When will the next recession be?

[DC Al Fine]

You may as well ask a bunch of shamans how bountiful the next harvest will be based on their reading of goat entrails. Predicting recessions is a mugs game.

That would be more fun than normal TV/radio reports.

"As you can see, the goat's intestines fell in a sort of S shape, which means we can expect a mild recession this year."

[Antonio the Sixth]

You may as well ask a bunch of shamans how bountiful the next harvest will be based on their reading of goat entrails. Predicting recessions is a mugs game.

That would be more fun than normal TV/radio reports.

"As you can see, the goat's intestines fell in a sort of S shape, which means we can expect a mild recession this year."

tbh yeah, that sounds far more interesting than the average financial news show

[136or142]

News story yesterday that many more people are having difficulty paying their auto loans.  In so far as the importance of the banking sector to the economy and the problem of bad debts, if this is indicative of a wider problem (i.e individuals having problems paying their mortgages)  the next recession and another possible credit freeze may not be far away.  Auto loans are about 10% of all household loans, so by themselves, these bad debts would probably not lead to a recession.

Given the number of recessions caused by bad loans, an increase in unpaid loans to banks is probably by far the best indicator of an oncoming recession.

https://www.caranddriver.com/news/a26310943/auto-loans-numbers-delinquent/

Seven Million Americans Delinquent on Auto Loans Could Be a Bad Sign
The U.S. is at an all-time high for loan delinquencies. Is this the sign of overborrowing or overconfidence in the economy's strength?

[Sirius_]

It depends that the results of the 2020 election are.

I agree, if we get Trump out quickly enough we might be able to avoid the brunt of it for a while.

[Sirius_]

It depends that the results of the 2020 election are.

I agree, if we get Trump out quickly enough we might be able to avoid the brunt of it for a while.

I'm not sure about that. Ever since the Democrats took the House of Representatives the economy hasn't been doing as well. The Democrats will cause the economy to crash before Trump does. This is a repeat of 2008 all over again.

I like how Trump doesn't have anything to do with the downtown because that isn't convenient.

[Southern Senator North Carolina Yankee]

It depends that the results of the 2020 election are.

I agree, if we get Trump out quickly enough we might be able to avoid the brunt of it for a while.

I'm not sure about that. Ever since the Democrats took the House of Representatives the economy hasn't been doing as well. The Democrats will cause the economy to crash before Trump does. This is a repeat of 2008 all over again.

Democrats taking the Congress in 2006 had nothing to do with the crashing of the economy in 2008.

That recession was baked into the pie thanks to legislation passed during Clinton's administration and the means by which the Bush Administration and the Federal Reserve got us out of the 2001 recession. Namely boosting Housing and using that as a lead sector to pull the economy out of one recession, directly caused another. The substitution of debt for rising income also meant that once the financial sector became crippled thanks to the exposure caused by both the repeal of Glass Steagall and the proliferation of derivatives led to a credit crunch in mid 2007. Absent debt fueled consumption, the economy went into recession in December 2007.

Take out its leading sector and its primary source of domestic consumption and the end result is a deep, deep recession.

[136or142]

It depends that the results of the 2020 election are.

I agree, if we get Trump out quickly enough we might be able to avoid the brunt of it for a while.

I'm not sure about that. Ever since the Democrats took the House of Representatives the economy hasn't been doing as well. The Democrats will cause the economy to crash before Trump does. This is a repeat of 2008 all over again.

Democrats taking the Congress in 2006 had nothing to do with the crashing of the economy in 2008.

That recession was baked into the pie thanks to legislation passed during Clinton's administration and the means by which the Bush Administration and the Federal Reserve got us out of the 2001 recession. Namely boosting Housing and using that as a lead sector to pull the economy out of one recession, directly caused another. The substitution of debt for rising income also meant that once the financial sector became crippled thanks to the exposure caused by both the repeal of Glass Steagall and the proliferation of derivatives led to a credit crunch in mid 2007. Absent debt fueled consumption, the economy went into recession in December 2007.

Take out its leading sector and its primary source of domestic consumption and the end result is a deep, deep recession.

The Great Recession was caused by fraud by bankers and a lack of willingness to regulate by Chris Cox at the FEC and Alan Greenspan at the Fed.  Full stop.  Anything else are just red herrings.

In terms of the creation of bubbles, it may be that cutting capital gains taxes so that passive income is favored over 'earned' income has led to the dot.com bubble of 2000 and the housing bubble. However, there would not have been a housing bubble if not for the fraud.

