How long before a recession? (capitalism, agent, borrow, financial)

[lieqiang]

Originally Posted by lchoro

Zero Hedge ran some brokerage articles on the monthly run rate of the asset purchases Japan and Europe would have to do to pick up from the end of the Fed's purchase program. Japan started theirs while the Fed was still in the beginning of the taper stage. Europe followed a year later. The aggregate purchases have increased as the dollar value of the assets have been elevated.

Now there is a surprise, a Zero Hedge reference.

We were talking about the QE programs in the United States, and how there were predictions that ending them would cause hardship. I believe "kicking the can down the road" was one of the tired cliches spouted by the Zero Hedge fans. The can stopped being kicked, and whatever Japan and Europe are doing is not the Federal Reserve QE.

[lchoro]

Originally Posted by lieqiang

Now there is a surprise, a Zero Hedge reference.

We were talking about the QE programs in the United States, and how there were predictions that ending them would cause hardship. I believe "kicking the can down the road" was one of the tired cliches spouted by the Zero Hedge fans. The can stopped being kicked, and whatever Japan and Europe are doing is not the Federal Reserve QE.

I don't read the comments sections. It's as bad there as it is anywhere else.

I was talking about the QE program, and how it is still continuing. You seem to not be able to grasp that the three major central banks might be coordinating their policies. You also don't seem to grasp that the predictions of hardship are also predictions that the QE program would continue in some form, either directly or through a proxy. That was the gist of the articles about the ECB asset purchase program. The analysis was provided by JP Morgan, Citigroup, GS, and others as to what level of purchase would be required to float the markets.

[lieqiang]

You seem unable to grasp that the QE program ended in 2014, when the US officially tapered their asset purchase program to $0 and this is reflected in the Federal Reserve's balance no longer rising. Actions of Japan's' Central Bank do no constitute the US Central Bank continuing QE. You're defending ZeroHedge being wrong with more ZeroHedge.

[artillery77]

Here's my anecdote. Venture capital is slowing in Silicon Valley - CB Insights. It's still much higher than the last recession, but it's dropped from around $30B a quarter to about $20B this past quarter in 3 successive quarters. We're back to 2013 levels. Even if negative, at least the downshift is coming much slower than in the past.

The macro of Silicon Valley basically is trade and talent dependant. It relies on having the steady supply of scarce inputs (engineers) to produce the most technologicially advanced items, which in turn require other companies to enter the area if they want those items in their products. The engineers are captured because they can take ideas and get them funded here. But once companies have stable funding, there's less incentive to stay here other than keeping supply chains happy. Was sad to see Lockheed decide to pull out their ballistic missile division. That will also hurt the area.

Anyway, when you're making the first self driving car, you don't care about the price of the warning label or the tire as much as you do when you're making a run of 1,000,000, so many of these products are initially made here despite the cost. So the loss of venture capital (allowing a company to operate for months) generally transcribes into a depressed local economy pretty quickly. A project is either going to make it to production and fly on it's own, or it's time to stop burning cash. The initial idea phase seems to be winding down.

So if the funding continues to drop, I'd expect SV to be in recession 6 months after it dips below $12B. Generally speaking, the country tends to be 12 months following.

If the supply of engineers is disrupted, this could speed up the funding distortion. If a trade war stops the flow of funds to the valley, this could also speed up the funding distortion.

But nobody knows what's going to happen. I wish I had more invested in the market right now, but I can't seem to replenish positions I've sold out of. Bonds are also rebounding, raising the spectacle of what is this growth really. Gold should be getting killed in the face of interest rate hikes, but it seems to be holding up. Copper prices are saying it's expansion time. Energy's adjusting to it's new realities, but looks nowhere near the shortages usually accompanying massive growth.

It's like every group is expecting favorable change to happen for them. No regulations and favorable tarriffs for mining and manufacturing. Interest rate increases for finance. Lower taxes for all. Already baked into equity prices.

I see Fed hikes, Frexit, Israel v. Iran, NAFTA dissolution, tarriffs all on the table...and seemingly ignored. Europe, assuming it sticks together, seems to finally be growing. Japan's sun is setting again, as it still doesn't have more people. BRICs seem to be coming back together. Africa and Asia are growing and the Aussies are loving the commodity run.

I guess there's never a sea without an iceberg but there's some pretty big treasures (tax, regulation, favorable tarriffs for some) and some pretty big icebergs (hot war, trade war, interest rate hikes) all floating around. At the end of the day, it seems like it's a game of self-fulfillment. If most people think it's wise to save and play it safe, they will, and the economy will fall.

Trump's got his center stage, we'll see how he uses it.

