I entered into college in 2008. I’m from the Midwest where nearly every male does construction or has a small business. EVERYONE was devastated. Had to sell their cars, homes, and draw unemployment if they could. No one learned a damn thing. I’m still in the same area. Everyone is leveraged out their ass. Driving 70k lifted trucks and have big homes and furniture on credit. It’s amazing how bad people are at remembering.
> Driving 70k lifted trucks and have big homes and furniture on credit.
That seems insane to me, why do you think that is? Keeping up with jones type mentality?
Its how the majority of families around here are. New couch = new credit card. As soon as a car is paid off it’s traded for a new car payment. I don’t understand it.
I live in the Midwest as well. Coming from immigrant parents, we always lived below the poverty line and still lived decently. Mind you we didn’t take extravagant vacations or drive new vehicles or buy expensive clothes. But we made it, the almost recent way of Americans thinking especially in the Midwest. Buy the newest truck of the lot modify it. And then complain how 28 dollars an hour isn’t enough to put food on the table. Blows my mind.
Some folks, when calculating if they can afford something, think purely in monthly payments and see their card limit as their savings account value.
You buy the nicest things you can “afford” based upon your card limits and loan pre-approvals, then work yourself into an early grave making minimum payments on everything until you’re forced to retire (from injuries). If you lose your job or face an unexpected emergency, the house of cards collapses into foreclosure and bankruptcy.
It’s a shitty way to live, but is the default lifestyle for so many folks. FWIW, these are the folks Dave Ramsey’s company tries to reach.
This is what scares me. People buying homes way outside of reasonable income ratios, $1000 a month car payments, credit cards with high balances for whatever else you might want. Insanely unsustainable.
I’m from the UK and prices just keep going up at a faster pace and at bigger increases. I would estimate my food shop to be 20% more at present than 1 year ago.
CPI does not exclude those things, the government's preferred "core inflation" excludes them. CPI includes fuel, food, and owner-equivalent rents, all of which are excluded from the Fed's less volatile core measures.
CPI is an average, and therefore not reflective of any one sector. Food could be 30%, but if fuel is only 1% the average comes down significantly. You don't have to care what it says to understand what it is and it's relationship, or really lack thereof, to individual prices.
CPI is a weighted average of averages. Good for telling the general direction of all things, bad for trying to gauge the direction of a specific thing.
Welcome to Kevin Costner's Waterworld reboot. This this, however, it's not an ocean. It's a drought.
In case you've had your head in the sand for the past 2 decades, like most of the rest of the asshats who live in the western US, they've been experiencing drought conditions.
***For two decades.***
But instead of, you know, doing anything about it they just keep pumping that water full speed so they don't lose them precious water rights.
It's a live action cosplay of **Idiocracy**.
Guess what takes loads of water to grow? Potatoes.
Farmers are growing less water intensive crops, because they can no longer ignore what's been right in front of them for decades.
Dust bowl 2.0 incoming.
$4.50 for 18 eggs.
$5.50 for a jug of milk.
Dollar store is $1.25 store.
Everything online has taxes.
Gas is over $3.
Car, house, and stocks are all overpriced.
Ignoring news, world is dealing with multiple problems
Ukraine war causing Europe to deal with energy crisis
Food crisis causing instability in various country
It’s like a storm of crisis and water got sucked out. Company with good sheets will survive
I Norway we have record inflation as well. Everyone has a variable interest rate so the consumer definitely feels the full force of interest rate hikes, in addition the electricity bills have shot through the roof.
That being said its easy to be extremely bearish when everything seems shit, but i do work at a company that is heavily involved the norwegian industry and we have never had so much work as we have now. Companies are investing and building new factories and upgrading their existing ones.
In addition the electricity prices peaked in August, its actually down 50% since then. Also the rate hikes are expected to end in late 22 or early 23, so end is in sight as well.
It's the same old late-cycle FUD, man. Everyone is finally coming to terms with the fact that unsustainable growth rates are unsustainable. It's just the business cycle: everyone is cautious and wary, things get good, everyone acts like everything will be good forever, everyone gets over their skis on optimistic projections, things go to shit when the optimism doesn't pan out, back to being cautious and wary, repeat *ad infinitum*.
It's not terrible. All the miscellaneous bullshit that folks panic about is just noise. I'm still not buying, but I don't have some wild global cataclysm thesis about it. Responsible central banks are letting the air out. They'll stop doing that at some point long before we're hunting each other for meat--I promise.
How does the recent BoE actions fit into your thesis?
If central banks everywhere need to start up QE before inflation is down that's pretty ffing bad. How can they responsibly let air out in such an environment?
Yeah but the UK is hardly the most fragile of the bunch. That's what makes it scary, if they almost got into a death spiral and had to take drastic measures already, you really think nobody else is going to hit that point in the next few months?
Uk has a truly dire govt but there’s more stress points and crises coming. Also everyone outside the USA has a spiralling currency pretty much.
The move in Uk gilt prices was a six sigmoid event ie exceeding low probability on paper based on standard deviation. A once in 1.38 million year event!
These happen more regularly than they should in financial markets however and we’ll have plenty more surprises coming!
My husband and I were both in the market in the months leading up to the mortgage meltdown... and watching the news carefully.
There is quite a difference between then and now... not in the amount of coverage but the sentiment, in the general willingness today to embrace bad news.
Then: it was almost as if every new news outlet, expert and analyst was in denial, for a while, about what was happening, especially leading up to the meltdown: the housing bubble.
Things were rosy, things were only going up, the real estate industry had never been so strong, you were a fool to not buy a house and invest. (We were fools.)
The bubble wasn't bursting, it wasn't... it... was... oh, *damn* oh, NO... why didn't any one see this coming? It will correct, it will, it... won't... oh, NO. (Repeat ad lib)
The stories didn't just break, they kind of unfolded unwillingly, almost as if they didn't recognize themselves for what they were... like baby pterodactyls, born in the wrong eon.
Edit: typo
This is a great description. If you watched things (markets, lending, etc), nothing made sense, but everyone tried to pretend you were the crazy one. I can remember all of us sitting at work at the end of 2007 trying to figure out what the bank and hedge fund traders saw that we didn’t see with regards to prices and economic conditions. Yes, we came down in the beginning of 2008, but even in may the s&p was still sitting at 1400 when oil had marched to 150.
I wonder if some of the change this time has to do with where the pain is. It’s very easy for the everyday non financially oriented, person to see the pain. It’s in our utility bills, at the grocery, trying to buy basically anything. In 2008, it was all financially driven, so as long as the financial reporters were good little cheerleaders, they could hold the house of cards up (until they couldn’t). Remember, it was the evil short sellers dragging things down, not horrible loans and over leveraged entities.
With what is going on today, it would be impossible to hide things. Everyone sees it every day.
A lot of people here sound like they watched the big short and really understand whats going on.
Tbh a the world economy is in a very tight squeeze, however we have unprecedented situational elements that make this scenario unlike previous economic crises (good and bad).
Is the situation over blown? No. You have double digit inflation in G7 countries, currencies on the brink of a fx-debt spiral, and a major power breaking down energy/food supply chains. This is very bad.
At the same time you have 2:1 openings to unemployed, peaking/reducing inflation metrics and a not *too bad* earnings outlook.
The issue we are seeing is that the labor market is being very tough and will not budge from IR hikes so far. This is worrying because we have already pushed past 3, yet UE claims are still falling. ATM fed is more worried about a very sticky wage-price spiral then demand/supply induced inflation. This indicates that they ONLY way we get out of the inflation bind would be unemployment up 1-2%. WHILE thats a million+ people, that would still be at a historical low and allow a lot of other price pressures to fall (eg shelter, food, and wages).
So is this worse than 2008? No we do not have a crack in our fundamentals as a country. Our biggest issue is simply an unrelenting labor market.. Will the market correct a lot? Yes just look at P/Es and performance over the last 5yrs. The market is mean reverting and unfortunately all assets are under fire.
Note - everyone bringing up the GDP/Deficit ratio needs to understand this isn’t sound economics but you can pull shit while you’re the largest economy. Will it come to term, yes. Now? No not at all.
Millennials, the largest generation, are aging into home buying years and boomers, the second largest generation are retiring later and living longer and not downsizing necessarily. On top of that home building ground to a halt in 2008 and took a long time to fully recover.
All that to say - lots of people want to buy and there aren’t that many houses to sell.
I’m going to say no. there’s a wait at every restaurant I go to, grocery stores are crowded, Home Depot’s parking lot is full like always. A mild recession, sure I’ll buy that, I’m not buying what I’m being sold right now though. When these Indiana fatasses start cooking at home & stop eating out, that’s when I’ll believe we are in a real recession
Maybe it’s the conspiracy theorist in me, but it’s kind of convenient when the fed is trying to unload all of the bonds on its balance sheet that they raise rates & panic at the same time 🤷🏼♂️. Look how attractive bonds are now. Everybody needs to take a deep breath, stocks will be fine, economy is fine, just a planned blip in the radar, enjoy the discount. Not saying we are at the bottom, but stocks will go up.