The problem with the housing bank fraud is that loans were made that should not have been made.  Had there not been this fraud, by no means is it certain that alternative uses for the money loaned out would not have been productive.

[jaichind]

Fed pretty much announced no more rate increases in 2019.  Looking at historical that means that the next recession will most likely start 5 to 7 quarters from now which would mean late 2020 or early 2021.  Whoever wins the 2020 Prez elections will be winning a poisoned chalice.

[136or142]

Fed pretty much announced no more rate increases in 2019.  Looking at historical that means that the next recession will most likely start 5 to 7 quarters from now which would mean late 2020 or early 2021.  Whoever wins the 2020 Prez elections will be winning a poisoned chalice.

I certainly don't dispute that there is a 'business cycle' in the broad sense, but the economy is made up of many people making individual decisions to buy, invest...

The idea that there is something approaching an economic cycle that works like the earth goes around the sun every 365.25 days is utter nonsense.

[Southern Senator North Carolina Yankee]

It depends that the results of the 2020 election are.

I agree, if we get Trump out quickly enough we might be able to avoid the brunt of it for a while.

I'm not sure about that. Ever since the Democrats took the House of Representatives the economy hasn't been doing as well. The Democrats will cause the economy to crash before Trump does. This is a repeat of 2008 all over again.

Democrats taking the Congress in 2006 had nothing to do with the crashing of the economy in 2008.

That recession was baked into the pie thanks to legislation passed during Clinton's administration and the means by which the Bush Administration and the Federal Reserve got us out of the 2001 recession. Namely boosting Housing and using that as a lead sector to pull the economy out of one recession, directly caused another. The substitution of debt for rising income also meant that once the financial sector became crippled thanks to the exposure caused by both the repeal of Glass Steagall and the proliferation of derivatives led to a credit crunch in mid 2007. Absent debt fueled consumption, the economy went into recession in December 2007.

Take out its leading sector and its primary source of domestic consumption and the end result is a deep, deep recession.

The Great Recession was caused by fraud by bankers and a lack of willingness to regulate by Chris Cox at the FEC and Alan Greenspan at the Fed.  Full stop.  Anything else are just red herrings.

In terms of the creation of bubbles, it may be that cutting capital gains taxes so that passive income is favored over 'earned' income has led to the dot.com bubble of 2000 and the housing bubble. However, there would not have been a housing bubble if not for the fraud.

The problem with the housing bank fraud is that loans were made that should not have been made.  Had there not been this fraud, by no means is it certain that alternative uses for the money loaned out would not have been productive.

Chris Cox was not appointed until 2005, by then it was really too late.

Both Bill Clinton and George Bush tried to push housing for people who could not afford it. The good part is that now that Hillary Clinton is gone from the mix and no one feels the need to carry the Clinton's water, Democrats are starting to acknowledge the role that Clinton played in the fiasco. It was Clinton's signature on the repeal of Glass-Steagall and it was Clinton's signature on the Commodities-Futures Modernization Act.

Without the Mortgage Backed Securities and credit default swaps, there would have been no credit based expansion and therefore no credit crunch (which is what induced the recession directly).

[Mr.Phips]

It depends that the results of the 2020 election are.

I agree, if we get Trump out quickly enough we might be able to avoid the brunt of it for a while.

I'm not sure about that. Ever since the Democrats took the House of Representatives the economy hasn't been doing as well. The Democrats will cause the economy to crash before Trump does. This is a repeat of 2008 all over again.

Democrats taking the Congress in 2006 had nothing to do with the crashing of the economy in 2008.

That recession was baked into the pie thanks to legislation passed during Clinton's administration and the means by which the Bush Administration and the Federal Reserve got us out of the 2001 recession. Namely boosting Housing and using that as a lead sector to pull the economy out of one recession, directly caused another. The substitution of debt for rising income also meant that once the financial sector became crippled thanks to the exposure caused by both the repeal of Glass Steagall and the proliferation of derivatives led to a credit crunch in mid 2007. Absent debt fueled consumption, the economy went into recession in December 2007.

Take out its leading sector and its primary source of domestic consumption and the end result is a deep, deep recession.

The Great Recession was caused by fraud by bankers and a lack of willingness to regulate by Chris Cox at the FEC and Alan Greenspan at the Fed.  Full stop.  Anything else are just red herrings.

In terms of the creation of bubbles, it may be that cutting capital gains taxes so that passive income is favored over 'earned' income has led to the dot.com bubble of 2000 and the housing bubble. However, there would not have been a housing bubble if not for the fraud.

