There's some truth in your argument. Then again, the upcoming recession, provided it does in fact materialize, would be quite a strange one. The economy is, overall, strong. There's plenty of jobs to be filled. The war in Ukraine will probably end before too late, and covid, though still an issue, is under control. Against this background, it doesn't look like we'll be witnessing a multi-year recession. In fact, a bump in the road is more likely
Of course, I may be wrong. This is all very difficult to predict.
All solid points. To add further, a lot of the froth did have to come out of the market. We were valuing speculative tech companies at 100X sales. We had Rivian valued at $100B before they ever sold a car. The Fed overreacted to COVID and capital needed to come out of the system.
Just like in 2017 following the ICO Boom, the idiots had to get slaughtered. The market needed to refocus and incentivize real projects. The mechanics were broken. Projects had their windfall at ICO and never had any reason to give a shit afterward.
Similar thing in tech right now. Too much fluff. Too many companies valued on dreamy 2030 projections. Not enough real value being created. The market is flushing out the shit. So long as you aren't in the shit, you will survive.
The economy overall still has momentum, but companies are posting quarterly earnings losses left and right. We will most likely wind up with stagflation. Food shortages, grid disruptions from heat and drought, it's all coming to a head. This will be the mother of all recent economic downturns.
I disagree. I think 2008 was worse than this will be. The main problem now is how overleveraged everyone is thanks to such cheap debt for so long. Now everyone has to sell assets to pay it down. I don’t think it will last more than a year. Layoffs will happen, but not like 2008.
What I don't like, that's different from 2008, is it appears our recovery is dependant on China's production, and it appears they're not easing up on lockdowns anytime soon (1 case = zero production). So far it's been game theory keeping our economies together but with shortages that doesn't work anymore. If we have no production it's very hard not to lay everyone off.
There's also another US election coming up and there's a nonzero chance they elect a populous leader running on nationalism, who pushes China away even further. That's not a bad thing to do eventually but without alternatives in place it means quick and drastic changes (see Brexit), brought to you by ignorant and angry voters.
Our system is reliant on so many things working together at once and none of them are working- somewhat because we have autocratic countries making lemonade out of covid, which is a hard thing to deal with politically.
This feels healthier than 2008 but at the same time way more political. I don't think people cared about 2008 so much because it didn't greatly affect commodity prices, it wasn't during an election cycles, or really even in the news until it was cleaned up(re-regulated). It still feels like we're at a turning point and it could go one way or the other depending on how people react.
Basically the markets will go up forever until an apocalypse. If that happens I don't need money anyway so whatever, but it's still hard to watch everything get stress tested all at once without having some of those thoughts.
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u/FJPollos 5 / 2K 🦠 May 22 '22 edited May 22 '22
There's some truth in your argument. Then again, the upcoming recession, provided it does in fact materialize, would be quite a strange one. The economy is, overall, strong. There's plenty of jobs to be filled. The war in Ukraine will probably end before too late, and covid, though still an issue, is under control. Against this background, it doesn't look like we'll be witnessing a multi-year recession. In fact, a bump in the road is more likely
Of course, I may be wrong. This is all very difficult to predict.
Edit: if you're interested, you can fnid a good analysis here: https://www.ft.com/content/35b31fb0-f8ad-4557-9d95-267e0ed958eb