General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThe economy is humming, so why do experts fear a recession?
The skies of the U.S. economy are clear and sunny, but many analysts see storm clouds on the horizon.
By many measures, the economy is in its best shape since the Great Recession of 2007 to 2009. Employment hit an 18-year low of 3.8% in May. Average wage growth is widely expected to reach 3% by the end of the year. And the economy is projected to grow nearly 3% in 2018 for just the second time since the downturn.
Yet the economic expansion is the second-longest in U.S. history, leading many economists to forecast a recession as early as next year. Half the economists surveyed last month by the National Association of Business Economics foresee a recession starting in late 2019 or in early 2020, and two-thirds are predicting a slump by the end of 2020.
Why?
Precisely because things seem to be going so well.
The late stage of an economic expansion is most vulnerable to a popping of the bubble. It's typically when unemployment falls, inflation heats up, the Federal Reserve raises interest rates to cool the economy down often going too far and investors and consumers pull back.
Its just the time when it feels like all is going fabulously that we make mistakes, we overreact, we overborrow, says Mark Zandi, chief economist of Moodys Analytics.
But some other ingredient typically is needed to tip an economy into recession, Zandi says. In 1990-91, it was an oil price shock. In 2001, it was the bursting of the dotcom bubble and resulting stock market decline. In 2007, it was the housing crash.
A recession fundamentally is an outbreak of pessimism that causes consumers and businesses to rein in spending, economist Jesse Edgerton of JPMorgan Chase says.
https://www.msn.com/en-us/money/markets/the-economy-is-humming-so-why-do-experts-fear-a-recession/ar-AAyu9FQ?li=BBnbfcN
bearsfootball516
(6,378 posts)But if it did happen in 2020, it would basically doom Trump's chances of reelection. Obama had a slight lead over McCain going into October, then the economy collapsed and he went sprinting out ahead.
marylandblue
(12,344 posts)Historically, they take advantage of economic downturns by looking for scapegoats. He will blame immigrants and liberals for the problem. Many will believe him, because it's easier to assign blame than to understand business cycles. Our political divides could get even worse than they are now.
shanny
(6,709 posts)tRump isn't a populist, he pretends to be one while doing the bidding of his billionaire "friends" (as if he has any). And now he's probably even pissing them off.
marylandblue
(12,344 posts)They all pretend to be for the people while they are really just looking for their own power and glory.
ansible
(1,718 posts)It's awful yes, but I just can't imagine any other possible way to defeat Trump.
bearsfootball516
(6,378 posts)He's solidifying his base, but not expanding it. He's also pissing off independants and firing up the Democratic base. I think even if the economy holds, a good candidate can beat him.
ansible
(1,718 posts)bearsfootball516
(6,378 posts)I'm a Cory Booker fan personally. Smart, young, energetic, has experience but not so much that it would be baggage, charismatic, pretty popular in his state and would probably get the Obama coalition out.
pwb
(11,319 posts)Any.
tazkcmo
(7,306 posts)Its brought on by rich assholes gambling with people's savings accounts, 401k's and such. In other words, unmitigated greed and lack of morals.
ProfessorGAC
(65,466 posts)The off the books war money was causing issuing of treasuries with no accounting that negatively affected inflationary pressures and diluted the equity flow into those markets. The result was that the market was actually overinflated, and was not rising at historical rates. So, then the sharks got in the pool and started the greed thing to speculate prices up (or hedged them down) but with insufficient macroeconomic foundation to support the inflated value.
There's less of that going this time (at least while the bank laws are still in place, and who knows how long that will last).
Last point: The OP is asking why the "experts" are expecting a downturn. Not all the experts are. Some are expecting a slow down, but that's quite a lot different than a crash.
tazkcmo
(7,306 posts)It all means more poverty, bankruptcy and homelessness.
ProfessorGAC
(65,466 posts)You can do the gloom and doom thing all you want, but i'm not playing that game.
There is a GIANT difference between a crash and a slow down. One leads to what you describe on a massive scale, the other doesn't.
1929 was a crash. 2008 was a near crash. We're heading for neither.
SWBTATTReg
(22,226 posts)and no one can ever predict where and when it will happen...amazing when you consider all of the millions of figures and facts available online to just about anyone who seeks it out. It's the interpretation of these facts and what's used to compile these 'facts'. In the housing boom, massive amounts of substandard housing was included when it should have discounted to begin w/, but the powers that be back then hid these facts from the public.
Perhaps its the increasing discrepancy between low income and high income proportions that will lead the next recession/slump? Sure wages have been slowly creeping up, but far too slowly. However, asset prices across the board have been increasing at a higher rate. Eventually these two will run into conflict w/ each other. The federal debt can't continue to spiral out of control as the repugs allowed to do, when all of a sudden, this wasn't an issue w/ them, but instead, their donors were the issue. Thus, tailoring a tax cut specifically to one unique class of personnel (their donors) is bound to cause problems in multiple ways.
Just hunker down, and don't concentrate too much stuff in one stock or one asset class (spread it around baby) and this should minimize any unforeseen negative movements somewhat, although w/ the real estate crash of 2008/2009, it crossed over into the stock market too, as well as other asset classes, and brought their values down too.
YessirAtsaFact
(2,064 posts)It stimulated an already robust recovery, and may cause inflation, especially if you add these idiotic tariffs to the equation.
part Of the concern is that the inflation may cause a recession
safeinOhio
(32,763 posts)and the list goes on. Everyone else is making a killing on something. More folks jump on the band wagon and then the wheels fall off. Prices go beyond value and it all comes crashing down. Wanna buy some Bennie Babies cheap?
Ernesto
(5,077 posts)uponit7771
(90,378 posts)... and it always fails harder without regulation
shanny
(6,709 posts)Caliman73
(11,760 posts)When Reagan and the Republicans cut taxes and rolled back banking regulations in the 1980's, the bottom didn't suddenly fall out. The US was sluggishly pulling out of the doldrums of the 1970's but was heading upward economically. Reagan's cuts had generated a bump, but predictably created a deficit because of the loss of revenue.
We are seeing the same thing here with Trump. President Obama cut unemployment from 10% to about 5% and under Trump it went down to 4%. Trump is taking credit for the low unemployment when he only was around for the final percentage point drop.
Republicans do it all the time. Democrats work their way from a downward turn, then Republicans use the good numbers to justify a tax cut for the richest people, and then revenue starts to breakdown, pessimism sets in, and we slide back into recession. Then the Democrats come in during the difficult times, piece together the economy while Republicans complain that it isn't happening fast enough, then idiot voters put Republicans back in charge and the cycle continues.
lame54
(35,359 posts)Just as Bush's crash was Clinton's fault
Funny how that works