phurist 4y ago
      Cringe
jmartrican 4y ago
When I see predictions like this I think "awesome, no global recession coming in 2023". I have not done a study on this, but it seems like every prediction I come across is just wrong. Its like when I watch Artosis or Tasteless give a prediction during an SC2 tournament and immediately be wrong. "caster's curse" i think its called.
- nextaccountic 4y ago
  > When I see predictions like this I think "awesome, no global recession coming in 2023" From now on, every recession can be blamed on journalists that refused to publish its prediction
- d0mine 4y ago
  It depends on the definition "global recession" Who says it is not already here?
  - smitty1e 4y ago
    Well, those pencil-whipping the definitions, for starters.
  - jokethrowaway 4y ago
    I'm sure we used to have one. Something to do with 3 quarters of negative growth
    - nuc1e0n 4y ago
      2 quarters
    - Izkata 4y ago
      Two quarters of negative growth has only ever been a rule-of-thumb that mostly matched, the official determination has been with the National Bureau of Economic Research for a long long time ( https://www.nber.org/ https://www.nber.org/ ). You can see on this graph that the rule-of-thumb didn't hold right at the beginning of the graph in 1947 when no recession was declared, nor in 2008 when it started with a single quarter, or even 2001 when it started with a positive quarter: https://fred.stlouisfed.org/series/A191RL1Q225SBEA https://fred.stlouisfed.org/series/A191RL1Q225SBEA
curation 4y ago
Why are global symptoms of capitalism (recessions, financializations, slow motion crashes aka inflation) subjects of speculation but the cause - capitalism itself - not?
- brookst 4y ago
  I’ll one-up you: capitalism isn’t the problem, people are the problem.
  - za3faran 4y ago
    But we know that when we don't have boundaries, people will go to whatever extent to maximize their personal gains at the expense of others. That's why we have laws.
- BirAdam 4y ago
  Capitalism no longer exists. Current economic systems are based around debt and not capital.
  - switch007 4y ago
    That’s seems like a very very narrow definition of capitalism
    - BirAdam 4y ago
      No, the idea of capitalism is that one acquires capital for future investment. One forgoes wealth in the present for wealth in the future. In debt based economics, this process is reversed. The future is leveraged for the sake of the present.
samwillis 4y ago
Disclaimer, I have no idea if this is even slightly logical, I'm not an economist. House prices have increased significantly above inflation for decades to the point of absurdity, many multiples of a households income. People in their 20s (and 30s) increasingly don't believe they will ever own a home. If we have a period of inflation, with increased wages (obviously with a painful lag), but house prices remain stagnant with no increase, would that bring them down in real terms without a "housing crash"? Could this be a "good thing" and does that even make sense?
- diogenescynic 4y ago
  >If we have a period of inflation, with increased wages (obviously with a painful lag), but house prices remain stagnant with no increase, would that bring them down in real terms without a "housing crash"? Could this be a "good thing" and does that even make sense? It's still only part of the equation since interest rates are much higher now so mortgage payments are double what they were a year ago. So even if the home price isn't rising, the costs to finance it are.
  - throwthroyaboat 4y ago
    This is a good point. This is also somewhat dependent on how a particular country does mortgages. The USA does 30-year fixed rate, but that is not the norm in most countries. The main benefit of lower house prices (even if the monthly finance costs are the same) is that the amount you have to save for a deposit is reduced, which is often a significant barrier for young people.
    - samwillis 4y ago
      That's more or less where my thinking comes from, I'm in the UK and most people fix for 2-5 years at a time. Interest rates will come down again so the effect of them being a barrier will reduce. But the fundamental problem for most people here in the UK is getting a 10-20% deposit together when the average house price is £296k, average salary is about £27k, and average household income is £31k.
  - 4y ago
breck 4y ago
The fact that this article is behind a paywall leads me to believe that the editor-in-chief of the Economist has no idea what's about to happen in 2023. ;)
tester756 4y ago
Whenever somebody makes claims like this I do wonder whether they actually bet money on that
luxuryballs 4y ago
recessions aren’t surprising or avoidable right? it seems to align with everything else in nature that things fluctuate and move in waves, entropy causes things to come into balance, dead weight is shed because it’s dead weight and economic health depends on shedding dead weight, a recession is just the trough of a much bigger economic wave, ride the wave! it’s just like cutting back some roses in fall to enable more healthy flourishing growth in spring
college_physics 4y ago
Geopolitical risk can easily decimate economic activity. But the flipside is that its avoidance can boost animal spirits. It doesnt feel like the planet is currently reaching for a peace and cooperation dividend and 2023 will still be working out the impact of the covid and ukraine war shocks
bob1029 4y ago
I am still looking for aggressive growth. My strategy over the last ~9 months has been to buy (things I trust) on a continuous, daily basis. I intend to maintain this strategy all the way through next year as well. When I start to see lots of headlines like "recession is inevitable", I remind myself that the stock market is a time machine and/or palantir operating at some arbitrary offset in the future. Keeping my cash in safe bets and waiting until the Economist says "all clear" is going to be way too late to capitalize on much of the downturn or volatility.
- adam_arthur 4y ago
  This works if what you’re buying is fair value. Plenty of dotcom names went to 0, or took 15+ years to break even. As long as there’s a future for the company and valuation is fair, you should be fine though. I’m doing the same. My threshold is roughly PE 15 or less with strong balance sheet and decent growth. Lots of REITs that are pretty sure bets at closer to 10x or lower multiples. Still would not buy any 10x or more PS companies. By and large going to be stinkers over the next decade imo
