Next Recession
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At-Large Senator LouisvilleThunder
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« on: June 23, 2017, 02:26:43 PM »

When do you think the next recession in the United States will happen? Is the current economic growth and low unemployment sustainable?
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Del Tachi
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« Reply #1 on: July 13, 2017, 10:37:29 AM »

It will be terrible because the Fed will have no effective way to combat a recessionary episode because interest rates are already so low.

Here's to hoping that the current schedule of rate hikes stays on pace. 
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RFayette
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« Reply #2 on: July 13, 2017, 10:45:56 AM »

It will be terrible because the Fed will have no effective way to combat a recessionary episode because interest rates are already so low.

Here's to hoping that the current schedule of rate hikes stays on pace. 
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Beet
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« Reply #3 on: July 13, 2017, 10:50:18 AM »

The Fed always has a way to combat recessions, since Ron Paul's absurd gold standard idea wasn't adopted.
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Paul Weller
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« Reply #4 on: July 19, 2017, 12:00:01 PM »
« Edited: July 19, 2017, 03:11:14 PM by Fremont Speaker Henry Wallace »

     Since the Great Depression, all major US recessions besides the 1970s recession, which was rather odd and was caused by an oil embargo, have been caused by either the Fed raising interest rates or a bubble bursting. The Great Depression, the early 2000s recession, and the Great Recession were all caused by a bubble bursting. The early 1980s recession and the early 1990s recession were both caused by the Fed raising rates. Right now, there doesn't appear to be a bubble in the US economy, meaning a recession caused by a bubble popping is unlikely to happen any time soon. Also, if the Fed keeps rates low, then there's no chance a recession caused by the Fed raising rates will happen any time soon.

     So more likely than not there won't be a recession anytime soon, meaning that it won't matter if interest rates are near the zero lower bound. However, this is only the case if the Fed doesn't raise rates. If the Fed does raise rates, though, then a recession like the early 80s or the early 90s recession could occur. Raising rates would be even more inexcusable now, though, because at least in the early 80s and the early 90s inflation was high. Right now inflation is 1.6%, considerably below the Fed's 2% target. Unfortunately, the Fed has been raising rates recently, so this is more likely than anything else to cause the next recession.
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Kingpoleon
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« Reply #5 on: July 19, 2017, 01:11:57 PM »

We clearly need the interest hikes. Inflation is a dangerous cancer, and it's "benefits" are always more or less negligible. I don't say that because I'm some raging anti-inflation person on economics - I understand that interest hikes are far less deadly than inflation.
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Paul Weller
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« Reply #6 on: July 19, 2017, 03:41:06 PM »
« Edited: July 19, 2017, 04:14:32 PM by Fremont Speaker Henry Wallace »

We clearly need the interest hikes. Inflation is a dangerous cancer, and it's "benefits" are always more or less negligible. I don't say that because I'm some raging anti-inflation person on economics - I understand that interest hikes are far less deadly than inflation.

     It is true that very high inflation can be quite bad for the economy, such as the hyperinflation in the Weimar Republic and the stagflation in the US in the 70s and early 80s. However, inflation right now is nowhere near those levels. In fact, it is under the Fed's 2% target at just 1.6%. As for interest rate hikes, these too can have very bad effects on the economy. The early 80s and early 90s recessions were both caused by interest rate hikes. So why risk a recession when inflation is below average levels?

     And mild inflation does have benefits. It favors borrowers over lenders because when prices are high, money is worth less. Therefore, although the money borrowers pay back to the lenders is the same numerically, it is worth less than it would be if there was less inflation. Borrowers are often poorer than lenders. Thus mild inflation can help improve the economic circumstances of poor borrowers. Deflation, on the other hand, which can result from raising interest rates, benefits lenders.