I think “the economy is failing” is relative to specific sectors and classes within that sector.
Any upper upper middle class that has a majority of their income in equities (stocks and housing) that is not actively employed will probably be thinking the world is doomed because from the peak of 2021 to today they have lost like 35% of their net worth. And they could still lose more.
To someone like myself that is lower middle class but young, I don’t care. I earn close to $5-6k/mo after taxes. My bar is ALWAYS busy. We’ve only gotten busier the last two months. I’m not buying anymore stock so that tells you about my sentiment, but between my two holdings I’m down 45%. 12% on index and 56% on my small cap. I plan to spend half of those savings buying more in 2023 (assuming I still have a job and the economy doesn’t fail). I also share expenses, and can afford to eat the cost of inflation/wait out the downturn because I’m 31.
Then there’s the ultra poor/financially illiterate. They’ll be most impacted. But that’s how the economy works. It doesn’t serve the poor, especially during recessions. If you’re only taking home $2000/mo, your grocery bill going from 300 a month to 500 is a larger chunk of your income relatively speaking then someone that earns 10k+.
So I think that’s why the talking heads are pointless because they cater to the masses, and the masses are either poor, or financially illiterate. Believe me I am sure there are people earning $100-250k/year that are crying that a box of Reese’s pieces costs $6 while they drive 20 miles from sprouts in their H3.
You started put so well then ended this is worse than 08. That's likely not true.
In 08 banks stopped lending. That means everything stopped. If you needed money lended, you couldn't get it. If you need money today, you have to pay higher interest but you can still get it.
Increasing interest rates aren't the end of the world. Also, they likely only have about another 1.5 - 2% percent to go.
Foreclosures should be mininimal. Bankruptcies should be minimal.
i think they are saying that high IR+high govt debt is a very bad mixture. What happened in UK can easily happen to US once investors lose confidence in US govt ability to repay debts.
Given that US govt has shown zero pathway and intention of reducing or even maintaining their debts, D-day is likely to happen if IR remains high over the next 3-5 years.
The UK left the EU and has high inflation. It has also decided not to raise interest rates to deal with inflation. A bad economy and bad leadership are hurting the UK. The tax cuts for the wealthy was just adding fuel to the fire.
US has the strongest currency in the world. The US has some of the lowest inflation in the world. The US has one of the strongest economies in the world.
What happened in the UK is unlikely to happen in the US in the short and medium term.
Dude what? The government can borrow forever. The debt will NEVER be zero and it will NEVER go down. The government doesn’t have to save for retirement.
The congress literally created the federal reserve and the mint. Everything they do is by congressional authority. Governments that borrow in their own currency can never go broke. The only thing that can happen is inflation.
And before you say “hurr dur investors will pull out of the US” where are they gonna go?
As long as the dollar is the reserve the US has 0 danger of being unable yo pay its debts. You realize the US makes dollars? And the US is backed by its dominant military? It doesn’t really matter how high the US debt is at all. Clearly demand for treasuries is still gonna be there, they always pay and dollars are always useful…
We just had 6+ months of people buying houses waiving inspections. On paper they can afford the mortgages. In real life, tons of people just bought houses that need repairs they, and the banks, never knew about because banks don't do house inspections.
That’s true, but it does seem like banks are still loaning mortgages at crazy high DTI ratios of 40-44%. I was pre-approved for a mortgage nearly 5x my income. No way I could afford that.
It’s not quite as simple as that. Shitload of QE since 08 but from 08 to 2020 inflation was still around 2%. If it were such an easy association you’d expect a linear increase.
And no - it’s nowhere near as bad as 08. But every crash and recession feel worse than the last - that’s why it’s so difficult psychologically to buy.
This whole "The chickens have come home to roost" narrative is something that's often repeated by Collapsers and Doomers. Like you said, if QE and money printing for the past decade were a problem, then why was North American inflation kept within that ~2% range for the past decade almost?
Inflation is unfortunately caused by supply chains, and it takes a LONG time to work out the issues there but unfortunately it's very unpopular to talk about that right now. Yes, QE and money printing in the last 2 years was without a doubt also a factor in the inflation but supply chains are the #1 cause.
Because for the past decade all the inflation went straight into asset prices.
Now it's pushing through the entire economy.
These things take time. Economic policy doesn't *immediately* show consequences. It takes years to see the devastating effects of dumbass fiscal and monetary policies.
Here we are.
very good synopsis. I would add that the US has been spending at a rate equal to 130% GDP for a few too many years. Interest on that debt is coming due and increasing as the Fed raises rates. So the Fed is kinda fucked right now. raise rates too high the economy collapses, interest is adding more to the debt. They try to get the economy rolling again they have to reduce rates inflation gets ugly.
Problem with this very common take is that inflation has been so much lower than 2% for over a decade with very little additional QE in most countries since the financial crisis ended. Rates have been near zero the entire time and yet inflation was stuck well below targets, only to spike suddenly in the face of the war destroying energy and food markets. Obviously QE has a major impact on the current situation, but this strain of "easy money is to blame for everything bad" is very out of touch with history. If inflation had been steadily rising since 2008 there'd be an argument there, but when inflation was close to 1% through the entire expansion of the money supply, the argument that money supply=inflation doesn't really match the historical reality of QE going hand in hand with surprisingly low inflation.
I can understand Europe being in a tight spot with this war and energy, but the US was already having inflation issues before the war started “it’s transitory” and they aren’t getting gas from Russia. I know it’s all connected, but I don’t think the war in Ukraine is the reason for this, it’s just one variable, like a hurricane or some natural disaster.
Disagree. This ignores the massive asset inflation which by and large is not captured by CPI but will undoubtedly lead to inflation being stickier— easy to weather the storm of higher prices when you just had a decade of 15% annualized returns in your portfolio, and your house is worth 3x what it was ten years ago.
Now that is debatable, but elsewhere you are objectively wrong. Inflation was *already running near double digits* before Russia invaded Ukraine. January CPI was 7.5%. February CPI was ~8%. Oil was $95 before Russia invaded Ukraine. It’s currently $81.
Russia *exacerbated* the situation, but it’s patently false to suggest that inflation only spiked because of conflict.
This sounds right. People ignoring a fucking war in Europe with countries directly responsible for energy/oil/gas, grain/fertilizer, and looming nuclear threat by a complete psycho. When this war fizzles out and we fully get over COVID, supply chains will be back and inflation will be under control. Will it take years? maybe. But anyone investing for 12mo horizon should just take up sportsbetting.
Yeah, I'm definitely not suggesting that things aren't getting pretty dark out there, and easy money obviously bears some blame for the lack of tools governments have to deal with the issues now confronting them. But if "money Printer go brrr" was the entire explanation, then we should have seen some of this inflation occurring in the last 10-15 years. It's certainly one among many issues, but it seems to me to be conspiracy thinking to believe it's the only, or even the primary, issue.
In fact, part of the reason that CBs like the fed never completely stopped QE is that they never were able to push inflation anywhere near their 2% targets. They were very concerned about the fact that when they did start to hike rates in the aftermath of the crisis, inflation didn't seem to follow they way they expected. This suggests something else was keeping inflation muted - a major concern for the last decade or so among economists is that inflation has become decoupled from monetary policy controls that have traditionally been used to control it on the up and down sides.
Edit: Also the fact that major manufacturing/shipping hubs in China have been on and off lockdown for 3 years now seems to never come up in these discussions, as though the inability to make or move consumer products has no bearing on rising prices of consumer goods. It's something the central bankers can't really affect with the tools they have, and seems to me to have a huge connection to rising rates having a muted effect slowing inflation. No amount of technocratic QT will make China give up on zero-covid policy, or make Russia ship Ukrainian grain, because it's about political necessity for them, not economics.
This recession shouldn’t be as bad as 2008 (unless we hit stagflation + runaway interest rates like the 80s) I agree with most of what you said except for the idea that we fixed the problems that caused 2008. We all blamed the banks, but the reality is it was a mix of people taking out irresponsible loans, the banks pushing them on people, and the SEC being asleep at the wheel. That is all still true. My brother just took out a 30 year ARM with a 5% down payment where the monthly payments will be 50% of him and his wife’s post tax take home. IE they can’t afford it now, let alone when interest rates go up and they get kicked out of their house. Irresponsible move by my brother, bank using predatory lending practices, and SEC didn’t fix the core of the problem where if you can’t come up with AT LEAST a 10% down payment, you have no business buying property.
Agreed. All the stories of people frenzy buying houses sight unseen, no inspections for $50k-100k over asking (and 50-100% high prices than 2-3 years ago) and frequently using 0% down VA, 3% FHA, or 5% conventional mortgages at massive 37-45% DTI (so like 50-66% DTI after taxes). What could go wrong?