nuc1e0n 4y ago
The US government has had it's own policy failures that give it cause to consider saber rattling also. The best option seems to me to stay local and hunker down but keep talking to each other. Fibre optics are cheap. Can't Xi and Biden just play Starcraft or something?
qgawt 4y ago
Many people here say that it's just another Economist prediction. It isn't. The OECD predicts a recession for Germany and The UK in 2023: https://www.oecd.org/economy/germany-economic-snapshot/ https://www.oecd.org/economy/germany-economic-snapshot/ https://www.oecd.org/economy/united-kingdom-economic-snapshot/ https://www.oecd.org/economy/united-kingdom-economic-snapsho... I'm also astonished by the denial in forums that the Sars-Cov2 and Ukraine policies are the cause. You may like those policies, but it requires mental contortions to deny their influence.
MilnerRoute 4y ago
The key word is "global". The article mentions Europe (especially the post-Brexit UK) and then, surprisingly, China. "America’s economy enters 2023 in fundamentally stronger shape than either China’s or any in Europe. The Federal Reserve’s aggressive rate increases will tip the economy into recession, but with the labour market still strong and household savings copious, it will be a mild one."
dan-g 4y ago
As odd as it is, does this need a [2022] since it’s from November of last year, technically?
claytongulick 4y ago
This thread has been such an interesting read, I know so little about economics that I'm not sure how to parse a lot of the comments. I don't mean to introduce politics into the discussion more than as a thought experiment: if we had a different president (Trump, for example) would your opinion on whether we are in a recession be different? It's sort of an interesting method of self reflection.
dgudkov 4y ago
The world has been on the bull run powered by QE and zero rates for 13 years or more, then the fun ended, and suddenly it's all the disasters in the world that will inevitably lead to a recession. When did the economists forget the term "market correction"?
guerrilla 4y ago
Also headline today at the Financial Times is that 87% of analysts they spoke to are betting on a recession in 2023. Also the IMF is warning recession will hit 1/3 of the world this year.
thoughtstheseus 4y ago
There are structural reasons why Unemployment will remain low in the US. One, Covid deaths plus Covid retirements(boomer cohort that had assets to retire), educational delays from poor schooling practices, low immigration have all created a labor shortage of ~3 million in the U.S. that’s a figure based on 2019 labor projections vs 2022 estimates. Recession is a consumption definition. Nothing more
JakeAl 4y ago
The only stat you need to know: debt to GDP ratio. When the debt > GDP, it means you are underwater and not taking in enough money to pay your bills as a nation. The US debt to GDP ratio has been over 120% since 2020. By IMF definition >120% means the country is an an economic death spiral. The government can't pay it's bills (all those loans for all that free bailout money.) By 2028 the US will only be making payments on the interest on it's loans, not the principal, which is the point of no return/when the economic death spiral becomes irreversible with US insolvency by 2042. Those are just the numbers and the timeframe. Look at how many countries are >120% and how they are each able to manage the problem (or not). The best example is Japan who can manage it even with lost decades because they are incestuous with their own money and resources. This has been a global economic crisis that has been hidden/ignored since at least 2014. Do a search for economic crisis and you'll see how long this has been going on and how long the government has had a timeline for it's own bankruptcy. Yet they overspend and prop up the economy for political purposes. China built entire fake cities to prop up their credit rating just so they could lend the US money. Anyway, as interest rates go up, private money goes into T-Bills, not stocks. That's what raising interest rates does. Private investment evaporates and smart money goes into stable not risky volatile assets whose price doesn't move much or at all (historically cash or gold), or those with best guaranteed returns, such as bonds. That's why T-Bills returns on short term bills are so high (if you trust the government can pay their bills, which they can't. They are betting on future growth and earnings, which comes with innovation, and barring solid state batteries, cold fusion or zero-point energy, we're all out of value innovation.) Soylent Green maybe?? So all that free money from the government with low interest rates on borrowing gets paid back before the government goes bankrupt. In theory. In reality it just excuses more overspending by government at the taxpayers expense. (just look at the past 20 years for reference.) Either way, recession is already underway despite what the government is telling you. The question is are we due for a depression. Barring some technical innovation/catalyst, all indicators point to yes without some major overhaul of the global economic system where debt is forgiven, digital currency which would end up working like a stock split, or war, which is the historical solution. Just a simple explanation of why inflation isn't going down is in this video: https://youtu.be/COZocfFifQw?t=423 https://youtu.be/COZocfFifQw?t=423 Apply this to most businesses/business models that took advantage of free/cheap/easy money for the past 10 years but didn't shift/pivot to a sustainable business model moving forward. Businesses will need to fold en masse before things START to change,(all the sick people dying off makes what's left look healthier) and that's going to kick into high gear starting his year. Systemic failures started in 2022. Just look at the food supply chain and the energy crisis that was created in the name of green energy and you'll start to wake up to how disastrous things have gotten thanks to energy and foreign/trade policy.

