Ask HN: Folks who were around the 2008 Recession
How does the current recession feel like to you compared to 2008?
Do you feel this is the beginning of the recession or are we in the middle/end of it?
Do you feel this is the beginning of the recession or are we in the middle/end of it?
As for me, I was stuck in a house that lost 50% of its value. I had just purchased in 2006 so I could not sell and I wanted to move. I didn’t end up leaving until 2012 at which point I was still 30+% underwater and so happy I could short sell without incurring taxes on the difference thanks to legislation.
Now prices are going up- like crazy. Salaries in our industry are skyrocketing. It’s impossible to buy large consumables at any price - cars are selling for multiples over sticker! In 2008 you could buy anything you wanted at a discount if you had cash.
So no this feels nothing like 2008 for me.
Wow! In my neighborhood prices kept falling between 2008 and 2012 - 2012 was the bottom. Crazy your neighborhood recovered so fast.
That doesn't mean it won't become a demand recession; it might. But the only thing I see that looks at all like 2008 is that house sales in at least some areas seem to have "frozen up", because everyone knows the prices from 3 months ago aren't good any more but nobody is sure how much cheaper they should be. So, the market isn't functioning all that well. But every other part of the economy seems to be functioning just fine, in terms of there is a market price. The price keeps going up, for everything except housing and gasoline, but that's not a recession.
Now there are a lot of things about a supply recession that are not as bad as a demand recession, but there is one problem: we don't have them very often, so we're not prepared. There are many well-understood ways in which government can step in and be the demand that is missing (e.g. infrastructure spending) or ameliorate the affects of low demand (e.g. unemployment benefits). We don't have very many ways for government to step in and be the supply that is missing; we have the Strategic Petroleum Reserve (already being used) and the government has some food supply, but for just about everything else the government cannot provide the supply.
As to your second question, right now the economy is in a very fragile state, so it is much more vulnerable to any shocks, for example if China invaded Taiwan or something. So many things are not working well, from a supply point of view, that there's not much slack to deal with fresh problems. Whether or not we get another big shock probably determines the answer to your second question.
In the UK I worry things could get extremely ugly this winter. Obviously the price of everything has been going up, but from October when our energy cap will increase which will mean the average household is now going to be spending about £3,000 extra on energy bills over the next year. On top of this because of how most homeowners in the UK have short-term fixed mortgage deals (2-5 years) a lot of people are going to be switching to a new deal over the next year which because of higher rates will leave them paying an extra £1,000 - £2,000 or so per year on their mortgage. Couple this with higher prices at the pump and higher food prices and I suspect a lot of lower-income families will forced into fuel poverty or may even lose their homes if they can't find an extra few grand to keep up with payments.
It seems the US is relatively well positioned in comparison and may even be able to avoid a recession entirely, but either way right now this is nothing like 2008 yet. From a consumers perspective the worse thing about 2008 was probably the labour market. It was just really hard to find work back then and a lot of people were losing their jobs. This was especially true for people working in the banking sector or any sector with exposure to the housing market. Today the labour market is red hot. Things might be more expensive, but so far the consumer has been fairly well positioned to weather those increased costs. Of course, this could change, and I think it's likely to in places like the UK, but the US is unlikely to experience anything like the 2008 recession unless the labour market rapidly cools which it doesn't seem to be.
Also, people with experience in relevant fields said they saw 2008 coming. The same is true recently, except the number of people who saw "this" coming this time around are easily in the millions, and many of them have little experience.
To me, these factors make recent events feel more like a shakeout. There are a lot of very strong, growing companies out there that are solving huge problems. There are some headwinds but I don't see those problems lasting in the longer term against such determined work and high levels of innovation.
I'd compare late 2008 to early 2020 for sure though. I remember getting stopped out of some positions and thinking, "damn I just lost a lot of my savings" and then things got worse and worse from there. Afterward I felt like some kind of f*cking genius for having set those stops! It was ridiculous.
If there's a recession from here on out, I would guess it's more of an optimistic (?) recession in which a new zone of economic support is found. I see perma-bear types still being perma-bears, but the more educated perma-bears are starting to show signs of FOMO. Much of the negative sentiment is baked-in and overbaked-in. It's fine to be a critic but a really good critic is educated in nuance, knows their emotions, and understands the value of both fundamentals and technicals.
Once medium-term support is established we'll continue the super-super-cycle on upwards IMO. I'm glad to see that climate change narratives are taking root recently and hope our kids all have a better way of life than we did, moving into the coming decades.
BTW right now would be a phenomenal time to study investing and trading. By the time the principles really start sinking in we'll probably be coming off a double bottom or developing some other obvious ranging pattern. ;-) Bears who want to believe in the great collapse will get caught in really epic mean-regressions.
What are some examples?
The problems should be obvious looking at tech or industry-by-industry headlines, or they should become more obvious over time as that research is covered.
