Most recessions are easy to predict because they’re intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work.
This is the top comment, while someone calling it a conspiracy theory is down-voted. That is sad.
The Fed was founded in 1913. The US had recessions in 1785, 1789, 1796, 1802, 1807, 1812, 1815, 1822, 1825, 1828, 1833, 1836, 1839, 1845, 1847, 1853, 1857, 1860, 1865, 1869, 1873, 1882, 1887, 1890, 1893, 1902, 1907, 1910.
Do you notice how frequent recessions were, pre-Fed? The average duration was also much longer. Blaming recessions on the Fed (who are trying to manipulate the business cycle) doesn't jibe with the data.
Perhaps it's my perception, but I've noticed this more lately.
I mean, there's always been a perception, for as long as I've been on this site that "things used to be better", so take that with a grain of salt, but objectively, if we don't have the "antibodies" in this community to reject obvious conspiracy theories like this... we're in a bad spot.
I think the current finance era may come to be viewed in the same light as the fire-fighting practices of the past century. Always working to prevent the little fires leaves the forest unhealthy and sets up an eventual inferno that no one can control.
Indeed. That's the norm with recessions. It just so happens that the last one, the one we all remember (2008) was...really bad. It will affect people's perceptions for the rest of their lives, much like the Great Depression.
It is also very odd to call all of the periods you mention recessions...they weren't. Some of them were specific banking panics that had no effect on the real economy. The purpose of the Fed, which was effective eventually, was to alleviate the disruption caused by the agricultural cycle (which caused gold to flow in/out changing the monetary base. But there was no real mandate for economic stability, that isn't why the Fed was created, and that idea would have made no sense to central bankers until very recently (probably the 1980s, although for different reasons over time).
I'd compare it to forest fires. They should be frequent and small. Make them less frequent (via suppression), and they get a lot worse and much more dangerous.
It is like saying that wars are easy to predict because they are (obviously) the result of governments declaring war.
Same thing for companies, even if a layoff is planned, no one knows exactly when it will happen, not even the people who planned it. It may be earlier than expected, or later, or not at all depending on the results, the whims of the market, the legal framework...
Like when central bankers refused to use negative interest rates even though the natural rate was clearly plunging into the negative. In 2009 their own Taylor rule models put the correct rate at negative 4% (https://www.brookings.edu/blog/ben-bernanke/2015/04/28/the-t...). Central banks kept interest rates very high at zero.
Also, I fail to see how this theory applies to the recession of '08.
This isn’t a big secret, it’s right there in FOMC meeting notes. Google Greenspan and punch bowl. Google Kalecki and politic aspects of full employment.
Do you have more prominent examples?
It's usually policy error in the other direction - keeping easy money for too long. I.e. you don't handle a catastrophe by fixing the down leg (that's emergency measures with bad side effects), you prevent the up leg. Alan Greenspan will be forever remembered and hated by some after his efforts to create the dotcom and the housing bubble.
You are basically correct but these factors are essentially structural. For example: is the central bank independent from the govt? How much oversight is there over policy decisions? Etc. In the West, it has been politically impossible to actually do this.
Your understanding of early 1990s Britain is not correct. The UK was forced to raise rates because of the ERM and rising inflation. The govt ran the BoE so it should be quite obvious that they had no desire to slow the economy down but were forced to do so.
Also, this is not about the FED being dependent or independent from the government. This is about the widespread idiocy of thinking that expensive assets = well-being of the country. Dotcom and 2008 (and today, but let's wait for it to burst first) are all FED's pedal-to-the-metal work.
Again: no they didn't. They didn't "want" high rates. You understand how dependent the Conservatives were on home owners and the structure of UK mortgages?
The reason ERM was the main policy goal of Major was inflation. The Bundesbank was the immediate cause but the reason they got into that position was inflation (if you read the research, even the die-hard Lawson fans believe that the ERM set the stage for the 1990s).
Yes, the nature of the relationship between the central bank and the govt determines the response to those events. Do you realize that there have been substantial changes in this relationship since the Fed was created? The Fed is politically unable to respond. I don't understand the relevance of your point about expensive assets...that determines nothing, the market will go up and down regardless of anything.
MarketWatch - https://www.marketwatch.com/story/the-sp-500-is-in-its-first...
CNBC - https://www.google.com/amp/s/www.cnbc.com/amp/2019/06/24/ana...