127 points by madmanweb 4y ago

'inevitable' yet precedes to list examples in geopolitics, economy and energy which are all the result of choices made by human beings. Let us not use language which describes economic recessions as force majeure - they are the result of human acts, human decisions, perhaps more strategic and pre-planned than comprised publishers like the Economist would have us believe

cj 4y ago
> comprised publishers like the Economist I was under the impression that the economist was one of the last remaining high quality print magazines in existence. Curious what makes you think they’re compromised? (And if you’re aware of any similar publications that aren’t compromised?) Edit: just noticed the quote says “comprised” rather than compromised. Disregard this comment if that wasn’t a typo
- nuc1e0n 4y ago
  The Economist remains uncompromised in my view. Maybe out of touch though. Another reason for more vigourous debate. I still think all these troubles are just engineering problems to be solved. I relish the task.
  - jjeaff 4y ago
    I think most honest economists would tell you that economists have never been very good at predicting the future. They can do a pretty good job of explaining the why of the past and how markets work, but there are too many factors, either known or unknown that always come into play. But people really want predictions, which is why you get headlines like this one.
    - nuc1e0n 4y ago
      Well they are a company that needs to sell magazines/newspapers. Good for them I say. I think predictions can still be useful even if they are wrong.
rwmj 4y ago
This is extremely nitpicking. Obviously human factors cause recessions, have you noticed that economics is entirely about human affairs? The Economist doesn't need to state this explicitly.
- AmericanChopper 4y ago
  Economics is specifically the study of resource allocation decisions. That’s literally all an economy is, the sum of all resource allocation decisions.
eli_gottlieb 4y ago
The business cycle is inevitable under capitalism.
brookst 4y ago
I am pretty sure they are using inevitable to mean “given where we are today” and not “could never have been avoided by different past choices going back to the Big Bang”.