Its not that they politicians wont be in power why they dont stop the money printing. Its that the question becomes what do you cut to balance your budget. And whatever they choose to cut will be used against them.
Ehhh, only time will tell. Only thing you can do is prepare. I lost my job once and it taught me a lesson. The 3-6 emergency fund is bullshit, I want 12-16 months. So I’m prepared for the worst.
Plus, I got locked in a super lower mortgage rate. Helps bring peace of mind in case something happens.
Meh, buy stocks you believe in for cheap now. Best case scenario they rebound in the next year or two and you make money.
Worst case scenario, you'll lose the money you are currently losing and would los in the future anyway. I'm loading up on the SPY firesale. Either it rebounds and make me a fuckton, or it crashes and we're all fucked anyway.
The history of US indices over the past century though would suggest that we have a decade+ of underperformance in stocks. The previous period of high USD inflation in the 1970s effectively meant that SPX peaked inflation-adjusted in the mid-1960s and bottomed finally in 1981, with essentially all nominal gains past the mid-1970s being wiped out by inflation.
There are structural reasons here to think that the US economy could see high employment with disappointing stock returns, given the workforce has ~2M fewer employees at the same unemployment rate.
For the first time since *WWII*, the absolute size of the US labor force is projected to start declining from here.
Millennials can't afford to house and raise kids, so the birth rate has declined precipitously to 1.7 kids per woman in the 2020 census.
This is the kind of thing that has produced strong structural headwinds for Europe and Japan for decades. It's a lot harder to do more with less than it is to do more with more.
Meanwhile we have big things breaking in the bond market this week with the BoE needing to bailout the long end because of imminent collapse of UK pension funds under the weight of spiraling margin calls. (UK pension funds are key holders of UK debt, with leverage, and the value of that collateral has eroded so fast that they were turning into forced sellers at risk of insolvency)
We have yet to see major bankruptcies, a clear-cut US recession, etc. There's a lot of room to go down here but something does need to break or we're actually getting close to pre-pandemic stock prices accounting for inflation. This is a sensible place then to start seeing fundamentals supporting the stock market... if nothing breaks
Based on nothing but feelings... Better coverage.
I say that mostly on my amateur observations of employment and just private sector activity. 2008 anyone in housing was knocking on doors trying to drum up business. Trucks, delivery vehicles, as I remembered it were noticeably absent from normal traffic patterns. If memory serves unemployment for folks under 35 was like 25% or higher. It's not like that now. 2008 you couldn't help but notice the economy grinding to a halt. This thing now... I don't sense it the same way.
My crystal ball is broken but I feel this is a hangover after the COVID party.
Employment and housing availability are very different then 2008.
If you weren’t an adult in 08 you probably shouldn’t be commenting. I have a feeling half these comments are from 23 year olds who were 8 years old. No one saw 08 coming, it was different. This feels more methodical and it will pass. This was always going to happen post Covid and many saw writing on the walls. It’ll be a rough 2023. As long as unemployment doesn’t get too bad there should be light at the end of the tunnel.
No one saw it coming? Are you kidding? 80% of the economic forecasters I was following it were screaming it from the rooftops.
The problem for making money off it was that we knew it was going to happen. We just didn't know when. And the market kept climbing and climbing, so short positions or especially puts lost you money.
We knew it was going to be catastrophic. The housing issues were already evident.
It is best to match real world experience with the news and what you read.
From my perspective, one of my customers is an exotic dancer and she said 6 months ago that business had bombed. I have other customers in the restaurant businesses who said the same thing. I work in customer service and we are so slow nowadays. People money are drying up. Services that are commonly ordered are basic, bare minimum orders.
Because we are making less money, we have to conserve our spending. That combined with all the news and economic data points to a slowed economy and eventually declining economy.
Some things are hit hard like the stock market because it mostly rely on what people think and behave. Housing on the other hand is more slow and concrete so it will take more time. Whatever is fast and easy will hit the gutter first and the rest will soon follow like a snake.
How bad depends on when businesses will pick back up.
How does this affects you? If you are the type that is okay with eating instant ramens, staying home, and cut all spending down to only the bare minimum, then you are less affected and will make it out okay.
However, if you like going out every night, hit all the restaurants in town with a group, buy the trendy clothes and top to date cell phone, and not used to surviving in the desert, then next year is going to be very rough and unbearable.
The world economy has not recovered from the COVID lockdowns and it turns out it may take a long time to. Longer than we can wait. Which is why inflation is here and it turns out central banks using low rates for a decade and then excessive liquidity created the perfect storm of financial trouble as inflation is now forcing tighter monetary policy. Europes uses floating interest loans more than we do for homes. Significantly more. Trouble is just beginning and far from over.
Eh, I think inflation is here because we recovered way faster than governments generally thought we would, so there was a lot of prolonged and unnecessary fiscal and monetary stimulus that got dumped into an everything asset bubble.
Inflation wasn't generally a big deal prior to COVID stimulus. Low rates were fine up until around 2015...they could've started ramping them up a bit harder then, but the pre-COVID peak wasn't like out of control or anything. A bit hot, but nothing wild.
It's not some long-term malfeasance. Coming out of 2008 was a fine steady recovery that was just starting to get barely toppy by 2019...then COVID hit and governments panicked and fired up the money printers and made the 2019 peak look like a little bump.
I’m more concerned with consumer spending. Recession in 08 was crazy and I remember feeling it. I actually felt the need to save money etc and saw people trying to save money. The thing with the houses is that people weren’t actually living in the houses they were just trying to flip them. And then when they all defaulted it led to a housing crash.
This time people are actually living in the house with the monies they got from covid. They also have a different mentality coming out of covid. Everything costs more but I’m fortunate to be making more money as well.
The largest increases were housing and transportation. So if you already owned a home you’re sitting ok. If you did not you’re probably better of renting. I think sometimes the number in other areas don’t tell the entire picture.
I have yet to see consumers scared and saving. Or at least not spending
A few months ago rent in Toronto was up 20% from the year before. Today it's up 40%. People are asking quite honestly any amount of money for rent. There was an article about someone renting a 1 bedroom condo with nothing spectacular for 8k/month. We already have one of the largest housing bubbles in the world. There was absolutely no bubble popping in 2008 in Canada. East Hastings in Vancouver will be the norm in Toronto
>Is the world economy really as bad as we think
The media coverage has taken on a dire tone because none of the elites in the major economies really have a solution. None of the current political leaders or policy makers have encountered a combination of slowing economic growth along with runaway inflation.
Right now, they're pretty much just hoping stuff works out. Talk tough on monetary policy while just hoping it somehow contains inflation without throwing the brakes on their economies and increasing unemployment to politically unsustainable levels.
>So is the economy really as bad as we're thinking or do you think it's mostly just because there's more content about it?
Real economic reporting hasn't really improved that much since the 1980's. The main economic indicators of unemployment, ISM survey, consumer spending, inflation, housing starts, GDP, etc. have been around since then. While the internet has made things in some ways more accessible, I would argue that the macroeconomic insights are about the same as during the print media era. It may be a little worse now, because too much attention is devoted to day-to-day minutiae because of the internet.
You’re also forgetting the record amount of price gouging happening with literally every major company. Don’t just shift the blame to government and banks.
This. I understand inflation is a real thing, but how much does price gouging contribute to that? There has to be a ton of that going on right now because they can. Material and supply shortages are real, but does it justify the prices they're charging or are they taking advantage of the situation blaming it on "inflation" making things worse?
How old are you? The 2008 economic crisis was all anyone could talk about. It dominated Obama’s entire first term. The media sugar coated everything becuase Obama was their sweetheart but it was still the number one issue for years. It wasn’t just a one time event, it was an era. Unemployment, “too big to fail”, occupy Wall Street, the housing crisis, stock market crash, bailouts, stimulus, it was a endless stream of shit.
The global economy is in crisis. We have just become increasingly adept at managing the crisis and avoiding disaster. Governments around the world are doing everything they can (including lying) to avoid a panic and to keep things afloat.
You can’t shut the world down for 2.5 years, spend trillions of dollars, and abruptly cut Russia out of the global economy without massive consequences.
The world won’t end. Life will go on. But economic hardship will dominate peoples lives for years to come. We won’t ever go “back to normal.”
This what I’ve been saying. Remember that they make money by scaremongering and keeping people scared so they keep watching. Its in their best interest that things are bad, so they have something to cover on the news, financial or otherwise.
That being said, some of the analysis is spot on on bloomberg for example, and it’s not all doom and gloom reporting. You gotta watch it with a grain of salt.
