by Great Minarchistan » Fri Jan 05, 2018 1:09 pm
by Major-Tom » Fri Jan 05, 2018 1:32 pm
by Great Minarchistan » Fri Jan 05, 2018 1:45 pm
Major-Tom wrote:I don't think we are in for a recession in the foreseeable future, but an economic slowdown triggered by unsustainable growth in some markets, as well as some bubbles could be possible in the next five years or so. But we'll see. At the moment, our market is quite good, but there are indicators, as you said, that this could change.
Major-Tom wrote:(Can't believe I'm agreeing with a libertarian here but meh. )
by Improved werpland » Fri Jan 05, 2018 1:48 pm
Nihon koku wrote:The Russians are probably behind this.
by Great Minarchistan » Sat Jan 06, 2018 6:11 pm
by Oil exporting People » Thu Jan 11, 2018 11:35 pm
For all the optimism surrounding low unemployment rates and record-high real median income, there are some signs that something is rotten in the US economy. This isn’t wholly surprising – economic health tends to be cyclical, and the US is due for a recession. But when the next recession comes, there’s reason to believe it won’t be business as usual. The structural problems that led to the 2008 financial crisis haven’t been fixed. If anything, they’ve gotten worse.
In January, we forecast that the signs of just such a recession would emerge by the end of the year. And emerge they have. The yield curve between short-term and long-term US Treasuries is the flattest it has been at any point in the past 10 years. One of my colleagues, Xander Snyder, wrote an excellent piece last week on this very subject, and I encourage you to familiarize yourselves with it if you have not already done so.
A flattening yield curve, as he points out, is a problem in its own right, as is a declining prime-age labor force unable to secure adequate wages. But there are other longer-term forces at work that threaten to make what should be a minor cyclical recession a much more painful and prolonged affair. The two most consequential of these forces are increases in total household debt and the continued growth of wealth inequality within the US economy.
Household debt in the United States is now almost $13 trillion. That figure exceeds total household debt at any point during or in the recovery period after the 2008 financial crisis. Housing debt has creeped back to pre-2008 levels. Credit card debt has reached pre-2008 levels too. Student loan debt has skyrocketed by 134 percent since the first quarter of 2008 (about 9 percent on average per year).
Increased household debt, though, doesn’t mean the end is nigh; it just means people are borrowing more money. Still, problems arise when people default on credit card and consumer loans. In the second quarter of 2017, the delinquency rate on credit card loans was 2.47 percent and on consumer loans was 2.21 percent. Low though these rates may be, they are trending upward. Last month, shares of JPMorgan Chase and Citigroup fell on the news that both banks had increased their reserves for consumer loan losses – just under $300 million for JPMorgan Chase and just under $500 million for Citigroup. Put simply, American consumers are beginning to spend beyond their means.
More serious than higher household debt, though, is increased income and wealth inequality in the United States since the 1970s. In 2015, the top 10 percent of all US earners accounted for just under 49 percent of total income – a share greater than at any time during the Great Depression. The top 1 percent accounted for 20 percent of total income. This kind of disparity is a refrain in US economic history. It characterized the Gilded Age of the late 19th century as well as the decade or so before the Great Depression. Both were eras of immense wealth generation that benefited only the top, and both were rampant with speculation – the railroads and oil in the Gilded Age, the stock market in the Roaring Twenties. Today’s inequality is statistically more pronounced than during both of those times in history.
Wealth inequality was already increasing before the 2008 financial crisis, but what happened in 2008 has exacerbated the problem. According to the Pew Research Center, only upper income families have recouped the wealth they lost during the financial crisis. Median wealth was roughly 40 percent lower for lower-income families in 2016 than it was in 2007. It was roughly 33 percent lower for middle-income families. The median wealth for upper-income families, however, grew by 10 percent. The US economy may have recovered in terms of top-line figures, but middle- and lower-income families have not. For those hardest hit, the tales of recovery ring hollow.
If that is the case, then how is it that real median income – one of the most important economic indicators we use to assess the health of the US economy – is so high? When we first forecast the coming crisis of the American middle class in 2011, median household income, adjusted for inflation, was lower than it was in 1989 or in 2000. The subsequent rise in real median income is a sign that the middle class has stabilized, right? Well, not really. Real median income can rise even as the gap between those above and below the median widens. For example, the share of adults living in middle-income households has fallen since 1970. That year, 61 percent of adults lived in a middle-income household. In 2015, that number had fallen to 50 percent. The share of those living in a low-income household increased by 4 percent, and the share of those living in an upper-income household increased by 7 percent. The underlying problem is wealth inequality, and real median income does not necessarily capture wealth inequality.
And in 2017, real median income doesn’t go nearly as far as it used to. In the 1950s, the median cost of a home was a little more than double a family’s average annual income. A car was just under half of a family’s average annual income, according to data from the US Census Bureau and the US Department of Commerce. Today, it costs an average family about four times its average income to buy a house, and almost two-thirds its annual income to buy a car. A majority of households in the 1950s, moreover, were single-income households. By the end of that decade, the husband was the sole income generator for 70 percent of American households. Analysis performed by Pew in 2015, based on the last US census, estimated that in 2012, 60 percent of American households were dual-income households. The purchasing power of the real median income has decreased even as US households have added a second breadwinner to the home.
