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"This time it's different" is literally the last things always said right before the next recession kicks in.

A nice, 500 page overview: https://press.princeton.edu/titles/8973.html

Blind link goes to page for:

This Time Is Different: Eight Centuries of Financial Folly

by Carmen M. Reinhart & Kenneth S. Rogoff (2009)

Aren't those the economists who managed to turn a spreadsheet bug into disastrous worldwide accepted economic policy?

It was even worse than that: the paper had multiple problems, of which the Excel bug was one, but they also chose an outrageously dumb sampling method. Basically, if a country had data for five years, it was weighted five times as heavily as a country that had that data for only one. Which, conveniently, lined up perfectly with overweighting countries whose development matched their hypothesis and underweighting countries that contradicted it. Frankly I will never be convinced that it wasn't outright academic fraud in order to generate the conclusion they wanted, and I'm angry that they still have jobs.

The benefactors desired a conclusion, and the authors delivered it for them. They served their purpose. That "academic integrity" was not a purpose reflects the state of affairs in economics.

And people are using it today as "proof" to support their preferred flavor of an economic system.

Anyone who's been even an armchair observer of economics for 20+ years should know well how silly these conversations can get.

Just as one unimportant example: Bond vigilantes used to be a term you'd encounter regularly, when's the last time you heard it now?

Is that because the concept is bad, or because the conditions for it haven't been present in a while?

https://www.cnbc.com/2018/02/09/bond-vigilantes-saddled-up-a...

Those are two possibilities. Another is that the government is the biggest player in the bond market and has unlimited funds at their disposal that they can categorize as Other.

But of course, that's illegal, so it would never happen would it. But at the same time, you and me will never, ever, hear from the bond vigilantes again.

I coming to this topic from utter ignorance, but if longer term data might be considered more reliable, then might it also be reasonable to preferentially weight the more reliable, longer term data, all else being equal?

This is a very good point. It's worth comparing to history, but it's also worth keeping an eye on when the old paradigm breaks.

The lasting booms starting post WWII surprised economists of the time. Stagflation was so out-of-model that the 1970s caused a major shift in economic theory. The list goes on.

And, of course, we already know that traditionally aligned indicators have been out of sync since ~2007. Productivity and wages broke lockstep in the 70s, wage growth has lagged employment growth to an unprecedented degree since 2009, the current consumer debt bubble is overwhelmingly student loan debt which is largely non-dischargeable and impossible to repossess.

There's an entire genre of thinkpieces arguing that the economy has been doing something unprecedented since 2008, a lot of which line up with your third theory where a strong stock market is basically a reaction to weak fundamentals in other investment categories. It's weird to see that abandoned when people try to do predictions from past indicators.

> Productivity and wages broke lockstep in the 70s

Welllll kinda. Total inflation adjusted comp has done almost nothing but go up: https://fred.stlouisfed.org/series/COMPRNFB

But I think this too was a paradigm change: Wages shifted to untaxed benefits, like healthcare. At least I think that's going on.

When you plot the line absent a comparison to growth to company productivity, it loses context.

https://www.epi.org/publication/understanding-the-historic-d...

> There is a widespread but mistaken belief that wage stagnation has been partially caused by a shift of compensation toward benefits. Benefits have grown far less than most people realize, rising from 18.3 percent of compensation in 1979 to just 19.7 percent of compensation in 2014

Wow, great counterpoint. Thanks.

Hey, thanks very much for this. I've been seeing "rising non-salary compensation" used to explain the gap for ages, but I've never seen anyone actually use the proper comparison. Not exactly convincing with the productivity chart retained.

> Productivity and wages broke lockstep in the 70s, wage growth has lagged employment growth to an unprecedented degree since 2009

I certainly believe this on a national scale, but I've never seen these stats properly adjusted for globalization. A billion people were lifted out of poverty in the time period mentioned. It doesn't seem to me that these traditional indicators are wrong, they've just been corrected for a global marketplace.

