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Comment by that_guy_iain | Hacker News Reader

Everyone has a super bad feeling about the economy. I think most large companies are going to be announcing back to office then followed by layoffs.

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I was much more nervous about the long running policy of cheap capital to be honest. I’m glad for a correction before it goes too long.

Precisely this. We've been looking at too many startups raising money constantly and still have not been making any money.

We'll now see who will survive this correction, no matter how long it takes.

BLS issued job numbers today and May was still very strong. 390K new jobs, participation rate is up and unemployment rate steady at 3.6%. We're in a bizarre situation where labor is in such short supply that eliminating millions of jobs would just bring us to parity and not lead to a spike in unemployment. It would at least relieve upward pressure on wages and possibly put downward pressure.

It won't be 2007-2008 bad, but there will be a recession. First lay offs tend to be the R&D.

I agree I don't think it'll be 2007-2008 bad. I think it'll be worse. Covid, Ukraine, Remote Work, etc are all hammering the economy.

>bad. I think it'll be worse.

Different.

2007/08 was a financial crisis, and global banking infrastructure almost imploded. Here we're talking about deglobalization, supply chain issues and, well, a war.

What's interesting is that the main problems may not be US focussed, it may happen around the world (although no one will be safe). For example, hard to imagine the Canadian real estate sector isn't going to melt down...

Far from economist, but I kinda agree. Finance is like 6x larger than real economy hence it really rules the world.

That said, wonder what's going to happen with cost of living and property market going thru the roof everywhere. Riots? Ain't got time for that when you need to feed yourself.

> Finance is like 6x larger than real economy

How are you measuring this? By conventional metrics, it's less than 10% [1].

[1] https://fred.stlouisfed.org/series/VAPGDPFI

Unsure - I've heard it over Odd Lots podcast. Could've been sixth?

There was a somewhat accepted view after QE that the next crash is going to be worse because of all the money that is being pumped into the system, and I think that logically makes sense. Although I agree we don't have shitty financial instruments this time, but it's still a lot of leverage in the system right? It must have accumulated somewhere? Or did something happen such that it's no longer the case and a danger? Did the economy actually grow into the leverage such that it's no longer a problem?

"For example, hard to imagine the Canadian real estate sector isn't going to melt down..." - Oh, how many times did I hear that, but it's wishful thinking. At best it's 20% down

bear in mind that 20% down is often times losing 100% of your capital due to leverage.

20% down means the prices go back to approximately last year's. The only people who lose money would be those who bought in the past year.

Is remote work hammering the economy? What effect does it actually have on productivity?

It's keeping a lot of people at home who otherwise would be in downtowns or suburban office districts buying lunch, having clothes drycleaned, stopping in stores, buying gas, etc.

Because what the economy needs right now is… more demand?

This still happens regardless of remote work. People still live in the cities. The city isn't 100% full of remote tech workers. I think there is some assumption that remote work represents the majority, which its not even close.

This is a "broken window" fallacy.

I think it's not the broken windows fallacy when it increases many remote workers' savings rate. That's different from the parable of paying a glazier for the window instead of a tailor for a suit, but rather having less money circulating in the economy when 20 days a month, I don't burn $5 of gasoline, eat a $2 lunch instead of a $15 lunch, and wear sweat pants instead of office clothes.

That could be $3000 of spending reduction for me that isn't replaced with $3000 of other consumption, but rather a significant portion of it goes into savings/investments.

Yes, but the economy is not suffering from a lack of demand right now. Quite the opposite, in fact.

> it increases many remote workers' savings rate

I think that was true during lock-outs, for obvious reasons, but now? On the contrary, people have more money to spend and the opportunity to spend it.

The personal savings rate is well below pre-pandemic levels now.

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

If you've had people fixing broken windows for 100 years then windows stop getting broken, it may be more efficient in the long term - but in the short term, you've got lots of glaziers going bankrupt.

Which is bad for them but good for the overall economy. They will find other jobs and since the net benefit of fixing broken windows is 0 anything they do will grow the economy.