The problem with the housing bank fraud is that loans were made that should not have been made.  Had there not been this fraud, by no means is it certain that alternative uses for the money loaned out would not have been productive.

Chris Cox was not appointed until 2005, by then it was really too late.

Both Bill Clinton and George Bush tried to push housing for people who could not afford it. The good part is that now that Hillary Clinton is gone from the mix and no one feels the need to carry the Clinton's water, Democrats are starting to acknowledge the role that Clinton played in the fiasco. It was Clinton's signature on the repeal of Glass-Steagall and it was Clinton's signature on the Commodities-Futures Modernization Act.

Without the Mortgage Backed Securities and credit default swaps, there would have been no credit based expansion and therefore no credit crunch (which is what induced the recession directly).

Glass Steagall and the Commodities Futures Modernization Act passed the Republican Congress with enough votes to override any Clinton veto.

[136or142]

The other problem that led to the Financial meltdown of 2007/2008 was that the banks were allowed to sell their mortgage loans.

Banks are supposed to provide a screening function for the economy.  This 'due diligence' is supposed to be ensured by making the banks responsible for loan losses.  However, when the banks were able to sell their loans, they had no incentive to ensure that the loans were quality loans.  This directly led to the NINJA loans (No Income, No Job or assets.)

[Frodo]

After the 2020 election, probably.  

A U.S. recession looks less likely in 2020, boosting Trump’s chances of reelection

Whoever wins in 2020 will be winning a poisoned chalice, in all likelihood. 

[RFayette]

After the 2020 election, probably.  

A U.S. recession looks less likely in 2020, boosting Trump’s chances of reelection

Whoever wins in 2020 will be winning a poisoned chalice, in all likelihood. 

I doubt this.  A recession in 2021 doesn't seem like a huge liability.  Yes, it would result in rough midterms, but there would likely be a recovery well underway by 2024.  A recession in late 2022 or especially 2023-2024 is where real danger lies.

[136or142]

Barring some bubble bursting, the only other cause of recessions are:
1.A lack of innovation  or risk taking resulting in economic slowdown.  This is obviously an entirely theoretical argument.  Dystopian authors might have written books about it.

2.Two sides of the same coin (more or less): rising inflation that causes interest rates to rise or an increase in loans going bad that result in something of a credit crunch.

Despite Trump's increasing use of tariffs and the increasing price of a barrel of oil (WTI) the 10 year Treasury Note is still at a low 2.58% yield, so there doesn't seem to be a concern of rising inflation.  In terms of bad loans, there may be an increasing problem with auto loans and certainly many people are squeezed with their credit card debt, but there doesn't seem to be anything out of line here either.

Unless there is something that I'm not aware of, those are the only things that lead to recessions.

Market cycles do occur: an expanding economy ultimately grows faster than the factors that need to support it can expand (labor and inputs) and this leads to inflation in those factors which leads to rising interest rates, which leads to slowdown...

However, central banks are actually pretty good at 'smoothing' these things out.  So, while the economic growth will be faster at times and slower at times (known as a 'growth recession') there really is no need for real recessions to ever occur.  People who look at the economy or 'economic cycles' as regular things like the movement of the stars are just using the wrong analogy.  

So, people who say 'there hasn't been a recession for 8 or 9 years, we're due for one,' are just wrong.

[Fmr. Pres. Duke]

The correct answer is, no one knows. We're in a strange period because money is cheap and the Fed has signaled that it will remain cheap going forward. There is not much space now to drop rates should things slow, and as long as there is cheap capital, the growth may continue. The biggest risk will lie with the trade war we are currently waging.

[DINGO Joe]

The correct answer is, no one knows. We're in a strange period because money is cheap and the Fed has signaled that it will remain cheap going forward. There is not much space now to drop rates should things slow, and as long as there is cheap capital, the growth may continue. The biggest risk will lie with the trade war we are currently waging.

The transport numbers (train traffic, implied demand from EIA oil numbers) really, really sucked in May.  Made more amazing by the Mississippi River being shut down in large sections because of high water.

[raymundoflx]

Before 2020

[Archon]

Probably 2021, as a bloomberg article recently reported

[here2view]

Interesting takes in hindsight.

[It’s so Joever]

Nobody properly guessed that a spiky protein ball would cause the next recession.

[Samof94]

Nobody properly guessed that a spiky protein ball would cause the next recession.

Nobody guessed that Venezuela would fall apart in just two decades.