paulpauper 4y ago

Hasn't it been inevitable every years? It seems like the media writes this headline every year. Anyone can find reasons for recession if you look hard enough. Who knows. I am not selling stocks.

guax 4y ago
If they keep calling it every year they'll eventually be right.
- brookst 4y ago
  The year of Linux on the desktop!
guerrilla 4y ago
It's not just the media, but a lot of very heavy value investors, like Jeremy Grantham, believe that it has been inevitable the entire time. They maintain that we are in a bubble of sorts and that it must correct eventually.
stocknoob 4y ago
As the saying goes, economists have predicted 8 of the last 3 recessions.
- yyyk 4y ago
  ...And Nouriel Roubini is famous for predicting 8000000000*10^(uncountable infinity) of the last 3 recessions.
  - slashdev 4y ago
    With a nickname like Dr Doom, what else would you expect? The guy seems like he would be fun at parties.
- lyu07282 4y ago
  Listening to economists predictions on the economy is like listening to theologians, the least likely to know anything truthful about religion.

fumblebee 4y ago

https://archive.ph/YcqHG https://archive.ph/YcqHG

ianai 4y ago

Remains to be seen how Powell and the current Fed perceive their joint mandate of low inflation/low unemployment. By indicators, the labor market is still resembling hermit crabs leaving shells empty anytime a shell gets filled with a crab. But I thought the market was overweighted in 2017/2018 and the Fed wouldn't raise rates until 2022. As the economist stated here or elsewhere in this group of articles, the effects of raised rates take a year to take effect. It’s also economic dogma that the labor market reaches equilibrium after all the other markets. Me, I’d raise rates no higher than 5.5% for a quarter or two. There’s every reason to not jerk so hard on the economy that the economy reacts wildly. I hope they're not seeking additional runway for a future regime of lowering rates. The time for that is a time that looks like 2017-2019-not a time compounded by fall out from pandemic, war, threats of war, and increased uncertainty. Ceteris paribus. A wild reaction at this point looks like more people leaving the labor market than entering, I suspect. Edit-economics in general may point to a recession. But this particular Fed has yet to convince me that they’re about their joint mandate of low unemployment and low inflation. They bought actual stocks (correction:bonds) during the Pandemic-a sure high point of departure from the past.

cosmojg 4y ago
> They bought actual stocks during the Pandemic-a sure high point of departure from the past. Is this true? I'm pretty sure the wildest thing they did was purchase corporate bonds via ETFs.
- ianai 4y ago
  Buybacks were rampant through this era. Difference without a distinction.
  - gruez 4y ago
    >Difference without a distinction. No, you're just playing fast and loose with facts. The fed also financed the federal government through treasury purchases, and the federal government sent out stimulus checks to americans, some of which bought crypto/meme stocks, but it would be disingenuous to write a screed about how bad the fed is because they bought "crypto/meme stocks" using the aforementioned reasoning.

koboll 4y ago

If it was truly 'inevitable' it would be priced in

guerrilla 4y ago
Something being inevitable and everyone knowing that it's inevitable and everyone acting on that knowledge are three distinct things.
- drstewart 4y ago
  So which is it? And how have you acted look it?
xdavidliu 4y ago
if that were a real dollar bill, someone would've picked it up by now.
simonh 4y ago
Firstly pricing it in doesn't to stop it happening. Even if it did, nobody knows which stocks, commodities, etc will be impacted by how much when. Then again assuming The Economist is correct not everyone necessarily believes this and so won’t factor it into their behaviour.
diogenescynic 4y ago
Isn't the S&P 500 down like ~22% YTD?
- LaurensBER 4y ago
  Down -22% and PE ratios still hover around 19ish indicating that the market is expecting a soft landing. If I remember correctly the market is expecting earnings of the SP500 to _grow_ by 5% next year
- nuc1e0n 4y ago
  Who cares? It's all funny money anyway.

lvl102 4y ago

I am pretty sure the Economist cover has been repeatedly mocked as counter-indicator for many years now.