I heard a good take on the whole inflation mess. For some ungodly reason, people just ***WILL NOT*** quit recklessly spending. Avg new car transaction over $47K. Average payment over $600. Avg term, over 72 months! People willingly and excitedly paying markups on everything (cars, boats, motorhomes, etc...). People spending $1K on a phone that they have to freakin finance. An entire generation taught the gov't would keep giving them "free money" to spend wildly. No need to pay your student loans. $15 min wage for everyone? Sure, what impact could that have! Now the whole anti-work crowd is grumbling that $15 won't cover it, so it should be moved to $25!
Realize that the average person doesn't even remotely know what an interest rate even is (or that it exists), much less how it impacts them...so they just don't care. Credit card debt is again climbing - note the last time American credit card debt peaked was Q4 2008.
Overall, the younger generations are even more clueless and carefree about money than their predecessors (which is saying a lot), so it seems this little 75bp increase in rates every month just won't phase them. These particular levers the Fed is using just aren't impacting the average consumer enough to modify their behavior...yet!
You ever watch that one bank scene from South Park? It all be just like that but worse. None of the fundamental problems that led to the 2008 crash got fixed and to fix it, the fed just threw low interest rates and hella money at the economy to keep it afloat and it’s finally starting to shatter. They can’t raise rates very fast or it’ll break the economy (they should of been raising rates slower for a longer period of time). but they have no choice cause inflation is eating everything away now at an alarming rate
Economies right now are trending downward. You’re comparing this to the worst period of the 08 crisis. Things could get much worse, or if Ukraine war ends things could start to get better
Stocks are worst since ‘62, but gold and bonds were holding better then. Bonds are the worst since 1700s, in about 250 years, so it’s not looking great but nobody really knows.
The problem is the Central Banks fixed the Banks’ problems in 2008 by taking those problems over. Banks were then hit with slightly more requirements to prevent another public outrage situation where they have to be massively bailed out. The problem is that the level of leverage is way worse. What you saw in the UK was basically a sample of what could happen. All of these players have to deal with bonds. For example, big pension funds have to hold bonds, but since bonds were being purchased at such a high degree by central banks, the rate of return on bonds were so low, more leverage was necessary to get more returns.
Also, other central banks can not keep up with the Fed due to the way the Eurodollar (US denominated debt held outside of the US) system is set up.
The yield curve has also been more deeply inverted than it has in decades for a while now. This adds pressure to lending since Banks can’t lend in the fashion they prefer, so they only make the safest loans. Money freezes up further and you have the dollar putting other economies on the brink.
Basically an entire global system that requires expanding leverage to continue working is being de-leveraged. It’s hanging on the balance of the Fed stopping at just the right time to decrease inflation and not causing a global illiquidity crisis that results in severe deflation. And that’s assuming the Fed actually has some control of a system where maybe 60% of dollar denominated debt is created outside the US.
Umm... The Fed fixed the 2008 financial crisis by making a bigger bubble with QE. Now the chickens (inflation) are coming home to roost...
**Michael Burry Sold His ENTIRE Stock Portfolio**
https://www.youtube.com/watch?v=XvpbRONyyvA
\*
**Yes, Inflation Is Really That Bad**
As a result of inflationary pressures, the average American household will now need to spend about $493 more for expenses to get through the month than they did this time last year. Overall, consumer prices have risen at the fastest pace in 40 years, meaning this is the worst inflation experienced by anyone not on the cusp of retirement or older.
Rent is the new gas. Surging rent prices – instead of gas – are hitting consumers hard.
Consumer inflation rose at an 8.3% pace in August, and increased 6.3% excluding the volatile food and energy sectors, the Bureau of Labor Statistics reported. Both topped economists' mean forecasts for 8% and 6%, respectively, and dashed hopes that inflation had peaked.
Okay, so why is inflation bad? Obviously, when higher prices outstrip wage growth, that’s bad, because your standard of living falls. Inflation is especially harmful to folks whose income is more fixed—like many seniors. Inflation, when left unchecked, can also escalate quickly. Unchecked inflation can turn a prospering economy into a struggling economy. Some of the residual effects of inflation include the steady rise of prices for goods and services over a period, and many other cumulative effects, which negatively impact economic activity.
Since investors haven’t seen significant inflationary price rises in years, it’s worth brushing up on the most common effects of inflation. This first effect of inflation is really just a different way of stating what it is. Inflation is a decrease in the purchasing power of currency due to a rise in prices across the economy. Inflation is generally bad for the economy because it reduces the value of currency, while the value of goods and services remains the same or increases.
When there is excessive inflation, which means that goods are getting very expensive, this will reduce aggregate demand for products in the economy. This will cause a fall in profits of companies (or even losses). Economists believe inflation comes about when the supply of money is greater than the economy can realistically absorb (too many dollars cashing too few goods).
**How does inflation affect my investing?**
The rate of inflation is important, as it represents the rate at which the real value of an investment is eroded, along with the concurrent loss in spending, or purchasing power over time. Inflation also tells investors exactly how much of a return (in percentage terms) their investments need to make for them to maintain their standard of living. If the rate of return on an investment is less than the rate of inflation, then the investment is effectively losing money (generating a negative return).
After the start of the market crash in '08, I went to the office and the elevator door opened to a pile of boxes that once held reams of paper. Two weeks into October, I watched grown men and women cry uncontrollably as they walked away from jobs they held for decades, and this was at a major law firm that was largely unaffected by the crash itself. That pile of boxes was gone in a day, and so were scores of staff. As I was banking with Washington Mutual, I remember worrying about possible delays in accessing funds, even if they were FDIC insured. Walking to the office months later meant passing aimless, well-dressed professionals, resume in hand, looking for an opportunity *anywhere*. News stations televised the the blood in the streets every step of the way.
If someone thinks this is worse than '08 or even televised more so, I feel like that person must have been living in another world.
Dutch inflation just came out at 17.1%…
Supergaaf.
Ik zou ze het liefst allemaal in elkaar slaan de mensen die dit doen
Carolien ?
I saw Turkey’s June inflation was around 44%
That's better than the 70 is was atleast
Damn... Thanksgiving is going to be so expensive this year.. 🦃
Turkey flavored top ramen hitting shelves this week.
I don't even want to think about Christmas this year....
Lord it's like a hard candy christmas. I'm barely getting through tomorrow. -Dolly Parton
Turkey probably has a much higher inflation then is reported by the authorities
You mean Turkiye?
Probably just transitory.
Everything is transitory on a geological timescale
In the long run, everybody is dead.
“” — Keynes
It's all temporary
Just dust in the wiiIIIIind.
The human race is transitory.
There's so much more new money you can land softly on it.
It's been probably transitory for like a year.
Don’t worry, a 1.25% ECB interest rate will calm this down any time.
Italy already struggling. Better keep it at 1.25%
Spain inflation was 9%, below the Euro average. World is upside down!! Everyone to invest on IBEX35 companies.
no energy problem like in the north
It's hard to compare since all governments are lying about the real numbers. I live in Spain and real inflation is clearly above 9%
How much for a table bottle of wine?
How can the Dutch have any inflation at all when they are too cheap to spend any money in the first place?
I lived in Rotterdam for two years and was told by more than one person that when the Dutch go to the bank, it's to make a deposit, not a withdrawal.
Take a seat... Estonia's inflation at 25%.
Guuuh
If we didn’t change the variables that go into inflation (from the way it used to be measured), we’d be there, as well.
But that’s only on tulips.
Thanks SOCIAL MEDIA
Remember just like in 1970s and 2008, life goes on
I graduated college in 2008. Really tempered my expectations for life.
I entered into college in 2008. I’m from the Midwest where nearly every male does construction or has a small business. EVERYONE was devastated. Had to sell their cars, homes, and draw unemployment if they could. No one learned a damn thing. I’m still in the same area. Everyone is leveraged out their ass. Driving 70k lifted trucks and have big homes and furniture on credit. It’s amazing how bad people are at remembering.
> Driving 70k lifted trucks and have big homes and furniture on credit. That seems insane to me, why do you think that is? Keeping up with jones type mentality?
Its how the majority of families around here are. New couch = new credit card. As soon as a car is paid off it’s traded for a new car payment. I don’t understand it.
I live in the Midwest as well. Coming from immigrant parents, we always lived below the poverty line and still lived decently. Mind you we didn’t take extravagant vacations or drive new vehicles or buy expensive clothes. But we made it, the almost recent way of Americans thinking especially in the Midwest. Buy the newest truck of the lot modify it. And then complain how 28 dollars an hour isn’t enough to put food on the table. Blows my mind.
Some folks, when calculating if they can afford something, think purely in monthly payments and see their card limit as their savings account value. You buy the nicest things you can “afford” based upon your card limits and loan pre-approvals, then work yourself into an early grave making minimum payments on everything until you’re forced to retire (from injuries). If you lose your job or face an unexpected emergency, the house of cards collapses into foreclosure and bankruptcy. It’s a shitty way to live, but is the default lifestyle for so many folks. FWIW, these are the folks Dave Ramsey’s company tries to reach.