Nixon was forced to take the US fully off the gold standard since Charles De Gaulle was exchanging his treasuries for gold, exposing that the US could not keep it's dollar pegged to gold at the current price. This lead to significant inflation as the dollar floated against other currencies.

It is no stretch to say that there has been a new paradigm that started in the late 60s as the Vietnam war extracted a heavy monetary toll.

https://fred.stlouisfed.org/series/AMBNS

The current monetary system is only a few decades old.

So some random thoughts on the case for this time its actually different are:

1.) The internet and computing has increased the flow of information. Investments in data mining and data science by the Fed lets it make better decisions and test stuff iteratively and react to changes faster. Companies can also track inventory in a more controlled manner and not build too much too fast. Employees can find prevailing wage information easier to find better, more productive jobs. Home buyers can see how overvalued their houses are relative to other cities.

The internet and computing is enabling a much higher control loop (a.k.a. a steeper gradient descent toward optimal economic output based on the production needs for the current population).

2.) Steady reduction in the reliance on oil and gas. Much of the crazy inflation in past cycles was due to oil and gas shortages.

Would love to get opinions and more cases for why its different.

To add on to #1, the surface area of "tech" is so much larger than in the pre-mobile-phone, pre-web-2.0 (!!!) era. There should be a lot more dollars in tech than there were before 2005. There are more eco-systems to build on than ever and more consumer and business spending that follows.

Your second point is interesting since the US Dollar is the primary currency used for the oil trade. Demand for dollars beyond our borders lets us export our debt through inflation. If there is less reliance on oil, demand for dollars to service that market goes down and so does our ability to pass part of our debt off on to everyone who holds dollars. No idea if this is a large enough effect to matter or if there are other feedback loops that counteract it but decreased oil usage could have its own negative economic effects that aren't immediately apparent.

There is still a large human component that can act irradicatly, ignorantly, or just straight up abuse more information for personal benefit, especially if other people or industries are lagging behind the changes in technology and information.

One thing we can be sure will _not_ be different is the irrationality of human nature.

Any of the options you listed above is a possible scenario. I would add, as Thiel says, that the reason recessions happened so often after 1960s was because people's expectation of growth has been more optimistic than the real economy growth. This resulted in over-leveraging and over-buying of entire asset classes which eventually caused a bubble.

Here's a talk I found interesting regarding growth and the future of the economy: https://www.youtube.com/watch?v=KKLDevYyE9I&index=13&t=0s&li...

One relevant part I liked regarding the Madoff scandal:

Obviously, you were like how could these people be so stupid to give this person all this money? Didn't they read the details? ... But one of the reasons it happened, psychologically, was because people thought 8-10% with 0 risk was perfectly normal. That's why nobody asked any questions.

> Or capital's other options for returns (real estate, emerging markets, etc) will look bad-ish for the next 10 years and continue to prop up the stock market because its the only good outlet for extra cash for a decade or three.

And if capital flows into the stock market, not to keep pace with growth or to expropriate the standard rate of profit, but simply because it has nowhere else to go, then the natural outcome of this is overproduction. Which leads to a falling rate of profit. Which eventually means falling stock prices, as earnings and market cap are always linked over the long term (even for Amazon.com, which will have to start showing a profit when it moves from #8 to #2 on the Fortune 500 list).

Re your third option:

Let's say bonds are yielding 10%. Here's a stock that has a dividend of $1/year. What should the price be? $10 (assuming the company is not growing), because that's the price you would pay to get the same return in bonds. (Note that the bond market is twice as big as the stock market, so it defines the "normal" rate of return.)

Now bonds drop to 2.5% rate of return. Now the same stock is worth $40.

It's not just that the stock market is the only good outlet for extra cash. It's that the low rate of return in other markets raises the price of stocks until the risk-adjusted yield rates match.

Is this hypothesis based on something? By looking at history you have some evidence to base your conclusion on.

Everything seems to always be speeding up, so I'd bet on a shorter cycle (3-7 years, to pull numbers out of my ass) before I'd bet on longer cycles (20 years).

Although faster cycles might also mean faster adaptation, soooo.