[tijlover]

Generally speaking, a recession occurs every 8-10 years.

I'm old enough to have experienced the 1973-75 recession (a bad one) and then the 81-83 recession, then the 91-93 recession, then the 2001 recession, and then the latest.

I think it's an unknown when the recession ended, and the economy picked up, but I feel like we're headed for one in the next year or so, no matter who's in office!

[Pub-911]

I'm old enough to realize that nine of the ten US recessions to have occurred since 1950 occurred under a Republican President. And that the lone exception was the shortest, mildest one of the bunch. The simple passage of time may not have as much to do with these things as does how badly we mess up in electing national leaders.

[lchoro]

There were frequent recessions in the 50's, 70's, and early 80's. The 80-82 recession had several mini-recessions embedded. That's why they often refer to the recessions as double-dip. The same occurred in 2000-2003. The GDP started to decline in 2000 and avoided the "technical" definition by avoiding back-to-back negative quarters. The economy experienced another decline in 2001 and started to recover until Bush started introducing resolutions to launch the war against Iraq.

Japan just updated their quantitative easing schedule. Although the amount is down by 1 trillion yen, they're still buying enough debt in March to finance the fiscal deficits for both Japan and the US. The last time the Fed was in a interest rate hiking cycle was completely contained within the time period during which the Bank of Japan was engaged in QE. The last interest rate hike and the last asset purchase ended in March 2006. I recall that the stock market immediately started to decline and the government came out to support the market by lowering the margin requirement and assuring that volatility would be contained.

[Pub-911]

Originally Posted by lchoro

There were frequent recessions in the 50's, 70's, and early 80's. The 80-82 recession had several mini-recessions embedded. That's why they often refer to the recessions as double-dip. The same occurred in 2000-2003.

In the real world, there have been ten recessions in the US since 1950. Two were the direct result of exogenous oil price spikes. Two were the result of bone-headed Reaganomics.

The 2001 recession meanwhile was basically a crisis of confidence that lasted from March of that year until November, by which time, the events of 9/11 had shocked us out of it.

Originally Posted by lchoro

The GDP started to decline in 2000 and avoided the "technical" definition by avoiding back-to-back negative quarters.

There is no such "technical definition," and GDP did not decline in any quarter of 2000.

[lchoro]

Your problem is that you're a Democrat and it colors all your thinking. You have to take off the partisan shades.

You're not even stating the facts relevant to all those recessions.

To state that something is merely caused by loss of confidence indicates that you don't have a grasp of the history of that time, either through experience or even through reading the news articles retrospectively.

For example, the recessions in 1980 through 1982 were the result of Paul Volcker's monetary policies. He was trying to rein in inflation during an election year. He moved interest rates wildly in both directions during the first half of 1980. He tried to salvage the economy during the latter half because of the election and didn't start to tackle the money supply until a new administration was sworn in. The recession was entirely engineered by the Fed which made it much easier to undo without fiscal stimulus. I remember the 18 percent CD rates in that time. People were flocking to money market funds and pulling their money out of the banks and savings & loans (remember that one).

The technical definition is that specified by the NBER and often published in the newspapers. There are other definitions as well. For simplicity, if there are declines over an extended period, they lump together as a recession to note sustained growth.

[Pub-911]

Originally Posted by lchoro

Your problem is that you're a Democrat and it colors all your thinking. You have to take off the partisan shades.

I am actually an independent, but some need to label things so as to have something to attack.

All of your assertions here have meanwhile been off the mark. The brief, mild recession of 1980 was triggered by the dislocations of an oil price shock. The Recession of 1981-82 (at the time, the worst economic collapse since the Great Depression) was caused by Reagan's mistaken political zeal to wring inflation out of the economy. He created the Rust Belt instead. The 1990-91 Recession was brought on by an S&L crisis that bad interest rate policy and lax oversight written all over it. Another top-down failure.

NBER (the people who make the actual calls) has meanwhile stridently disavowed the "consecutive quarters" nonsense that you fronted as the "technical definition" of a recession. It is not any sort of definition at all for people with an economic clue.

The committee's procedure for identifying turning points differs from the two-quarter rule in a number of ways. First, we do not identify economic activity solely with real GDP and real GDI, but use a range of other indicators as well. Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology. Third, we consider the depth of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in activity." Fourth, in examining the behavior of domestic production, we consider not only the conventional product-side GDP estimates, but also the conceptually equivalent income-side GDI estimates. The differences between these two sets of estimates were particularly evident in the recessions of 2001 and 2007-2009.
-- NBER

Those are actual economists talking. They have credentials and stuff.