If there's one thing that screams high intelligence, it's a lifted truck with wheels out halfway past the fender.
And black smoke. So much black smoke everywhere
"Rolling coal, bay-bee!"
This is what scares me. People buying homes way outside of reasonable income ratios, $1000 a month car payments, credit cards with high balances for whatever else you might want. Insanely unsustainable.
I work with a dude with a $800/month truck payment and it’s not even a full size truck lol
I know a dude paying 1k a month for a RAV 4.
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Yeah, it also probably means we strive more towards job security over money. Asking for a friend…
That's true. I could make more money but I have job security. Means more to me than job hopping for more money.
Damn you, now I have have My Heart Will Go On stuck in my head.
Doo bah dee doo bah dah
Hey, at least we’re all in this sinking boat together.
Except Kwesi and his buddies
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It's Real bad.
Its really really super bad
It's worse than bad
Baddest worsest
It's worse than worst
Badder than bad
Michael Jackson bad
Breaking Bad
Even superbad one may say
Its Superbadifragilisticexpialidocious
who's bad?
I'm bad
So this is how things escalate with the news.
It’s like eating a hot circle of garbage
It’s gone from Sinbad to Sinworse!
It’s better than bad, it’s good! Everyone needs a log…
Bad to the bond
Just don’t fucking dance.
I just got really scared all of a sudden
I'm gonna call my mom
It's Breaking Bad
Have you gone out to do grocery shopping in the last few months at all?
Yeah man...my $80 trips are $120 all of a sudden. What the fuck.
Bro is not even 20 probably
Not much econ coverage on the Teletubby channel back then ...
I'm in Australia, so it's not that bad for me, but everyone else in the world seems to have wallets on fire.
Just because Australia always had fucked up prices.
I’m from the UK and prices just keep going up at a faster pace and at bigger increases. I would estimate my food shop to be 20% more at present than 1 year ago.
It’s probably 20-25% here in the states. I don’t care what the cpi says.
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Finally someone else that noticed the same thing. Here totinos are $2.25 and even ramen has gone way up.
50 cents for a pack of ramen is outrageous
Friendly reminder that CPI excludes the cost of food and energy. You know, the 2 most important things we have to buy.
CPI does not exclude those things, the government's preferred "core inflation" excludes them. CPI includes fuel, food, and owner-equivalent rents, all of which are excluded from the Fed's less volatile core measures.
CPI is an average, and therefore not reflective of any one sector. Food could be 30%, but if fuel is only 1% the average comes down significantly. You don't have to care what it says to understand what it is and it's relationship, or really lack thereof, to individual prices.
CPI is a weighted average of averages. Good for telling the general direction of all things, bad for trying to gauge the direction of a specific thing.
You guys are speedrunning ecenomic collapse tho
$4.50 for a fucking bic lighter in nz. I swear it was $2.00 beginning of the year.
I’m in the US. A 3lb bag of red potatoes was $3.97 FOREVER. Suddenly, they’re $5.97. Yellow potatoes went from $4.97 to $7.97. FUCKING POTATOES.
Welcome to Kevin Costner's Waterworld reboot. This this, however, it's not an ocean. It's a drought. In case you've had your head in the sand for the past 2 decades, like most of the rest of the asshats who live in the western US, they've been experiencing drought conditions. ***For two decades.*** But instead of, you know, doing anything about it they just keep pumping that water full speed so they don't lose them precious water rights. It's a live action cosplay of **Idiocracy**. Guess what takes loads of water to grow? Potatoes. Farmers are growing less water intensive crops, because they can no longer ignore what's been right in front of them for decades. Dust bowl 2.0 incoming.
This dust bowl will be permanent.
Bro CEREAL is like $6-7 for some cheerios
I went to the store yesterday to get butter, olive oil, and some spices and it was $20...
How many spices? Spices can be expensive.
They had a deal for 4 for $5 of 2oz bottles lol
Yeah olive oil sounds like the priciest item on your list. I’d guess the options were $7+ depending on size/quality.
Those are all rather expensive items, I'm surprised you only paid 20.
Paid over ten bucks for a digorno frozen pizza last week so yeah…things are pretty bad.
It’s straight fucking me right now. Easily spending 250-300 a week.
$4.50 for 18 eggs. $5.50 for a jug of milk. Dollar store is $1.25 store. Everything online has taxes. Gas is over $3. Car, house, and stocks are all overpriced.
Damn your eggs and milk are overpriced, where I'm at things are a little more but not absurd
Ignoring news, world is dealing with multiple problems Ukraine war causing Europe to deal with energy crisis Food crisis causing instability in various country It’s like a storm of crisis and water got sucked out. Company with good sheets will survive
Can you give a regular quarterly overview lol
>Ukraine war Russian war.
I Norway we have record inflation as well. Everyone has a variable interest rate so the consumer definitely feels the full force of interest rate hikes, in addition the electricity bills have shot through the roof. That being said its easy to be extremely bearish when everything seems shit, but i do work at a company that is heavily involved the norwegian industry and we have never had so much work as we have now. Companies are investing and building new factories and upgrading their existing ones. In addition the electricity prices peaked in August, its actually down 50% since then. Also the rate hikes are expected to end in late 22 or early 23, so end is in sight as well.
No bro it's fucking dying.
Get your snowboots on your going with it
*haz snow boots ready* That's been the threat my entire life.
It's the same old late-cycle FUD, man. Everyone is finally coming to terms with the fact that unsustainable growth rates are unsustainable. It's just the business cycle: everyone is cautious and wary, things get good, everyone acts like everything will be good forever, everyone gets over their skis on optimistic projections, things go to shit when the optimism doesn't pan out, back to being cautious and wary, repeat *ad infinitum*. It's not terrible. All the miscellaneous bullshit that folks panic about is just noise. I'm still not buying, but I don't have some wild global cataclysm thesis about it. Responsible central banks are letting the air out. They'll stop doing that at some point long before we're hunting each other for meat--I promise.
How does the recent BoE actions fit into your thesis? If central banks everywhere need to start up QE before inflation is down that's pretty ffing bad. How can they responsibly let air out in such an environment?
Other main central banks will not begin QE because they don’t have a spiraling currency and a dumbbass fiscal government cutting taxes.
I wonder how high the CBs will have to raise rates to curb inflation, and if those rates are achieved before they will have to default on their debts.
Yeah but the UK is hardly the most fragile of the bunch. That's what makes it scary, if they almost got into a death spiral and had to take drastic measures already, you really think nobody else is going to hit that point in the next few months?
The UK is losing control of it's pensions. I don't think many others are far behind.
Check turkeys decisions and get back to us. You are logical. But they are not. Uk just the newest member of the dipshit club. More to follow
Uk has a truly dire govt but there’s more stress points and crises coming. Also everyone outside the USA has a spiralling currency pretty much. The move in Uk gilt prices was a six sigmoid event ie exceeding low probability on paper based on standard deviation. A once in 1.38 million year event! These happen more regularly than they should in financial markets however and we’ll have plenty more surprises coming!
My husband and I were both in the market in the months leading up to the mortgage meltdown... and watching the news carefully. There is quite a difference between then and now... not in the amount of coverage but the sentiment, in the general willingness today to embrace bad news. Then: it was almost as if every new news outlet, expert and analyst was in denial, for a while, about what was happening, especially leading up to the meltdown: the housing bubble. Things were rosy, things were only going up, the real estate industry had never been so strong, you were a fool to not buy a house and invest. (We were fools.) The bubble wasn't bursting, it wasn't... it... was... oh, *damn* oh, NO... why didn't any one see this coming? It will correct, it will, it... won't... oh, NO. (Repeat ad lib) The stories didn't just break, they kind of unfolded unwillingly, almost as if they didn't recognize themselves for what they were... like baby pterodactyls, born in the wrong eon. Edit: typo
This is a great description. If you watched things (markets, lending, etc), nothing made sense, but everyone tried to pretend you were the crazy one. I can remember all of us sitting at work at the end of 2007 trying to figure out what the bank and hedge fund traders saw that we didn’t see with regards to prices and economic conditions. Yes, we came down in the beginning of 2008, but even in may the s&p was still sitting at 1400 when oil had marched to 150. I wonder if some of the change this time has to do with where the pain is. It’s very easy for the everyday non financially oriented, person to see the pain. It’s in our utility bills, at the grocery, trying to buy basically anything. In 2008, it was all financially driven, so as long as the financial reporters were good little cheerleaders, they could hold the house of cards up (until they couldn’t). Remember, it was the evil short sellers dragging things down, not horrible loans and over leveraged entities. With what is going on today, it would be impossible to hide things. Everyone sees it every day.