notlukesky 4y ago
The Economist is the Cramer of publications. To get to the truth do the anti-Cramer.
simonh 4y ago
I can see how someone who only read the covers and article titles, and didn’t read any of the actual content could come to that conclusion.
julienchastang 4y ago
Yeah, the article is a lot of FUD as usual. One sentence I have learned you can completely ignore in life is "Economist predict...". That said, I am sure that at some point there will be a global recession and a bad one, but it never plays out in the manner experts envision. Moreover, there is reason for optimism, at least in the long term. Look at the tremendous advancements playing out in the AI/ML arena and its implication for drug discovery, medicine, you name it. As for personal finances, be fully diversified across a suite of index funds and have a sizable nest egg. "Markets can stay irrational longer than you can stay solvent" is the old adage.

netman21 4y ago

Signs I look for of an impending recession: Stagnation. Inflation is a sign of a booming economy. Unemployment. I see help wanted signs everywhere Huge building projects abandoned. Here in SE Michigan I am seeing active construction sites everywhere. The Economist runs headlines like "Are Recessions a Thing of the Past?

senda 4y ago
I have the same thoughts. However I would say, why are there so many endless help wanted signs? Probably because the jobs don't provide enough income to be sustainable. I think the system currently is wabbling as employers are failing to keep rate with inflation in regards to pay. This will cause a bottleneck in regards to growth/performance for many businesses and ultimately be their downfall.
- dingusdew 4y ago
  This is absolutely the case. Federal minimum wage is $7.25 an hour. There is literally not anywhere in the country where you can pay for a studio apartment at that pay. Better hope you can scrape together five roommates in a three bedroom. People have figured out that the cost of going to low-wage jobs like that is more than it is worth. The number of parents who realized they actually brought more money home by one parent quitting their job and taking care of the kids instead of paying for childcare while they work is high. A lot of folks, after COVID, and seeing that business owners literally didn't give one fuck if they died on the job or not, decided that maybe living their life was more important than grinding at a job that will happily send you to your death to make a buck.
  - jjeaff 4y ago
    I think the $600/week unemployment boost was really a catalyst for a lot of this too. It finally gave so many low wage workers just a minute to breathe and reflect and not worry about their next paycheck. And those few weeks of breathing room was enough to sort of break people out of the rat race and give them time to reevaluate what they want to do. Poverty is very mentally taxing and it can make a huge difference if you have a minute to stop and plan out your life a little bit.

fnordpiglet 4y ago

This is from 11/18. A lot has changed in the last 1.5 months. Truss tax cuts, cited in the article, are not not on the table. Inflation has moderated. Etc.

JKCalhoun 4y ago
Good points. But so too can a lot change in the next 1.5 months. Or 12.

cm2187 4y ago

The economist is blaming it all on Ukraine but the reality is that rate increases will likely be the primary driver for the recession, at least in the US. And those rates hikes (and roll off of the Fed B/S) are a response to inflation. And as much as the economist or Biden would like to pin inflation on Putin, the reality is that the inflation started a year earlier than the Ukraine war, and is the result of money printing and mass covid subsidies. Ukraine is only making the matter worse. It is important to recognise the causes because a lot of governments, in the US and Europe are running inflationary policies of mass subsidies in response to inflation, making the matter worse.

brookst 4y ago
I knows that’s a theory, but I haven’t see any more evidence that inflation is due to monetary policy than I have that it is due to Ukraine. Lots of philosophical arguments that it must be, but no evidence. Correlation, causation, all of that. Have you seen evidence of causality that goes beyond theory? (I’m not necessarily disagreeing, just saying it often seems like a faith-based view)
- cm2187 4y ago
  The fact that the inflation predates the war in ukraine by several months should be evidence that Ukraine isn't the primary reason. That at least shouldn't be in dispute. I am not sure what sort of evidence you would expect. Every time you print money you create inflation. Even the post 2008 QE created massive asset inflation that wasn't captured in the main CPI, but the logic still stands.
  - jjeaff 4y ago
    While money supply is one of the factors, most economists don't seem to think it is the largest factor nor the most important. The world supply chain is still catching up from covid shutdowns. The auto industry is a perfect example of this. There are still waitlists for many new vehicles. Which has also caused increases in the used market. Now that supply chains are finally starting to catch up, we are already seeing prices fall in the used market, despite overall inflation.

