Could It Have Been Better to Have Had a Recession?

[Scrapr]

Honestly, where do these crazy ideas come from?

I think Keynes called it animal spirits
also Nobody know nothing

 

[Al18]

I don’t worry about things I have no control over.

 

[audreyh1]

I don’t worry about things I have no control over.

Although preparation is good. FIREcalc includes plenty of dire periods.

 

[frayne]

The U.S. economy will experience ups and downs, and the wise approach is to prepare for bad times during the good times. We recently came through a worldwide pandemic, and while the impact on the U.S. economy was significant, it wasn't as severe as what many other countries experienced. My greater concern is inflation and uncontrolled government spending, which are simply unsustainable in the long run.

 

[Aerides]

Not having avoided a recession over the past couple of years, assuming that would now be in the past, would have almost no impact over whether we have one crop up in the near future. The conditions that create them can still occur.

Personally, I think we're in for a lot of volatility, none of which I can control or plan for.

 

[target2019]

I'm probably speaking way above my own intelligence with this question, but it popped into my caveman head today and won't leave.

It seems to me like we're past the point at which the next recession will be mild and short. I think we're in for a doozy sometime. So I then wondered if the Fed's actions for a soft landing (along with everything else it does) has set up the economy for a harder fall... whenever it may happen. Perhaps a harder fall than just having let a moderate recession take place lat year and then responding to it. I know that would have meant hardship for many people by way of unemployment and reduced investment values. And I don't want anyone harmed.

Go gentle on me if I'm way out of line. I dare not post this on the other forum!

The Coronavirus Recession of 2020 may support something like your hypothesis. Just conjecture on my part.

 

[Tadpole]

Will crypto be the next "To big to fail" thing?

crypto or world wide currency starting with, perhaps, the dollar? A slow morph or a bold declaration. or NOT.

 

[stepford]

The Fed did a great job of gently tamping down inflation without causing a recession. As a result the villagers started picking up pitchforks and torches. They won't make that mistake next time.

 

[audreyh1]

Inflation is still elevated just not nearly as bad. The Fed is not done.

 

[FiveDriver]

"It's difficult to make Predictions, especially about the Future." Sounds like something Yogi Berra might have said.

But if the country made it thru the 2000 and 2008 mess, I think we'll be OK.

 

[brett]

In a word...

NO!

 

[aja8888]

All previous recessions included periods of high unemployment. We have historically very low unemployment right now. Something blowing up, like Bitcoin going bust, is not a recession. Neither is a stock market meltdown. Recessions usually hurt low income people.

 

[pb4uski]

Scariest thing to me is that someday - hopefully not for a long time - someone (some country - or several) will decide they don't want to buy our debt any more or hold our dollars. That could be ugly. Til then, I think we'll muddle through most problems okay. YMMV

I dunno. In terms of debt issuance we are and probably will continue to be the best looking horse in the glue factory.

 

[Markola]

Seems to me we’ve outlawed recessions this century. Whenever there’s a market plunge, the government floods the zone with “liquidity” (money printing in various forms) conjured from thin air, and interest rates are cut drastically to stimulate lending and investment. “Put it on the credit card.”

Of course, there are prices to be paid later in everyone’s decreased purchasing power caused by all those additional dollars in the system, followed by higher interest rates for everyone and for the government to make debt payments, all in an effort to mop up the excesses of the prior emergency liquidity injections.

It would probably be healthier to allow periodic, cleansing recessions, but then elections come along more quickly than recoveries, so officials decide it’s better to inject liquidity now, longer term consequences, like mushrooming national debt, be-damned. After all, those are future officials’ problems.

The Keynesian model has worked well for 100 years, helping make America prosperous, and the dollar the current global reserve currency. One price is debt payments that now exceed defense spending. Another is $22 for a plain breakfast a diner, which, soon enough we’ll look back on as having been cheap.

The political class isn’t known for long-term thinking, so I expect we’ll keep it up until we can’t.

 

[Qs Laptop]

It would probably be healthier to allow periodic, cleansing recessions, but then elections come along more quickly than recoveries, so officials decide it’s better to inject liquidity now, longer term consequences, like mushrooming national debt, be-damned. After all, those are future officials’ problems.

The political class isn’t known for long-term thinking, so I expect we’ll keep it up until we can’t.

The Federal Reserve sets monetary policy, like interest rates. The Federal Reserve members are not elected. They are appointed and serve 14 year terms. Their terms are staggered so that they are not all appointed in the same year or two.

The problem is the elected officials love to spend money and are loathe to collect it in taxes. Thus, the government borrows money. Recessions will not "cleanse" excessive spending habits.

 

[Markola]

^^^^ What I meant is, moderate recessions would cleanse a lot of zombie companies, profligate banks, and other excesses. But unelected Fed board member terms or no, we barely allow the creative destruction of the market to happen, because the political class can’t tolerate it. As the OP suggested, such excesses are building up and might cause something major. I think the OP poses a legitimate concern. YMMV.

 

[Qs Laptop]

"Creative destruction." I've never heard such an oxymoronic phrase before.

 

[Markola]

It’s one of the most well-known conceptions of capitalism.

“The phrase creative destruction" was originated by the Austrian economist, Joseph Schumpeter. He introduced the concept in his book "Capitalism, Socialism, and Democracy" published in 1942. Schumpeter used the term to describe the process by which innovation and technological advancements lead to the obsolescence of older industries and economic structures, thereby fostering new growth and progress.”

From Creative Destruction - Econlib

 

[MichaelB]

Quotes should be accompanied by attribution. A reminder to members to avoid using AI generated text from ChatBots.

 

[aja8888]

"Creative destruction." I've never heard such an oxymoronic phrase before.

Also known as bad decisions.

 

[marko]

Someone told me that the Great Recession of 2008 was only going to get much, much worse. That was on the last week of February 2009.

 

[audreyh1]

It did go down farther in March. The markets recovered then but the economy took much longer to recover, and was weak for a decade.

 

[Qs Laptop]

It’s one of the most well-known conceptions of capitalism.

“The phrase creative destruction" was originated by the Austrian economist, Joseph Schumpeter. He introduced the concept in his book "Capitalism, Socialism, and Democracy" published in 1942. Schumpeter used the term to describe the process by which innovation and technological advancements lead to the obsolescence of older industries and economic structures, thereby fostering new growth and progress.”

From Creative Destruction - Econlib

I'm happy that Mr. Schumpeter was able to coin a new phrase for use in his book. It's still a bald faced oxymoron.

Anyway, I don't see anywhere in that quote where it says that recessions are useful to foster new growth and progress.

 

[pjigar]

I think so, or rather it has to be so. But will it affect the overall economy to cause a recession? I have to believe that it won't.

Deleted

 

[MichaelB]

A reminder to please forego posts about crypto.