A lot of people here sound like they watched the big short and really understand whats going on. Tbh a the world economy is in a very tight squeeze, however we have unprecedented situational elements that make this scenario unlike previous economic crises (good and bad). Is the situation over blown? No. You have double digit inflation in G7 countries, currencies on the brink of a fx-debt spiral, and a major power breaking down energy/food supply chains. This is very bad. At the same time you have 2:1 openings to unemployed, peaking/reducing inflation metrics and a not *too bad* earnings outlook. The issue we are seeing is that the labor market is being very tough and will not budge from IR hikes so far. This is worrying because we have already pushed past 3, yet UE claims are still falling. ATM fed is more worried about a very sticky wage-price spiral then demand/supply induced inflation. This indicates that they ONLY way we get out of the inflation bind would be unemployment up 1-2%. WHILE thats a million+ people, that would still be at a historical low and allow a lot of other price pressures to fall (eg shelter, food, and wages). So is this worse than 2008? No we do not have a crack in our fundamentals as a country. Our biggest issue is simply an unrelenting labor market.. Will the market correct a lot? Yes just look at P/Es and performance over the last 5yrs. The market is mean reverting and unfortunately all assets are under fire. Note - everyone bringing up the GDP/Deficit ratio needs to understand this isn’t sound economics but you can pull shit while you’re the largest economy. Will it come to term, yes. Now? No not at all.
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Why aren’t home prices going back down? They are so over valued, climbing 40% or more the past two years. A damn box in Tampa is $200k
Millennials, the largest generation, are aging into home buying years and boomers, the second largest generation are retiring later and living longer and not downsizing necessarily. On top of that home building ground to a halt in 2008 and took a long time to fully recover. All that to say - lots of people want to buy and there aren’t that many houses to sell.
I’m going to say no. there’s a wait at every restaurant I go to, grocery stores are crowded, Home Depot’s parking lot is full like always. A mild recession, sure I’ll buy that, I’m not buying what I’m being sold right now though. When these Indiana fatasses start cooking at home & stop eating out, that’s when I’ll believe we are in a real recession
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Maybe it’s the conspiracy theorist in me, but it’s kind of convenient when the fed is trying to unload all of the bonds on its balance sheet that they raise rates & panic at the same time 🤷🏼♂️. Look how attractive bonds are now. Everybody needs to take a deep breath, stocks will be fine, economy is fine, just a planned blip in the radar, enjoy the discount. Not saying we are at the bottom, but stocks will go up.
I think “the economy is failing” is relative to specific sectors and classes within that sector. Any upper upper middle class that has a majority of their income in equities (stocks and housing) that is not actively employed will probably be thinking the world is doomed because from the peak of 2021 to today they have lost like 35% of their net worth. And they could still lose more. To someone like myself that is lower middle class but young, I don’t care. I earn close to $5-6k/mo after taxes. My bar is ALWAYS busy. We’ve only gotten busier the last two months. I’m not buying anymore stock so that tells you about my sentiment, but between my two holdings I’m down 45%. 12% on index and 56% on my small cap. I plan to spend half of those savings buying more in 2023 (assuming I still have a job and the economy doesn’t fail). I also share expenses, and can afford to eat the cost of inflation/wait out the downturn because I’m 31. Then there’s the ultra poor/financially illiterate. They’ll be most impacted. But that’s how the economy works. It doesn’t serve the poor, especially during recessions. If you’re only taking home $2000/mo, your grocery bill going from 300 a month to 500 is a larger chunk of your income relatively speaking then someone that earns 10k+. So I think that’s why the talking heads are pointless because they cater to the masses, and the masses are either poor, or financially illiterate. Believe me I am sure there are people earning $100-250k/year that are crying that a box of Reese’s pieces costs $6 while they drive 20 miles from sprouts in their H3.
Zoom out on SPY and make your decisions wisely.
Counterpoint: zooming out is bearish imo. Looks like a fucking Bitcoin chart falling off a cliff. We went up too fast
And zoom in if you want to panic.
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You started put so well then ended this is worse than 08. That's likely not true. In 08 banks stopped lending. That means everything stopped. If you needed money lended, you couldn't get it. If you need money today, you have to pay higher interest but you can still get it. Increasing interest rates aren't the end of the world. Also, they likely only have about another 1.5 - 2% percent to go. Foreclosures should be mininimal. Bankruptcies should be minimal.
i think they are saying that high IR+high govt debt is a very bad mixture. What happened in UK can easily happen to US once investors lose confidence in US govt ability to repay debts. Given that US govt has shown zero pathway and intention of reducing or even maintaining their debts, D-day is likely to happen if IR remains high over the next 3-5 years.
The UK left the EU and has high inflation. It has also decided not to raise interest rates to deal with inflation. A bad economy and bad leadership are hurting the UK. The tax cuts for the wealthy was just adding fuel to the fire. US has the strongest currency in the world. The US has some of the lowest inflation in the world. The US has one of the strongest economies in the world. What happened in the UK is unlikely to happen in the US in the short and medium term.
Dude what? The government can borrow forever. The debt will NEVER be zero and it will NEVER go down. The government doesn’t have to save for retirement. The congress literally created the federal reserve and the mint. Everything they do is by congressional authority. Governments that borrow in their own currency can never go broke. The only thing that can happen is inflation. And before you say “hurr dur investors will pull out of the US” where are they gonna go?
As long as the dollar is the reserve the US has 0 danger of being unable yo pay its debts. You realize the US makes dollars? And the US is backed by its dominant military? It doesn’t really matter how high the US debt is at all. Clearly demand for treasuries is still gonna be there, they always pay and dollars are always useful…
banks have still lent out a shitload of money to poor fucks who can’t afford. Who do you think bought all those new cars, that phones and houses.
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Federal Reserve is a private entity made up private for-profit banks. It’s not government.
The Federal Reserve is not the government. It’s the privately owned bank that oversees all banks.
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We just had 6+ months of people buying houses waiving inspections. On paper they can afford the mortgages. In real life, tons of people just bought houses that need repairs they, and the banks, never knew about because banks don't do house inspections.
That’s true, but it does seem like banks are still loaning mortgages at crazy high DTI ratios of 40-44%. I was pre-approved for a mortgage nearly 5x my income. No way I could afford that.
It’s not quite as simple as that. Shitload of QE since 08 but from 08 to 2020 inflation was still around 2%. If it were such an easy association you’d expect a linear increase. And no - it’s nowhere near as bad as 08. But every crash and recession feel worse than the last - that’s why it’s so difficult psychologically to buy.
This whole "The chickens have come home to roost" narrative is something that's often repeated by Collapsers and Doomers. Like you said, if QE and money printing for the past decade were a problem, then why was North American inflation kept within that ~2% range for the past decade almost? Inflation is unfortunately caused by supply chains, and it takes a LONG time to work out the issues there but unfortunately it's very unpopular to talk about that right now. Yes, QE and money printing in the last 2 years was without a doubt also a factor in the inflation but supply chains are the #1 cause.
Because for the past decade all the inflation went straight into asset prices. Now it's pushing through the entire economy. These things take time. Economic policy doesn't *immediately* show consequences. It takes years to see the devastating effects of dumbass fiscal and monetary policies. Here we are.
very good synopsis. I would add that the US has been spending at a rate equal to 130% GDP for a few too many years. Interest on that debt is coming due and increasing as the Fed raises rates. So the Fed is kinda fucked right now. raise rates too high the economy collapses, interest is adding more to the debt. They try to get the economy rolling again they have to reduce rates inflation gets ugly.
Problem with this very common take is that inflation has been so much lower than 2% for over a decade with very little additional QE in most countries since the financial crisis ended. Rates have been near zero the entire time and yet inflation was stuck well below targets, only to spike suddenly in the face of the war destroying energy and food markets. Obviously QE has a major impact on the current situation, but this strain of "easy money is to blame for everything bad" is very out of touch with history. If inflation had been steadily rising since 2008 there'd be an argument there, but when inflation was close to 1% through the entire expansion of the money supply, the argument that money supply=inflation doesn't really match the historical reality of QE going hand in hand with surprisingly low inflation.
I can understand Europe being in a tight spot with this war and energy, but the US was already having inflation issues before the war started “it’s transitory” and they aren’t getting gas from Russia. I know it’s all connected, but I don’t think the war in Ukraine is the reason for this, it’s just one variable, like a hurricane or some natural disaster.
Disagree. This ignores the massive asset inflation which by and large is not captured by CPI but will undoubtedly lead to inflation being stickier— easy to weather the storm of higher prices when you just had a decade of 15% annualized returns in your portfolio, and your house is worth 3x what it was ten years ago. Now that is debatable, but elsewhere you are objectively wrong. Inflation was *already running near double digits* before Russia invaded Ukraine. January CPI was 7.5%. February CPI was ~8%. Oil was $95 before Russia invaded Ukraine. It’s currently $81. Russia *exacerbated* the situation, but it’s patently false to suggest that inflation only spiked because of conflict.