theCrowing 4y ago

We are going to blame teachers and poor people again like in 2008, right?

deleted 4y ago
[deleted]

cj 4y ago

Stupid question: Are recessions a healthy part of a normal economic ebb and flow? (Over the long-term) I suppose an extremely long recession/depression (e.g. 5-10 years) would obviously be bad. But are recessions that last 1-2 years really something to panic over at a macro level? My (less than informed) assumption is high growth followed by a slight contraction/recession isn’t objectively bad if it helps an economy consolidate and become more efficient during the period of contraction before the next upswing.

deleted 4y ago
[deleted]
jonahx 4y ago
> Are recessions a healthy part of a normal economic ebb and flow? (Over the long-term) Ray Dalio discusses this in his video here: https://www.youtube.com/watch?v=PHe0bXAIuk0&t=483s https://www.youtube.com/watch?v=PHe0bXAIuk0&t=483s And basically the answer he gives is "yes".
- rcarr 4y ago
  I look at recessions as being analogous with a bodybuilding cut cycle. You go through a bulking cycle to build muscle and to do so you consume a calorie surplus. Because it's difficult to tailor your macros precisely, you most likely put on a bit of fat at the same time. So after a period of bulking you undertake a cut cycle, where you burn off all the fat you don't want. In economic terms, in the bulk cycle there's lots of resources sloshing around so it's easy to start a business, get finance and grow. Then in the cut cycle, the businesses that prove their value remain and we collectively dispense of the ones that don't. Whilst it is healthy for the overall group, it's not much comfort for the individual humans on the losing end and we should probably do more to help them rebuild their lives afterwards.
  - Phurist 4y ago
    Cringe

jmartrican 4y ago

When I see predictions like this I think "awesome, no global recession coming in 2023". I have not done a study on this, but it seems like every prediction I come across is just wrong. Its like when I watch Artosis or Tasteless give a prediction during an SC2 tournament and immediately be wrong. "caster's curse" i think its called.

nextaccountic 4y ago
> When I see predictions like this I think "awesome, no global recession coming in 2023" From now on, every recession can be blamed on journalists that refused to publish its prediction
d0mine 4y ago
It depends on the definition "global recession" Who says it is not already here?
- smitty1e 4y ago
  Well, those pencil-whipping the definitions, for starters.
- jokethrowaway 4y ago
  I'm sure we used to have one. Something to do with 3 quarters of negative growth
  - nuc1e0n 4y ago
    2 quarters
  - Izkata 4y ago
    Two quarters of negative growth has only ever been a rule-of-thumb that mostly matched, the official determination has been with the National Bureau of Economic Research for a long long time ( https://www.nber.org/ https://www.nber.org/ ). You can see on this graph that the rule-of-thumb didn't hold right at the beginning of the graph in 1947 when no recession was declared, nor in 2008 when it started with a single quarter, or even 2001 when it started with a positive quarter: https://fred.stlouisfed.org/series/A191RL1Q225SBEA https://fred.stlouisfed.org/series/A191RL1Q225SBEA

curation 4y ago

Why are global symptoms of capitalism (recessions, financializations, slow motion crashes aka inflation) subjects of speculation but the cause - capitalism itself - not?

brookst 4y ago
I’ll one-up you: capitalism isn’t the problem, people are the problem.
- za3faran 4y ago
  But we know that when we don't have boundaries, people will go to whatever extent to maximize their personal gains at the expense of others. That's why we have laws.
BirAdam 4y ago
Capitalism no longer exists. Current economic systems are based around debt and not capital.
- switch007 4y ago
  That’s seems like a very very narrow definition of capitalism
  - BirAdam 4y ago
    No, the idea of capitalism is that one acquires capital for future investment. One forgoes wealth in the present for wealth in the future. In debt based economics, this process is reversed. The future is leveraged for the sake of the present.