For the past 40 years in the US, the rich have been getting richer, the poor have been getting poorer, and the middle class has been disappearing. The crisis of 2008 was a global phenomenon, but in the US, it was also an episode in an era of increasing inequality that began in the 1970s. The American dream was never about just making ends meet – it was about social mobility and giving your children a better life than you had growing up. That is beyond the means of an increasing number of US households. When the next recession comes, it will come as inequality reaches new heights, and if US history is any indication, that will translate into massive political change.
by Dysmastan » Thu Jan 11, 2018 11:41 pm
by Minoa » Fri Jan 12, 2018 3:37 am
by Oil exporting People » Fri Jan 12, 2018 3:51 am
Minoa wrote:I personally think that the bitcoin is the biggest thing we should be watching right now, because the price of a virtual currency is unrealistically insane for something that seems to be created out of thin air, let alone the question of where I can even spend the bitcoins (Steam gave up on accepting bitcoins due to the transaction fees being so disproportionate).
It’s not like Squid Girl will accept them at the Lemon Beach House, if she has to pay more than €20 in fees for a €10 dining bill.
by Trumptonium » Fri Jan 12, 2018 4:22 am
by Great Minarchistan » Fri Jan 12, 2018 8:06 am
Trumptonium wrote:The stock market isn't really overpriced in any material manner. Most stocks are within their trend, and some are dirt cheap, especially bank stocks.
Only a few stocks are overinflating the general indexes, and unsurprisingly they're all tech indexes. Stocks like Tesla and Amazon are incredibly overpriced (literally multiples) relative to the average business when you look at their financial statements. They are based on future expectations, be it rational or hope. Most other businesses are valued on the 'here and now.' Which is a good thing, as in 2007 and 1999 it was closer to the former.
I own a two stocks, an automobile manufacturer and a bank, and neither of them have any tangible risk I would worry about in the short term.
by Liriena » Fri Jan 12, 2018 10:59 am
I am: A pansexual, pantheist, green socialist An aspiring writer and journalist | Political compass stuff: Economic Left/Right: -8.13 Social Libertarian/Authoritarian: -8.92 For: Grassroots democracy, workers' self-management, humanitarianism, pacifism, pluralism, environmentalism, interculturalism, indigenous rights, minority rights, LGBT+ rights, feminism, optimism Against: Nationalism, authoritarianism, fascism, conservatism, populism, violence, ethnocentrism, racism, sexism, religious bigotry, anti-LGBT+ bigotry, death penalty, neoliberalism, tribalism, cynicism ⚧Copy and paste this in your sig if you passed biology and know gender and sex aren't the same thing.⚧ |
by Liriena » Fri Jan 12, 2018 11:01 am
Great Minarchistan wrote:Trumptonium wrote:The stock market isn't really overpriced in any material manner. Most stocks are within their trend, and some are dirt cheap, especially bank stocks.
Only a few stocks are overinflating the general indexes, and unsurprisingly they're all tech indexes. Stocks like Tesla and Amazon are incredibly overpriced (literally multiples) relative to the average business when you look at their financial statements. They are based on future expectations, be it rational or hope. Most other businesses are valued on the 'here and now.' Which is a good thing, as in 2007 and 1999 it was closer to the former.
I own a two stocks, an automobile manufacturer and a bank, and neither of them have any tangible risk I would worry about in the short term.
US in the Roaring Twenties had their stocks doubling from 1924 to 1928 and another double from 1928 to 1929 yet P/E ratio was kept basically unchanged without spiking at high levels (in fact they were low). Plus what you described might show just another tech bubble.
I am: A pansexual, pantheist, green socialist An aspiring writer and journalist | Political compass stuff: Economic Left/Right: -8.13 Social Libertarian/Authoritarian: -8.92 For: Grassroots democracy, workers' self-management, humanitarianism, pacifism, pluralism, environmentalism, interculturalism, indigenous rights, minority rights, LGBT+ rights, feminism, optimism Against: Nationalism, authoritarianism, fascism, conservatism, populism, violence, ethnocentrism, racism, sexism, religious bigotry, anti-LGBT+ bigotry, death penalty, neoliberalism, tribalism, cynicism ⚧Copy and paste this in your sig if you passed biology and know gender and sex aren't the same thing.⚧ |
by Shofercia » Fri Jan 12, 2018 11:07 am
Great Minarchistan wrote:Taking the opportunity of the start of 2018 (Happy New Year!), I suppose it's also a good time to discuss what will happen to the US' economy during the second half of Trump's presidency. While not really his fault, I'm not getting good feelings on regards to it. The main factor to blame my pessimism is on the apparent bubble that has been developing since 2010ish. Some indications for a future disaster are:
-> Unemployment at one of the lowest levels registered in modern history (4.1%, almost breaking the 3.8% achieved in the evening before 2001 burst);
-> The gap between GDP and potential GDP has achieved the first positive -- meaning GDP is higher than potential -- since 2008. Worthy reminder that out of the eleven recessions registered since 1950, ten were preceded by this event, with an usual "countdown" of 7-9 quarters to recession after the first positive is achieved.
