We may be in the midst of one of the longest economic expansion cycles on record, but the Great Recession is still at the top of many investors’ minds including Yours Truly's.
The 2018 Q2 Zillow Home Price Expectations Survey found that surveyed economists and real estate experts expect the U.S. to enter another recession in 2020.
Others opine that if you're not in a recession you're headed for one. It's kind of like predicting that eventually a person will die. Since no one is immortal and death is a natural part of the life cycle, you can with certainty say a person will die.
The real question is when the next recession will hit. If you're just projecting gloom and doom and waiting to be proven right then that's just moronic.
It has dawned on me repeatedly over the past several weeks, as not only the doom and gloom merchants predict another recession in the coming years, but more and more actual educated economists are predicting the same.
Every time I log onto my Yahoo! account, I have at least one dire warning that the next recession will be a doozie. That you and I can be sure of. The last one was a doozie, the one before it was and the one before that one was. I could detail to you what they all were or the underlying reasons for them, but you know about them already and you can search them to your heart's content.
Furthermore, I would assume that the recession after the next recession will be a doozie as well.
The bursting of the Dutch tulip mania bubble of the 1630s was a doozie, as will be the artificial intelligence/ruined environment crash in thirty or so years.
When the 2008 crash occurred to everyone whose homes and stocks were not really worth what the -debt-fueled market said they were, markets crashed, banks flirted with insolvency, and the economy sank into a deep global recession.
Now, ten years later, it may be starting to happen again. Then again, it might not be!
This time, however, it will not be households using cheap debt to take cash out of their overvalued homes. Rather, it is giant corporations using cheap debt — and a one-time tax windfall — to take cash from their balance sheets and send it to shareholders in the form of increased dividends and, in particular, stock buybacks.
As before, the cash-outs are helping to drive debt, in this case corporate debt, to record levels. As before, they are adding a short-term sugar high to an already booming economy. And once again, they are diverting capital from productive long-term investment to further inflate a financial bubble, this one in corporate stocks and bonds. When that bubble bursts, it will possibly send the economy into another recession.
In "Fears of the Next Recession" by David Dayen in The New Republic, the author writes:
Economic predictions are no more reliable than Super Bowl ones. After all, those same economists predicting a recession also forecast an average of 2.8 percent growth in 2018, due to the Republican tax cuts passed late last year. But this much is certain: A recession in the next couple of years would be catastrophic for the many millions of Americans who haven’t recovered one bit since the last one.
Per a recent Chicago Tribune editorial,
It should be clear from all this that recession forecasting is more of an art than a science. There will be one, at some point in the next few years, but the timing can’t yet be forecast with any real confidence. Beware of economists banging the table and promising that it’s a dead cert for, say, the third quarter of 2019. It just isn’t.
The only thing I’m confident of is that the next recession will be nothing like the last one, and it won’t break the banking system. Recessions are roughly proportionate to the imbalances which precede them, and the economy today looks nothing like the period ahead of the financial crisis.
Fortunately, just because the most recent recession nearly blew global capitalism, doesn’t mean that the next one will too.
One thing that I can tell you for sure about the next recession (and the one after that) is that it will definitely be a doozie!
Others opine that if you're not in a recession you're headed for one. It's kind of like predicting that eventually a person will die. Since no one is immortal and death is a natural part of the life cycle, you can with certainty say a person will die.
The real question is when the next recession will hit. If you're just projecting gloom and doom and waiting to be proven right then that's just moronic.
It has dawned on me repeatedly over the past several weeks, as not only the doom and gloom merchants predict another recession in the coming years, but more and more actual educated economists are predicting the same.
Every time I log onto my Yahoo! account, I have at least one dire warning that the next recession will be a doozie. That you and I can be sure of. The last one was a doozie, the one before it was and the one before that one was. I could detail to you what they all were or the underlying reasons for them, but you know about them already and you can search them to your heart's content.
When the 2008 crash occurred to everyone whose homes and stocks were not really worth what the -debt-fueled market said they were, markets crashed, banks flirted with insolvency, and the economy sank into a deep global recession.
Now, ten years later, it may be starting to happen again. Then again, it might not be!
This time, however, it will not be households using cheap debt to take cash out of their overvalued homes. Rather, it is giant corporations using cheap debt — and a one-time tax windfall — to take cash from their balance sheets and send it to shareholders in the form of increased dividends and, in particular, stock buybacks.
As before, the cash-outs are helping to drive debt, in this case corporate debt, to record levels. As before, they are adding a short-term sugar high to an already booming economy. And once again, they are diverting capital from productive long-term investment to further inflate a financial bubble, this one in corporate stocks and bonds. When that bubble bursts, it will possibly send the economy into another recession.
In "Fears of the Next Recession" by David Dayen in The New Republic, the author writes:
Economic predictions are no more reliable than Super Bowl ones. After all, those same economists predicting a recession also forecast an average of 2.8 percent growth in 2018, due to the Republican tax cuts passed late last year. But this much is certain: A recession in the next couple of years would be catastrophic for the many millions of Americans who haven’t recovered one bit since the last one.
Per a recent Chicago Tribune editorial,
It should be clear from all this that recession forecasting is more of an art than a science. There will be one, at some point in the next few years, but the timing can’t yet be forecast with any real confidence. Beware of economists banging the table and promising that it’s a dead cert for, say, the third quarter of 2019. It just isn’t.
The only thing I’m confident of is that the next recession will be nothing like the last one, and it won’t break the banking system. Recessions are roughly proportionate to the imbalances which precede them, and the economy today looks nothing like the period ahead of the financial crisis.
Fortunately, just because the most recent recession nearly blew global capitalism, doesn’t mean that the next one will too.
One thing that I can tell you for sure about the next recession (and the one after that) is that it will definitely be a doozie!
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