samwillis 4y ago

Disclaimer, I have no idea if this is even slightly logical, I'm not an economist. House prices have increased significantly above inflation for decades to the point of absurdity, many multiples of a households income. People in their 20s (and 30s) increasingly don't believe they will ever own a home. If we have a period of inflation, with increased wages (obviously with a painful lag), but house prices remain stagnant with no increase, would that bring them down in real terms without a "housing crash"? Could this be a "good thing" and does that even make sense?

diogenescynic 4y ago
>If we have a period of inflation, with increased wages (obviously with a painful lag), but house prices remain stagnant with no increase, would that bring them down in real terms without a "housing crash"? Could this be a "good thing" and does that even make sense? It's still only part of the equation since interest rates are much higher now so mortgage payments are double what they were a year ago. So even if the home price isn't rising, the costs to finance it are.
- throwthroyaboat 4y ago
  This is a good point. This is also somewhat dependent on how a particular country does mortgages. The USA does 30-year fixed rate, but that is not the norm in most countries. The main benefit of lower house prices (even if the monthly finance costs are the same) is that the amount you have to save for a deposit is reduced, which is often a significant barrier for young people.
  - samwillis 4y ago
    That's more or less where my thinking comes from, I'm in the UK and most people fix for 2-5 years at a time. Interest rates will come down again so the effect of them being a barrier will reduce. But the fundamental problem for most people here in the UK is getting a 10-20% deposit together when the average house price is £296k, average salary is about £27k, and average household income is £31k.
- 4y ago

breck 4y ago

The fact that this article is behind a paywall leads me to believe that the editor-in-chief of the Economist has no idea what's about to happen in 2023. ;)

tester756 4y ago

Whenever somebody makes claims like this I do wonder whether they actually bet money on that

luxuryballs 4y ago

recessions aren’t surprising or avoidable right? it seems to align with everything else in nature that things fluctuate and move in waves, entropy causes things to come into balance, dead weight is shed because it’s dead weight and economic health depends on shedding dead weight, a recession is just the trough of a much bigger economic wave, ride the wave! it’s just like cutting back some roses in fall to enable more healthy flourishing growth in spring

college_physics 4y ago

Geopolitical risk can easily decimate economic activity. But the flipside is that its avoidance can boost animal spirits. It doesnt feel like the planet is currently reaching for a peace and cooperation dividend and 2023 will still be working out the impact of the covid and ukraine war shocks

bob1029 4y ago

I am still looking for aggressive growth. My strategy over the last ~9 months has been to buy (things I trust) on a continuous, daily basis. I intend to maintain this strategy all the way through next year as well. When I start to see lots of headlines like "recession is inevitable", I remind myself that the stock market is a time machine and/or palantir operating at some arbitrary offset in the future. Keeping my cash in safe bets and waiting until the Economist says "all clear" is going to be way too late to capitalize on much of the downturn or volatility.

adam_arthur 4y ago
This works if what you’re buying is fair value. Plenty of dotcom names went to 0, or took 15+ years to break even. As long as there’s a future for the company and valuation is fair, you should be fine though. I’m doing the same. My threshold is roughly PE 15 or less with strong balance sheet and decent growth. Lots of REITs that are pretty sure bets at closer to 10x or lower multiples. Still would not buy any 10x or more PS companies. By and large going to be stinkers over the next decade imo

nuc1e0n 4y ago

The US government has had it's own policy failures that give it cause to consider saber rattling also. The best option seems to me to stay local and hunker down but keep talking to each other. Fibre optics are cheap. Can't Xi and Biden just play Starcraft or something?

qgawt 4y ago

Many people here say that it's just another Economist prediction. It isn't. The OECD predicts a recession for Germany and The UK in 2023: https://www.oecd.org/economy/germany-economic-snapshot/ https://www.oecd.org/economy/germany-economic-snapshot/ https://www.oecd.org/economy/united-kingdom-economic-snapshot/ https://www.oecd.org/economy/united-kingdom-economic-snapsho... I'm also astonished by the denial in forums that the Sars-Cov2 and Ukraine policies are the cause. You may like those policies, but it requires mental contortions to deny their influence.