     In the aftermath of the Great Recession, this reduction in the value of debt borrowers have to pay back is especially beneficial because of the high levels of household debt that caused the Great Recession. While it may be advantageous for individuals to pay off that debt, it is bad for the economy as a whole if everybody does it at the same time because to pay for the debt, the borrowers spend less money, which decreases demand in the economy. If the value of household debt is less expensive due to inflation than it was previously, then borrowers are more likely to start spending money again because they don't have to use as much of it paying down their debts. That's not to say that inflation doesn't also hurt the poor by making goods less affordable, but in the aftermath of the Great Recession higher inflation really can have positive effects.
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Kingpoleon
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« Reply #7 on: July 19, 2017, 04:40:13 PM »

You're literally advocating for the boom-bust cycle...
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Paul Weller
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« Reply #8 on: July 19, 2017, 10:11:22 PM »
« Edited: July 19, 2017, 10:23:50 PM by Fremont Speaker Henry Wallace »

You're literally advocating for the boom-bust cycle...

I'm not quite sure why you think I'm advocating for the boom-bust cycle theory. I didn't mention it or any part of it at all. Was it because I mentioned bubbles? Most if not all mainstream economists and economic theories certainly accept the existence of bubbles; they're definitely not exclusive to the boom-bust cycle theory. In fact, economists who denied the existence of the housing bubble such as Alan Greenspan were proven hugely wrong; and economists who spotted the housing bubble early on such as Dean Baker were proven hugely right. Anyway, I strongly disagree with the boom-bust cycle theory. On the contrary, I agree with Keynesian theories such as the financial instability hypothesis and the debt deflation theory.
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Kingpoleon
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« Reply #9 on: July 19, 2017, 10:48:06 PM »

You're literally advocating for the boom-bust cycle...

I'm not quite sure why you think I'm advocating for the boom-bust cycle theory. I didn't mention it or any part of it at all. Was it because I mentioned bubbles? Most if not all mainstream economists and economic theories certainly accept the existence of bubbles; they're definitely not exclusive to the boom-bust cycle theory. In fact, economists who denied the existence of the housing bubble such as Alan Greenspan were proven hugely wrong; and economists who spotted the housing bubble early on such as Dean Baker were proven hugely right. Anyway, I strongly disagree with the boom-bust cycle theory. On the contrary, I agree with Keynesian theories such as the financial instability hypothesis and the debt deflation theory.

The boom-bust theory's proponents argue for inflation and low interest rates. I thought these dangers might be obvious to someone who speaks as grandiloquent words as you do. Once again, I dare say that bimetallism could very well crush economic wildfire theory - that recessions clear the ground, so to speak, for new life. Yet it seems that once again, radical Keynesians who reject every economic proposal and theory of Milton Friedman and Alan Greenspan, two of the greatest economists in their lifetimes, will crush the economy. Please at least tell me you wouldn't reject the opinions of Glenn Hubbard? No, I suppose that's too much to ask. Krugman has allowed his role as an economist to be politicized, and so poisoned minds with false economic understandings. There is only one thing worse than lack of knowledge, than ignorance - and that is the holding of false knowledge and false confidence.
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dw93
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« Reply #10 on: July 19, 2017, 10:59:36 PM »

Certainly not this year. I would say at the earliest quarter 3 or 4 of next year, but 2019 is more likely. The Great Recession ended in June of 2009 and the recovery from it has been uneven and up until recently weak. I can't see this expansion, given how fragile it's been, exceeding the 1990s expansion, which was 10 years (1991-2001).
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True Federalist (진정한 연방 주의자)
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« Reply #11 on: July 23, 2017, 12:38:54 AM »

Henry, there is a potential bubble out there. If the GOP manages to get a healthcare bill passed, the massive cuts they want to implement in healthcare spending will effectively act the same as a bubble, just that this time the collapse of demand will be due directly to government policy instead of market forces.

Fortunately, the Republicans so far have been unable to agree how they will trigger the next recession, but even that lack of agreement might be enuf to trigger one if the private insurance market collapses because of their efforts, even if they never pass anything.
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Spark
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« Reply #12 on: August 11, 2017, 10:45:06 PM »

2019 or 2021
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Shadows
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« Reply #13 on: September 06, 2017, 02:30:54 AM »

We clearly need the interest hikes. Inflation is a dangerous cancer, and it's "benefits" are always more or less negligible. I don't say that because I'm some raging anti-inflation person on economics - I understand that interest hikes are far less deadly than inflation.