-> Commercial and industrial loans have effectively stagnated since mid-2016, a possible signal of:
-> Credit tightening from Federal Reserve, that has done four hikes since 2016 -- rather impressive for a central bank that has let the rates on the floor during seven years -- and plans to schedule three more hikes in 2018. This has probably led to:
-> Seemingly irrational exuberance on stocks during the last 12-18 months. While rather far from achieving annualized growth of 40-60% (when stock markets typically proceed to crash), we are on our way to it.
-> Private debt ratio has barely deflated on post-2008 and is growing back again.
Those are all the factors I can remind as of now to justify fears of another recession and, God forbid me, another huge financial crisis. You might be asking why did I create that topic and well, I think it would be also worthy to find more opinions about the matter within the NSG community and new indicators or discussion about the extent of the possible impact to be taken on a global scale.
Brace yourselves
by Shofercia » Fri Jan 12, 2018 11:15 am
Improved werpland wrote:Nihon koku wrote:The Russians are probably behind this.
Well you say that jokingly, but it's not like they haven't tried :^)
by Trumptonium » Fri Jan 12, 2018 1:10 pm
Great Minarchistan wrote:Trumptonium wrote:The stock market isn't really overpriced in any material manner. Most stocks are within their trend, and some are dirt cheap, especially bank stocks.
Only a few stocks are overinflating the general indexes, and unsurprisingly they're all tech indexes. Stocks like Tesla and Amazon are incredibly overpriced (literally multiples) relative to the average business when you look at their financial statements. They are based on future expectations, be it rational or hope. Most other businesses are valued on the 'here and now.' Which is a good thing, as in 2007 and 1999 it was closer to the former.
I own a two stocks, an automobile manufacturer and a bank, and neither of them have any tangible risk I would worry about in the short term.
US in the Roaring Twenties had their stocks doubling from 1924 to 1928 and another double from 1928 to 1929 yet P/E ratio was kept basically unchanged without spiking at high levels (in fact they were low).
Great Minarchistan wrote:Plus what you described might show just another tech bubble.
by Shofercia » Fri Jan 12, 2018 1:47 pm
Trumptonium wrote:Great Minarchistan wrote:
US in the Roaring Twenties had their stocks doubling from 1924 to 1928 and another double from 1928 to 1929 yet P/E ratio was kept basically unchanged without spiking at high levels (in fact they were low).
Quite true. But a major difference between now and 1925-1929 is the difference in the behaviour of banks. There's no margin lending today.Great Minarchistan wrote:Plus what you described might show just another tech bubble.
I'm hardly the first one to predict this.
Case in point
In the event of a 2008 repeat, I can't see Ford falling any further than about 15-20% given their fundamentals. Tesla is like a -99%.
(For the record, I have no gains in Tesla, the automobile manufacturer I own I mentioned earlier is BMW AG)
by Trumptonium » Fri Jan 12, 2018 2:39 pm
by Major-Tom » Fri Jan 12, 2018 2:44 pm
Shofercia wrote:Trumptonium wrote:
Quite true. But a major difference between now and 1925-1929 is the difference in the behaviour of banks. There's no margin lending today.
I'm hardly the first one to predict this.
Case in point
In the event of a 2008 repeat, I can't see Ford falling any further than about 15-20% given their fundamentals. Tesla is like a -99%.
(For the record, I have no gains in Tesla, the automobile manufacturer I own I mentioned earlier is BMW AG)
And that's why I'm not investing in Tesla.
by Petrolheadia » Fri Jan 12, 2018 4:53 pm
Trumptonium wrote:Great Minarchistan wrote:
US in the Roaring Twenties had their stocks doubling from 1924 to 1928 and another double from 1928 to 1929 yet P/E ratio was kept basically unchanged without spiking at high levels (in fact they were low).
Quite true. But a major difference between now and 1925-1929 is the difference in the behaviour of banks. There's no margin lending today.Great Minarchistan wrote:Plus what you described might show just another tech bubble.
I'm hardly the first one to predict this.
Case in point
In the event of a 2008 repeat, I can't see Ford falling any further than about 15-20% given their fundamentals. Tesla is like a -99%.
(For the record, I have no gains in Tesla, the automobile manufacturer I own I mentioned earlier is BMW AG)
by MERIZoC » Fri Jan 12, 2018 5:04 pm
Unemployment at one of the lowest levels registered in modern history (4.1%, almost breaking the 3.8% achieved in the evening before 2001 burst);
by Somecoldwetislands » Fri Jan 12, 2018 5:52 pm
by Aclion » Fri Jan 12, 2018 7:18 pm
MERIZoC wrote:Unemployment at one of the lowest levels registered in modern history (4.1%, almost breaking the 3.8% achieved in the evening before 2001 burst);
If you ignore underemployment, sure.
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