MilnerRoute 4y ago

The key word is "global". The article mentions Europe (especially the post-Brexit UK) and then, surprisingly, China. "America’s economy enters 2023 in fundamentally stronger shape than either China’s or any in Europe. The Federal Reserve’s aggressive rate increases will tip the economy into recession, but with the labour market still strong and household savings copious, it will be a mild one."

dan-g 4y ago

As odd as it is, does this need a [2022] since it’s from November of last year, technically?

claytongulick 4y ago

This thread has been such an interesting read, I know so little about economics that I'm not sure how to parse a lot of the comments. I don't mean to introduce politics into the discussion more than as a thought experiment: if we had a different president (Trump, for example) would your opinion on whether we are in a recession be different? It's sort of an interesting method of self reflection.

dgudkov 4y ago

The world has been on the bull run powered by QE and zero rates for 13 years or more, then the fun ended, and suddenly it's all the disasters in the world that will inevitably lead to a recession. When did the economists forget the term "market correction"?

guerrilla 4y ago

Also headline today at the Financial Times is that 87% of analysts they spoke to are betting on a recession in 2023. Also the IMF is warning recession will hit 1/3 of the world this year.

thoughtstheseus 4y ago

There are structural reasons why Unemployment will remain low in the US. One, Covid deaths plus Covid retirements(boomer cohort that had assets to retire), educational delays from poor schooling practices, low immigration have all created a labor shortage of ~3 million in the U.S. that’s a figure based on 2019 labor projections vs 2022 estimates. Recession is a consumption definition. Nothing more

JakeAl 4y ago

The only stat you need to know: debt to GDP ratio. When the debt > GDP, it means you are underwater and not taking in enough money to pay your bills as a nation. The US debt to GDP ratio has been over 120% since 2020. By IMF definition >120% means the country is an an economic death spiral. The government can't pay it's bills (all those loans for all that free bailout money.) By 2028 the US will only be making payments on the interest on it's loans, not the principal, which is the point of no return/when the economic death spiral becomes irreversible with US insolvency by 2042. Those are just the numbers and the timeframe. Look at how many countries are >120% and how they are each able to manage the problem (or not). The best example is Japan who can manage it even with lost decades because they are incestuous with their own money and resources. This has been a global economic crisis that has been hidden/ignored since at least 2014. Do a search for economic crisis and you'll see how long this has been going on and how long the government has had a timeline for it's own bankruptcy. Yet they overspend and prop up the economy for political purposes. China built entire fake cities to prop up their credit rating just so they could lend the US money. Anyway, as interest rates go up, private money goes into T-Bills, not stocks. That's what raising interest rates does. Private investment evaporates and smart money goes into stable not risky volatile assets whose price doesn't move much or at all (historically cash or gold), or those with best guaranteed returns, such as bonds. That's why T-Bills returns on short term bills are so high (if you trust the government can pay their bills, which they can't. They are betting on future growth and earnings, which comes with innovation, and barring solid state batteries, cold fusion or zero-point energy, we're all out of value innovation.) Soylent Green maybe?? So all that free money from the government with low interest rates on borrowing gets paid back before the government goes bankrupt. In theory. In reality it just excuses more overspending by government at the taxpayers expense. (just look at the past 20 years for reference.) Either way, recession is already underway despite what the government is telling you. The question is are we due for a depression. Barring some technical innovation/catalyst, all indicators point to yes without some major overhaul of the global economic system where debt is forgiven, digital currency which would end up working like a stock split, or war, which is the historical solution. Just a simple explanation of why inflation isn't going down is in this video: https://youtu.be/COZocfFifQw?t=423 https://youtu.be/COZocfFifQw?t=423 Apply this to most businesses/business models that took advantage of free/cheap/easy money for the past 10 years but didn't shift/pivot to a sustainable business model moving forward. Businesses will need to fold en masse before things START to change,(all the sick people dying off makes what's left look healthier) and that's going to kick into high gear starting his year. Systemic failures started in 2022. Just look at the food supply chain and the energy crisis that was created in the name of green energy and you'll start to wake up to how disastrous things have gotten thanks to energy and foreign/trade policy.