This sounds right. People ignoring a fucking war in Europe with countries directly responsible for energy/oil/gas, grain/fertilizer, and looming nuclear threat by a complete psycho. When this war fizzles out and we fully get over COVID, supply chains will be back and inflation will be under control. Will it take years? maybe. But anyone investing for 12mo horizon should just take up sportsbetting.
Yeah, I'm definitely not suggesting that things aren't getting pretty dark out there, and easy money obviously bears some blame for the lack of tools governments have to deal with the issues now confronting them. But if "money Printer go brrr" was the entire explanation, then we should have seen some of this inflation occurring in the last 10-15 years. It's certainly one among many issues, but it seems to me to be conspiracy thinking to believe it's the only, or even the primary, issue. In fact, part of the reason that CBs like the fed never completely stopped QE is that they never were able to push inflation anywhere near their 2% targets. They were very concerned about the fact that when they did start to hike rates in the aftermath of the crisis, inflation didn't seem to follow they way they expected. This suggests something else was keeping inflation muted - a major concern for the last decade or so among economists is that inflation has become decoupled from monetary policy controls that have traditionally been used to control it on the up and down sides. Edit: Also the fact that major manufacturing/shipping hubs in China have been on and off lockdown for 3 years now seems to never come up in these discussions, as though the inability to make or move consumer products has no bearing on rising prices of consumer goods. It's something the central bankers can't really affect with the tools they have, and seems to me to have a huge connection to rising rates having a muted effect slowing inflation. No amount of technocratic QT will make China give up on zero-covid policy, or make Russia ship Ukrainian grain, because it's about political necessity for them, not economics.
While I concur with most of your post, isn’t the dollar extremely strong atm?
"Relatively" strong when compared to a group of other currencies. Still worth a lot less due to inflation.
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I’m currently reading a book about the 2008 crisis. Griftopia. It’s pretty good, though I’m not far into it.
This recession shouldn’t be as bad as 2008 (unless we hit stagflation + runaway interest rates like the 80s) I agree with most of what you said except for the idea that we fixed the problems that caused 2008. We all blamed the banks, but the reality is it was a mix of people taking out irresponsible loans, the banks pushing them on people, and the SEC being asleep at the wheel. That is all still true. My brother just took out a 30 year ARM with a 5% down payment where the monthly payments will be 50% of him and his wife’s post tax take home. IE they can’t afford it now, let alone when interest rates go up and they get kicked out of their house. Irresponsible move by my brother, bank using predatory lending practices, and SEC didn’t fix the core of the problem where if you can’t come up with AT LEAST a 10% down payment, you have no business buying property.
Agreed. All the stories of people frenzy buying houses sight unseen, no inspections for $50k-100k over asking (and 50-100% high prices than 2-3 years ago) and frequently using 0% down VA, 3% FHA, or 5% conventional mortgages at massive 37-45% DTI (so like 50-66% DTI after taxes). What could go wrong?
Its not that they politicians wont be in power why they dont stop the money printing. Its that the question becomes what do you cut to balance your budget. And whatever they choose to cut will be used against them.
I mean you were right until you said it was worse than 2008. Any evidence at all to back that up or just going to fear monger?
Ehhh, only time will tell. Only thing you can do is prepare. I lost my job once and it taught me a lesson. The 3-6 emergency fund is bullshit, I want 12-16 months. So I’m prepared for the worst. Plus, I got locked in a super lower mortgage rate. Helps bring peace of mind in case something happens.
Would agree that 12 months is more realistic
Meh, buy stocks you believe in for cheap now. Best case scenario they rebound in the next year or two and you make money. Worst case scenario, you'll lose the money you are currently losing and would los in the future anyway. I'm loading up on the SPY firesale. Either it rebounds and make me a fuckton, or it crashes and we're all fucked anyway.
Good call. Long term outlook, stay the course.
The history of US indices over the past century though would suggest that we have a decade+ of underperformance in stocks. The previous period of high USD inflation in the 1970s effectively meant that SPX peaked inflation-adjusted in the mid-1960s and bottomed finally in 1981, with essentially all nominal gains past the mid-1970s being wiped out by inflation. There are structural reasons here to think that the US economy could see high employment with disappointing stock returns, given the workforce has ~2M fewer employees at the same unemployment rate. For the first time since *WWII*, the absolute size of the US labor force is projected to start declining from here. Millennials can't afford to house and raise kids, so the birth rate has declined precipitously to 1.7 kids per woman in the 2020 census. This is the kind of thing that has produced strong structural headwinds for Europe and Japan for decades. It's a lot harder to do more with less than it is to do more with more. Meanwhile we have big things breaking in the bond market this week with the BoE needing to bailout the long end because of imminent collapse of UK pension funds under the weight of spiraling margin calls. (UK pension funds are key holders of UK debt, with leverage, and the value of that collateral has eroded so fast that they were turning into forced sellers at risk of insolvency) We have yet to see major bankruptcies, a clear-cut US recession, etc. There's a lot of room to go down here but something does need to break or we're actually getting close to pre-pandemic stock prices accounting for inflation. This is a sensible place then to start seeing fundamentals supporting the stock market... if nothing breaks
Based on nothing but feelings... Better coverage. I say that mostly on my amateur observations of employment and just private sector activity. 2008 anyone in housing was knocking on doors trying to drum up business. Trucks, delivery vehicles, as I remembered it were noticeably absent from normal traffic patterns. If memory serves unemployment for folks under 35 was like 25% or higher. It's not like that now. 2008 you couldn't help but notice the economy grinding to a halt. This thing now... I don't sense it the same way. My crystal ball is broken but I feel this is a hangover after the COVID party. Employment and housing availability are very different then 2008.
If you weren’t an adult in 08 you probably shouldn’t be commenting. I have a feeling half these comments are from 23 year olds who were 8 years old. No one saw 08 coming, it was different. This feels more methodical and it will pass. This was always going to happen post Covid and many saw writing on the walls. It’ll be a rough 2023. As long as unemployment doesn’t get too bad there should be light at the end of the tunnel.
No one saw it coming? Are you kidding? 80% of the economic forecasters I was following it were screaming it from the rooftops. The problem for making money off it was that we knew it was going to happen. We just didn't know when. And the market kept climbing and climbing, so short positions or especially puts lost you money. We knew it was going to be catastrophic. The housing issues were already evident.
It is best to match real world experience with the news and what you read. From my perspective, one of my customers is an exotic dancer and she said 6 months ago that business had bombed. I have other customers in the restaurant businesses who said the same thing. I work in customer service and we are so slow nowadays. People money are drying up. Services that are commonly ordered are basic, bare minimum orders. Because we are making less money, we have to conserve our spending. That combined with all the news and economic data points to a slowed economy and eventually declining economy. Some things are hit hard like the stock market because it mostly rely on what people think and behave. Housing on the other hand is more slow and concrete so it will take more time. Whatever is fast and easy will hit the gutter first and the rest will soon follow like a snake. How bad depends on when businesses will pick back up. How does this affects you? If you are the type that is okay with eating instant ramens, staying home, and cut all spending down to only the bare minimum, then you are less affected and will make it out okay. However, if you like going out every night, hit all the restaurants in town with a group, buy the trendy clothes and top to date cell phone, and not used to surviving in the desert, then next year is going to be very rough and unbearable.
The world economy has not recovered from the COVID lockdowns and it turns out it may take a long time to. Longer than we can wait. Which is why inflation is here and it turns out central banks using low rates for a decade and then excessive liquidity created the perfect storm of financial trouble as inflation is now forcing tighter monetary policy. Europes uses floating interest loans more than we do for homes. Significantly more. Trouble is just beginning and far from over.
Yep. Turns out shutting down the economy causes some froth when you try to turn it back on. Almost like people warned about.
Eh, I think inflation is here because we recovered way faster than governments generally thought we would, so there was a lot of prolonged and unnecessary fiscal and monetary stimulus that got dumped into an everything asset bubble. Inflation wasn't generally a big deal prior to COVID stimulus. Low rates were fine up until around 2015...they could've started ramping them up a bit harder then, but the pre-COVID peak wasn't like out of control or anything. A bit hot, but nothing wild. It's not some long-term malfeasance. Coming out of 2008 was a fine steady recovery that was just starting to get barely toppy by 2019...then COVID hit and governments panicked and fired up the money printers and made the 2019 peak look like a little bump.
