Recessions A Thing of the Past?

[marko]

This guy believes that Central Banks have essentially made recessions a thing of the past.

https://www.cnbc.com/2019/04/30/fed...-eliminated-recessions-palihapitiya-says.html

He writes:
“We have completely taken away the toolkit of how normal economies should work when we started with QE. I mean, the odds that there’s a recession anymore in any Western country of the world is almost next to impossible now, save a complete financial externality that we can’t forecast.”

Personally I believe that recessions are a good thing, allowing markets to clean out and reset themselves and, from a selfish standpoint an opportunity to find bargains.

 

[JDARNELL]

Maybe another sign of irrational exuberance. No way. Rest assured there will be another recession at some point.

 

[copyright1997reloaded]

Personally I believe that recessions are a good thing, allowing markets to clean out and reset themselves and, from a selfish standpoint an opportunity to find bargains.

So does he. Another quote from the article:

A lack of downturns is not necessarily a good thing, Palihapitiya added, and he criticized central banks for refusing to allow normal economic cycles to play out.

“Central bankers have lost all intestinal fortitude to actually put a country through a recession, because it’s actually regenerative and useful,” he said.

 

[Aerides]

The article is describing the thoughts of a single VC? meaningless. He's described as....

"A well-known investor across a multitude of areas, including as a very early Facebook executive and a big proponent of cryptocurrencies..."

lol...

 

[street]

Interesting. I remember reading a thread here on the this subject. It was interesting reading the thoughts etc.. One thing I do remember from that thread is they said, that when we have a recession now, it doesn't last as long because Gov reacts quick to the problem. It doesn't just take it's course like in the 20's and 30's. We have real time markets and people get to see those markets instantly.

 

[Stonewalker]

Maybe another sign of irrational exuberance. No way. Rest assured there will be another recession at some point.

Sadly, I see this as inevitable. Because of the way the USA mismanages the cash flow in this country, a collapse of the dollar is very likely, though the timing is in question.

The FED cannot keep printing money and expect no repercussions.

That's fuel for a longer thread, I suppose.

 

[Stonewalker]

Interesting. I remember reading a thread here on the this subject. It was interesting reading the thoughts etc.. One thing I do remember from that thread is they said, that when we have a recession now, it doesn't last as long because Gov reacts quick to the problem. It doesn't just take it's course like in the 20's and 30's. We have real time markets and people get to see those markets instantly.

Yes, but does the Govt react correctly?

According to the Treasury Dept report in March, the US lost $1.16 Trillion dollars in 2018 - and that was a relatively good year.

Expect a reckoning.

 

[Mdlerth]

There's one born every minute

This guy believes that Central Banks have essentially made recessions a thing of the past.

I remember about 20 years ago hearing a fair number of folks spout analogous predictions about "The New Economy". The introduction of the internet meant that companies didn't need to worry about showing a profit any more. All those archaic rules about the importance of earnings and costs could be discarded. Growth was permanent and guaranteed...

...until it wasn't.

 

[Alan]

Britain’s chancellor of the exchequer during the 1990’s was Gordon Brown who then became Prime Minister after Tony Blair and was embarrassed in interviews during the bust of 2007/8 because in the late 90’s he repeatedly declared that we were at the end of “boom and bust” due to the great money controls governments now had their disposal.

https://youtu.be/E5UILQzJgCA

 

[CaptTom]

This guy believes that Central Banks have essentially made recessions a thing of the past.

When people start saying the rules have changed, there's a "new economy" or "this can go on forever"...

It's time to start worrying!

 

[ckelly78z]

I feel like i'm walking the tightrope attempting to bank retirement funds, fully invested in LCG equities that have returned 20.4% this year so far. I fully expect a recession to hit at any time, but the market keeps plugging along making gains. I am practicing irrational exuberance, but willing to gamble a bit with 10 years to go.

 

[MichaelB]

I agree with the thread title - recessions are a thing of the past.



They’re also a thing of the present and future ...

 

[Stonewalker]

I agree with the thread title - recessions are a thing of the past.



They’re also a thing of the present and future ...

I almost snorted my coffee! Thanks for that!

 

[Andre1969]

Interesting. I remember reading a thread here on the this subject. It was interesting reading the thoughts etc.. One thing I do remember from that thread is they said, that when we have a recession now, it doesn't last as long because Gov reacts quick to the problem. It doesn't just take it's course like in the 20's and 30's. We have real time markets and people get to see those markets instantly.