The ones solving the problems are less obvious but the first step is always distinguishing between "solving" and "solved" which will help eliminate common emotional excesses of the critic archetype.
A lot of people mix up those two, but also a lot of people who do that are trying too hard to be Simon Cowell. Or a mix between Simon Cowell and Warren Buffett. They want to hold the bar, be the bar, set the bar. They mix intrinsic and extrinsic solution value and usually focus too much on the former.
It can be risky to your sanity to name specific companies unless you know the asker is above this behavior, and they should always specify whether they believe that meaningfully huge problems have been solved at a corporate level in the past.
Anyway I believe late 20's/early 30's is the worst age to deal with a recession, specially if you happen to work in field correlated to economic growth (like architecture). At that time I lost everything (job, investments, fiancée, expat lifestyle and probably mental health). Were I older and more "established" (or younger and less accountable) everything could have been different. I didn't fully recover from that time yet. Most of my peers didn't too. Most likely we never will.
Wishing you happiness, health and peace from Liverpool.
This is temporary inflation from the Russian invasion of Ukraine exerting upward pressure on gas and grain prices, right as post-COVID supply chains were starting to unwind and unlock inventory. It's already easing. This doesn't feel similar at all.
2008 came very close to ending very, very badly. It wasn't "will I get laid off, and if I do, will I lose my house". 2008 was "will a number of the largest banks in the world fail, overwhelm the FDIC, and take everything else with them".
This feels like the middle, but I could be wrong. It could be just a flat spot on the way down.
But I'm reminded of how, in the aftermath of the Great Depression, rules were put in place to prevent investment banks from being the same institution as deposit-taking banks, so that bad investments couldn't destroy depositors' money. But time passed, and that whole generation died off, and nothing like the Great Depression happened again, and people forgot why the rules were there, and relaxed or removed them, and we got 2008.
People will remember 2008. They'll remember the sick feeling of fear, wondering if tomorrow (literally the next day) everything would collapse. But the time will come when the people who lived through it are gone, and the people who follow won't remember why the regulations and changes were needed. They may know intellectually, but they won't know at the gut level of having lived through it. And so the guardrails will eventually be removed. And then...
But this isn't that. This is just another dip in the business cycle.
Many people are going to struggle (to put it lightly) with energy bills in winter. The extra £100-500/mo will be taken away from many other businesses. Those that don't go bankrupt will raise prices significantly to cover things like energy increases.
People predict very large food prices increases during the autumn harvest too.
Rents are going up like crazy as landlords try to shield themselves from interest rate increases. People tend to only fix mortgage rates for 1-5 years. Mine is expiring next year. Many people locked in some very very low rates (0.89% - 1.5%) and will be paying multiples of that
It's going to be a very bleak winter in the UK
That said, the 2008 recession seemed somehow more "fake" to me despite the results being more abrupt and obvious - domestic manufacturing and production being the most sudden and visible, with entire swaths of America suddenly shut down, abandoned, paranoid, desperate. But nobody could really tell you why. Sure, smart pundits would talk your ear off about banks lending more than people could pay and housing prices and such, but to the regular person, why would that suddenly make their job not exist and gas prices rise? It made no sense. And then it got fixed, sort of, with a "new normal" of working 2 or 3 part time jobs and still not having affordable healthcare despite hope and change - in many cases, healthcare plans suddenly became a charge that hadn't been a consideration before.
It was a long slog, and was only slightly beginning to perk up by the time 2016 rolled around and frothed everyone up one way or the other ideologically, then things started to get pretty good, but half the country insisted it was false and that everything was horrible and getting worse and only removing the President could fix it. Then pandemic, ousting of that President, and more pandemic, and war, and housing shortages as population outpaces supply in desirable areas, and people are forced into "the bad parts of town" and tell the Internet how much they love it and how it's not that bad even as they install expensive surveillance and rarely leave their fortified homes.
This recession? I mean, not a recession, because that's not a well defined term and has multiple factors and it's not a recession this time if we don't say it is? This time? It seems inevitable, slow paced, easily fixed (although nobody knows how). It seems more real than the last one, because we can point at why, but it also hasn't effected many lives too abruptly. Yet.
I work at a Fortune 100 company and they are laying people off and have stopped hiring, even internal transfers can’t happen. So this tells me that it might get worse before it gets better. Either way, life goes on.
Many people lost jobs, good people in good jobs.
Current situation doesn't feel remotely as bad, like not even in the same ballpark.
Prior to that time, just before the turn of the century, I was working on an expert system middle tier for a bank (y2k) while half the workers around me were spending weekends bundling some kind of financial instrument which combined risky loans with good ones; the bank was hustling those. Little did I realize then that this was what was fueling the real estate boom which I encountered a few years later. Also did not see, at that time, just how that game would bring down the economy.
So...look around. Anything like that going on now (well, in the previous few years)?