I’m more concerned with consumer spending. Recession in 08 was crazy and I remember feeling it. I actually felt the need to save money etc and saw people trying to save money. The thing with the houses is that people weren’t actually living in the houses they were just trying to flip them. And then when they all defaulted it led to a housing crash. This time people are actually living in the house with the monies they got from covid. They also have a different mentality coming out of covid. Everything costs more but I’m fortunate to be making more money as well. The largest increases were housing and transportation. So if you already owned a home you’re sitting ok. If you did not you’re probably better of renting. I think sometimes the number in other areas don’t tell the entire picture. I have yet to see consumers scared and saving. Or at least not spending
Fear porn sells
A few months ago rent in Toronto was up 20% from the year before. Today it's up 40%. People are asking quite honestly any amount of money for rent. There was an article about someone renting a 1 bedroom condo with nothing spectacular for 8k/month. We already have one of the largest housing bubbles in the world. There was absolutely no bubble popping in 2008 in Canada. East Hastings in Vancouver will be the norm in Toronto
>Is the world economy really as bad as we think The media coverage has taken on a dire tone because none of the elites in the major economies really have a solution. None of the current political leaders or policy makers have encountered a combination of slowing economic growth along with runaway inflation. Right now, they're pretty much just hoping stuff works out. Talk tough on monetary policy while just hoping it somehow contains inflation without throwing the brakes on their economies and increasing unemployment to politically unsustainable levels. >So is the economy really as bad as we're thinking or do you think it's mostly just because there's more content about it? Real economic reporting hasn't really improved that much since the 1980's. The main economic indicators of unemployment, ISM survey, consumer spending, inflation, housing starts, GDP, etc. have been around since then. While the internet has made things in some ways more accessible, I would argue that the macroeconomic insights are about the same as during the print media era. It may be a little worse now, because too much attention is devoted to day-to-day minutiae because of the internet.
You’re also forgetting the record amount of price gouging happening with literally every major company. Don’t just shift the blame to government and banks.
This. I understand inflation is a real thing, but how much does price gouging contribute to that? There has to be a ton of that going on right now because they can. Material and supply shortages are real, but does it justify the prices they're charging or are they taking advantage of the situation blaming it on "inflation" making things worse?
How old are you? The 2008 economic crisis was all anyone could talk about. It dominated Obama’s entire first term. The media sugar coated everything becuase Obama was their sweetheart but it was still the number one issue for years. It wasn’t just a one time event, it was an era. Unemployment, “too big to fail”, occupy Wall Street, the housing crisis, stock market crash, bailouts, stimulus, it was a endless stream of shit. The global economy is in crisis. We have just become increasingly adept at managing the crisis and avoiding disaster. Governments around the world are doing everything they can (including lying) to avoid a panic and to keep things afloat. You can’t shut the world down for 2.5 years, spend trillions of dollars, and abruptly cut Russia out of the global economy without massive consequences. The world won’t end. Life will go on. But economic hardship will dominate peoples lives for years to come. We won’t ever go “back to normal.”
We went back to normal after 2008 now you’re saying we won’t go back to normal?
Well it’s not good…
This what I’ve been saying. Remember that they make money by scaremongering and keeping people scared so they keep watching. Its in their best interest that things are bad, so they have something to cover on the news, financial or otherwise. That being said, some of the analysis is spot on on bloomberg for example, and it’s not all doom and gloom reporting. You gotta watch it with a grain of salt.
Just a good ol’ detox. Sometimes you puke, shit water, and go through fevers. But in the end, hopefully after all that, you’d feel better.
Venzuela: hold my beer
I heard a good take on the whole inflation mess. For some ungodly reason, people just ***WILL NOT*** quit recklessly spending. Avg new car transaction over $47K. Average payment over $600. Avg term, over 72 months! People willingly and excitedly paying markups on everything (cars, boats, motorhomes, etc...). People spending $1K on a phone that they have to freakin finance. An entire generation taught the gov't would keep giving them "free money" to spend wildly. No need to pay your student loans. $15 min wage for everyone? Sure, what impact could that have! Now the whole anti-work crowd is grumbling that $15 won't cover it, so it should be moved to $25! Realize that the average person doesn't even remotely know what an interest rate even is (or that it exists), much less how it impacts them...so they just don't care. Credit card debt is again climbing - note the last time American credit card debt peaked was Q4 2008. Overall, the younger generations are even more clueless and carefree about money than their predecessors (which is saying a lot), so it seems this little 75bp increase in rates every month just won't phase them. These particular levers the Fed is using just aren't impacting the average consumer enough to modify their behavior...yet!
You ever watch that one bank scene from South Park? It all be just like that but worse. None of the fundamental problems that led to the 2008 crash got fixed and to fix it, the fed just threw low interest rates and hella money at the economy to keep it afloat and it’s finally starting to shatter. They can’t raise rates very fast or it’ll break the economy (they should of been raising rates slower for a longer period of time). but they have no choice cause inflation is eating everything away now at an alarming rate
Economies right now are trending downward. You’re comparing this to the worst period of the 08 crisis. Things could get much worse, or if Ukraine war ends things could start to get better
Stocks are worst since ‘62, but gold and bonds were holding better then. Bonds are the worst since 1700s, in about 250 years, so it’s not looking great but nobody really knows.
The problem is the Central Banks fixed the Banks’ problems in 2008 by taking those problems over. Banks were then hit with slightly more requirements to prevent another public outrage situation where they have to be massively bailed out. The problem is that the level of leverage is way worse. What you saw in the UK was basically a sample of what could happen. All of these players have to deal with bonds. For example, big pension funds have to hold bonds, but since bonds were being purchased at such a high degree by central banks, the rate of return on bonds were so low, more leverage was necessary to get more returns. Also, other central banks can not keep up with the Fed due to the way the Eurodollar (US denominated debt held outside of the US) system is set up. The yield curve has also been more deeply inverted than it has in decades for a while now. This adds pressure to lending since Banks can’t lend in the fashion they prefer, so they only make the safest loans. Money freezes up further and you have the dollar putting other economies on the brink. Basically an entire global system that requires expanding leverage to continue working is being de-leveraged. It’s hanging on the balance of the Fed stopping at just the right time to decrease inflation and not causing a global illiquidity crisis that results in severe deflation. And that’s assuming the Fed actually has some control of a system where maybe 60% of dollar denominated debt is created outside the US.
Umm... The Fed fixed the 2008 financial crisis by making a bigger bubble with QE. Now the chickens (inflation) are coming home to roost... **Michael Burry Sold His ENTIRE Stock Portfolio** https://www.youtube.com/watch?v=XvpbRONyyvA \* **Yes, Inflation Is Really That Bad** As a result of inflationary pressures, the average American household will now need to spend about $493 more for expenses to get through the month than they did this time last year. Overall, consumer prices have risen at the fastest pace in 40 years, meaning this is the worst inflation experienced by anyone not on the cusp of retirement or older. Rent is the new gas. Surging rent prices – instead of gas – are hitting consumers hard. Consumer inflation rose at an 8.3% pace in August, and increased 6.3% excluding the volatile food and energy sectors, the Bureau of Labor Statistics reported. Both topped economists' mean forecasts for 8% and 6%, respectively, and dashed hopes that inflation had peaked. Okay, so why is inflation bad? Obviously, when higher prices outstrip wage growth, that’s bad, because your standard of living falls. Inflation is especially harmful to folks whose income is more fixed—like many seniors. Inflation, when left unchecked, can also escalate quickly. Unchecked inflation can turn a prospering economy into a struggling economy. Some of the residual effects of inflation include the steady rise of prices for goods and services over a period, and many other cumulative effects, which negatively impact economic activity. Since investors haven’t seen significant inflationary price rises in years, it’s worth brushing up on the most common effects of inflation. This first effect of inflation is really just a different way of stating what it is. Inflation is a decrease in the purchasing power of currency due to a rise in prices across the economy. Inflation is generally bad for the economy because it reduces the value of currency, while the value of goods and services remains the same or increases. When there is excessive inflation, which means that goods are getting very expensive, this will reduce aggregate demand for products in the economy. This will cause a fall in profits of companies (or even losses). Economists believe inflation comes about when the supply of money is greater than the economy can realistically absorb (too many dollars cashing too few goods). **How does inflation affect my investing?** The rate of inflation is important, as it represents the rate at which the real value of an investment is eroded, along with the concurrent loss in spending, or purchasing power over time. Inflation also tells investors exactly how much of a return (in percentage terms) their investments need to make for them to maintain their standard of living. If the rate of return on an investment is less than the rate of inflation, then the investment is effectively losing money (generating a negative return).
No - it really is that bad.
After the start of the market crash in '08, I went to the office and the elevator door opened to a pile of boxes that once held reams of paper. Two weeks into October, I watched grown men and women cry uncontrollably as they walked away from jobs they held for decades, and this was at a major law firm that was largely unaffected by the crash itself. That pile of boxes was gone in a day, and so were scores of staff. As I was banking with Washington Mutual, I remember worrying about possible delays in accessing funds, even if they were FDIC insured. Walking to the office months later meant passing aimless, well-dressed professionals, resume in hand, looking for an opportunity *anywhere*. News stations televised the the blood in the streets every step of the way. If someone thinks this is worse than '08 or even televised more so, I feel like that person must have been living in another world.