I wonder how true that really is, though? The only recessions I have to go on, from personal memory, are the '79-83 period, the '00-02 recession, and the "Great Recession" of '08-early '09.


I think if you go by the actual textbook definition of "recession", there were actually two of them in that '79-83 time period, and they were actually quite short. But, I just remember the whole period as being a time of turmoil and unrest, so in my mind tends to lump that whole period together as "recession".


I believe there was, technically, a recession during Bush I's term, but I was in college at the time and hadn't started really investing yet, so I don't remember any really serious impact. I do remember paying around $1.65 for a gallon of gas around the time of Desert Storm though, and people griping about that.

 

[timbervest]

"Is the Business Cycle Obsolete?" by Martin Bronfenbrenner published in 1969 just as the longest recovery in history was coming to an end. Entertaining reading (available on Amazon).

 

[Christine]

My 0.02 NOK:


Before QE recessions were hard to predict. But in hindsight they were obvious.


What is new is that all this QE with negative interest rates and new money flows has created a new economy. And this new economy makes it hard to predict any recessions coming.

 

[conversationalphrase]

Great discussion.

I've often wondered if there was a way to adjust historical market performance for modern accounting guidelines, SEC rules, laws like Sarbanes-Oxley, academic advancements in economic theory and corporate finance.

I wonder if anyone has studied this. Perhaps looking at past recessions or the depression and backwards applying today's rules and methods to estimate how the path may have changed.

 

[GravitySucks]

It's different this time

 

[RunningBum]

I remember about 20 years ago hearing a fair number of folks spout analogous predictions about "The New Economy". The introduction of the internet meant that companies didn't need to worry about showing a profit any more. All those archaic rules about the importance of earnings and costs could be discarded. Growth was permanent and guaranteed...

...until it wasn't.

Yes! I remember similar. I distinctly remember hearing our CEO, in a very profitable high tech company, declare that we were in a "recession-proof" industry, or maybe that it was our specific company's situation. Not long after, the dotcot bust hit, and the stock still hasn't returned to the high level it was at when he made that declaration some 19 years ago.

 

[street]

I really have no opinion but what I remember from a previous thread and found some of the material said, very interesting.
As far as in the feds are doing the right thing or making the right decisions is really anyone's guess. I hope what ever they do doesn't backfire and make things worse then just letting things play out. Time will tell.

 

[Running_Man]

I believe in theory most people believe that recessions are inevitable, it is just they are no longer accepted since the Central Banks declared they have the tools to stop the worst of recessions since 2008. Japan is a pretty good model of what the economy could look like going forward the next 20 years, once you get here there is no escape. As long as corporations and governments can borrow near zero there is no need to fear a recession, as you can just borrow to re-ignite demand. At 1 percent interest rates 50 times GDP in debt is only 5 percent of GDP to service the debt, implying at 1 percent the US government could easily borrow 1 Quadrillion dollars (22.5% annual increase in debt) to forstall any recession over the next 20 years and net interest paid by the government would only rise slightly over the 20 years (5 percent annual growth in interest payments by 2040).

Before you think this is impossible Japan Government debt grew by 17 percent per year from 1993 to 2018 and only now are starting to run into interest payment issues. And exchange rates have been a minor annoyance, in 1993 it was 129 to the dollar and actually has strengthened to 111 to the dollar today.

The reason inflation does not come into play is that with near zero interest rates new companies tap the capital markets can lose money for a decade to grab market share at a time and put pricing pressure on the market, giving below market prices to consumers and abnormally high competition. Bad thing is in 1993 Japan GDP was 4.5 Trillion USD and it's only 5 trillion USD today.

 

[Chuckanut]

No more recessions. Nice to know.

Now excuse me while I watch reruns of Groucho Marx's show "You Bet Your Life".

 

[audreyh1]

I agree with the thread title - recessions are a thing of the past.



They’re also a thing of the present and future ...

Agreed!

It’s inevitable.

We had a very bad one last time, and crept very slowly out of the gate. We actually came pretty close to recession a couple of times, and experienced mild deflation. Europe still hasn’t recovered. China started getting into trouble a few years ago.

It’s just a matter of time.

 

[WestUniversity]

Maybe another sign of irrational exuberance. No way. Rest assured there will be another recession at some point.

+1