Remember "too big to fail". Anything like that now? I think that the fed chair back then spoke of "irrational exuberance".
There isn't even a concensus that we are in a recession today.
What I saw in 2008 was:
- coworkers getting laid off en masse. no jobs waiting for them. good people with families.
- the housing market crashing bad and foreclosure signs everywhere. normal people, not just people spending over their means.
- those unsold/foreclosed on houses eventually started to rot and get overtaken by tall weeds, making things look like The Walking Dead. Actually, it made me notice that lawns were being cut in TWD, because IRL, unkept lawns were a lot worse than what was on the show.
- thieves started stripping the metal off of whatever they could. You'd see houses and other equipment missing lengths of metal or cabling.
Compared to 2008 this seems less terrifying and apocalyptic.
I think the same applies to the general public today. Most people in the west have enough, and have seen the markets go up and up for so long that they have forgotten, or never experienced, severe downturn. I think it will blow up worse than 2008.
The job market was very tight in 2008, people were losing their jobs then not being able to get a job anywhere doing anything. Not an exaggeration. My friend who made minimum wage at fast food place at the time said there would be at least five people a day coming in asking for a job application. The restaurant wasn't accepting any applications.
At the intangible level, 2008 had a dark cloud overhead, right now doesn't.
So far this one feels different in the sense that people aren't getting laid of. Demand still seems to exist for software engineers.
Neither of the previous crashes involved high inflation either.
Australians are the only people I've heard referring to the 2008 crash as the "Global Financial Crisis".
At the time did I feel anything? With nobody to support and living with my parents that would be a resounding no. But I do remember the vibe was pretty gloomy as I worked side by side with much older, more experienced people somewhere between the ends of their careers and retirement, who had to settle for an hourly paycheck.
IMHO we aren’t anywhere close to that situation. But even if it were, it might be a blessing in disguise. I guess it just depends.
This one does not feel so bad, but the things that have happened leading up to it feel much worse, and we might look back and say at this time we shouldn’t have even called it a recession, because it might get far worse.
You can’t just shut down the economy and give people tons of free money and not have there be serious consequences.
All we can do now is try to do hard things and make sacrifices that will enable our grandchildrens’ lives better.
I don't know enough about economics to have any clue how this is going to shake down.
There was a much higher level of general anxiety then, which I'm not sensing as of yet.
So we're not meaningfully in a recession yet, I feel. But we're due for one, so this is prob the beginning.
Oil was just another asset to play with and I played with it, got bored and sold it. I made a little money in royalties and didn't take a big loss on it.
Buying something and flipping it with credit has inflationary effects because whenever money is borrowed from a financial institution it has to create that money in checking accounts. There is no vault that has loads of hundred dollar bills. It is simply created on a ledger, but that's a whole other story. Anyway the money gets spent by the general public and more often because what they buy they flip for a profit to the greater fools. Billionaires are famous for not wanting to spend their money, so that their high score in the money game is better than if they did. Only if spending money to make even more is their thing. But if houses are bought and sold more often, with the intention of doing so at a profit the little guy has a ton of hot cash and that makes milk, gas, rent, bread, and a ton of things much more expensive. That was the case then and now. Now people aren't just flipping houses, they flip used cars and sell them at a price higher than the MSRP on a new one (the MSM said this).
People are much more likely to fall for financial scams now. Look at all the people that thought it was possible to earn 17% indefinitely on a savings account. Why? Because crypto magic and my cousin is doing it. But actually, that has never happened (savings account with that kind of return). If I knew about it, I would have warned people. I only found out about it after it blew up. I expect to hear and see more of this "if I knew I'd had said something" blow ups in the future but not with my peers because I don't think any of them would fall for it.
I've tried to think of a time that is similar to this in terms of economic issues and I can't really find anything close. The disruption of global trade and supply chain issues are more akin to a siege economy (look to Cuba for how this works out), than just a downturn.
Recessions are normal. Growing up I saw a recession in the 80s that was pretty bad, there was unemployment, and high costs. 91 was a kind of slump.
Greed and magic thinking with lucky charms like bitcoin making people millionaires overnight is probably going to revert below the mean very soon.
Rent is soaring, car prices cannot keep going up or people will not be able to work at their job any more because cars do wear out and need replaced. So that is why we are in the eye of the storm. Other parts of the world are in the storm's worst part. Some are coming into it slowly. Sooner or later something is going to break that will be unfixable. There was no talk of nuclear war in 2008 with anyone. No one was telling New Yorkers to tune into internet news in case of a nuke detonating there.
There was no new morality, accept it or else mentality.
My dad told it to me like this. When your neighbor is out of work it is a recession. When you are out of work it is a depression.
I start a new job on Monday.
2020 was scary - global pandemic, no vaccine - people out of work
2022 doesn't feel like that - there's inflation but no impending sense of doom