     It is true that very high inflation can be quite bad for the economy, such as the hyperinflation in the Weimar Republic and the stagflation in the US in the 70s and early 80s. However, inflation right now is nowhere near those levels. In fact, it is under the Fed's 2% target at just 1.6%. As for interest rate hikes, these too can have very bad effects on the economy. The early 80s and early 90s recessions were both caused by interest rate hikes. So why risk a recession when inflation is below average levels?

     And mild inflation does have benefits. It favors borrowers over lenders because when prices are high, money is worth less. Therefore, although the money borrowers pay back to the lenders is the same numerically, it is worth less than it would be if there was less inflation. Borrowers are often poorer than lenders. Thus mild inflation can help improve the economic circumstances of poor borrowers. Deflation, on the other hand, which can result from raising interest rates, benefits lenders.

     In the aftermath of the Great Recession, this reduction in the value of debt borrowers have to pay back is especially beneficial because of the high levels of household debt that caused the Great Recession. While it may be advantageous for individuals to pay off that debt, it is bad for the economy as a whole if everybody does it at the same time because to pay for the debt, the borrowers spend less money, which decreases demand in the economy. If the value of household debt is less expensive due to inflation than it was previously, then borrowers are more likely to start spending money again because they don't have to use as much of it paying down their debts. That's not to say that inflation doesn't also hurt the poor by making goods less affordable, but in the aftermath of the Great Recession higher inflation really can have positive effects.

The early 90's in debatable but the early 80 Reagan one was due to the sudden interest rates. And it was necessary. Sometimes, you need to have a small recession to save the economy. In the 80's there was stagflation, high inflation coupled with low growth. That is a vicious cycle & in the end you have collapsing growth & super high inflation, destabilizing the economy.

There are multiple problems with a low interest rate. Seniors don't get a good return & return on investment other than stock is pretty low. There is no overall correction of the market & it is managed by low interests & excessive liquidity without correcting the basic fundamental problems. And beyond a certain time, it becomes pretty meaningless. Interest rate is 1 part - And a small part of the overall Growth puzzle.

There is nothing to say that low interest rates will prevent a recession. Recession & low interest rates have been common. It is however a tool to provide excess liquidity to manage such a crisis. When you end up with 0% & the economy goes south, there is very little you can do next.

My guess in 2022 or 2023 @ the topic. I expect all of Trump's stupid policies to pile up & then in 5 years the deficit will rise (due to high interest rates) forcing huge spending cuts. There is already a huge concentration of wealth & this sudden huge cuts in a slow stagnant economy will cause a recession.
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« Reply #14 on: September 27, 2017, 07:38:46 PM »

It will be terrible because the Fed will have no effective way to combat a recessionary episode because interest rates are already so low.

Here's to hoping that the current schedule of rate hikes stays on pace. 
We can only hope. They have kept rates artificially low for far to long just
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Mr.Phips
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« Reply #15 on: September 28, 2017, 04:12:02 PM »
« Edited: September 28, 2017, 04:14:56 PM by Mr.Phips »

It will be terrible because the Fed will have no effective way to combat a recessionary episode because interest rates are already so low.



Sure they can.  The fed can just engage in quantitative easing to increase the money supply.  Or simply print money at a faster rate.

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All Along The Watchtower
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« Reply #16 on: October 06, 2017, 03:37:27 PM »

2018-2019.

And no, it's not. But our oh-so-respected leaders in business and government don't care.
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mileslunn
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« Reply #17 on: October 15, 2017, 12:09:08 AM »

Tough to predict, but my best guess is 2019.  Could come late next year at the earliest will could be as late as the spring of 2021.  If you are Trump you are hoping for the latter as usually presidents when the recession hits or close to it lose.
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