Dry cleaning being the exception, I believe I spend more in my local neighborhood than ever before. If anything I’m giving more to the local stores rather than some far downtown area or sprawling office complex area.

I certainly was out a lot less during most of the 2019-2021 times, but that was mostly because COVID.

Funny enough I probably go out more now than I did before, something about WFH is a lot less draining and I don’t feel the urge to take a unexpected nap at 6pm.

Or at they at home thinking about revamping their kitchens, bathrooms, gardens and upsizing the place they spend 23 hours a day?

What's the broken window fallacy?

IDK the economy isn't built on dry cleaning and lunch

In theory what you are describing is a more efficient economy which would actually boost the economy, except for those unnecessary producers. Everyone cuts out unnecessary items and has more money to spend on necessary items. This is kind of true as the supply of nearly everything can’t meet the demand at the moment. Less people cutting hair and washing clothes means more people can work on producing other things people want… however since things that people want are mostly produced in China we can’t properly reallocate the labor force to increase production to meet demand, in particular in cities. US is way behind on manufacturing and is completely missing the tools to ramp up production. We are missing entire business to business categories that make production impossible because no one knows where or how to obtain raw materials or supplies, let alone the machinery to produce goods.

will the stop spending altogether? They ll spend on other things

Food and gas prices are already inflated now. It's not clear how people paying even more for these would help the economy.

it has significantly shifted spending; downtown landlords are kind of screwed

Unemployment in city centers and businesses reliant upon the city commuter and office crowd are not doing well. The unemployment rate of Manhattan is still pretty high for instance. A lot of remote workers have priced out local service workers in some small towns, so some restaurants and businesses are now more or less permanently closed due to short staffing. They can't afford to live where they work so they moved. You could blame AirBnB as well for this development where short term rentals outnumber actual rentals available. Under those conditions I'd expect a detriment to the local economy.

hasnt the pandemic been a much bigger shock than remote work ?

I'd imagine the determining the relative impacts should be best left to policy experts and wonks. I don't think one can determine the impact of the pandemic without also contextualizating the rise of remote work. They cascade and coalesce together.

Worse??? where have you been the past 2 years

Says who? For tech companies, S&M is usually first to go. You don't need your growth engine during recessions, you need profit.

https://tomtunguz.com/sales-marketing-spend-model/

I think it's going to be 2001 bad best and 1939 bad worst :/

> It won't be 2007-2008 bad

It will be far worse since we're still in the unresolved credit bubble that created that crash. We never actually solved the core problems that created that crisis.

What we're seeing now is the beginning of what we have avoided for over a decade, and narrowly dodged during the pandemic, start to finally unravel.

Is it just bias from such a long, fun ride that tech has had that make people unable to see this? Back in 2019 there were plenty of people deeply worried about our credit system and the fragility of our global economy. Our actions to avoid catastrophe in 2020 only allowed the issue to become worse.

We've been living in a fantasy economy so long people have started to believe that nothing is real (just a few days ago there was a post claiming that "natural resources" don't exist and everything is fantasy). But a variety of factors are coming together that so that we'll see the revenge of reality. I don't think it's going to be pretty.

Yet not one of the doomers can articulate how a financial meltdown will happen with cascading failures. 2008 was a feedback loop of house values falling which caused banks to fail which caused people to liquidate housing supply which lowered values. What happens this time?

> What happens this time?

Unless you're deep in the financial industry you couldn't have possibly known the details of what was coming in 2008 in 2007. However you easily could tell, if you were paying attention, that something wasn't right in 2007.

Plenty of analysts and economists much smarter and more informed than me have been worried about the massive credit bubble we're in and the consequences of that popping.

While I agree, it would be far more interesting to know exactly what is going to cause the system to snap, it doesn't mean that observations that something is deeply wrong and we are very likely in for a lot of trouble are invalid "doomerism".

Additionally, what's your evidence that this will be less severe than 2008?

Isn't it easier to lay off people remotely?

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