Hasn't it been inevitable every years? It seems like the media writes this headline every year. Anyone can find reasons for recession if you look hard enough. Who knows. I am not selling stocks.
Everything about this "boom" from 2012 on was, from a market perspective, about as artificial as you could get. At least the events leading up to the .COM and '08 crash there weren't central banks openly putting their thumbs on the scales by being an active market paticipant buying debt securities, the quality of that debt be damned, and making price discovery next to impossible.
The lesson investors took from '08 and certainly from 2020 was that the powers that be will gladly use moral hazard to protect asset prices. Profits are privatized and losses are socialized.
From an adequate distance, fraction reserve banking looks a whole lot like a ponzi scheme.
Interest-paying debit can be quite healthy. It does not have to be a ponzi scheme.
The 2 phenomenons are very different, if you trace monetary movements from one economic actor to another. They are not even close. It's like comparing a hat and a car.
https://www.investopedia.com/terms/f/fractionalreservebankin...
"Banks only need to keep a specific amount of cash on hand and can create loans from the money you deposit. "
So a bank can loan out more money than it has to loan. In addition to creating money out of thin air, that loan will accumulate interest fees.
It gets even worse when these loans are made to another bank who will loan that money out again.
No, let's look at this system, as I said, "from a distance." The entire system has X number of dollars in it and Y amount of loans. It doesn't take long and the amount of debt exceeds the amount of actual dollars that exist in the system. That is to say, there isn't enough money in the system to pay all of these loans back.
It's worse than a Ponzi.
And what do you mean by "sacrifice the wealth of future generations for the sake of the current"? The government issues bonds to pay for stuff. Then at some point :) the bonds presumably become due, and future generations have to pay it back. Whom do they pay it back to? Isn't it back to themselves? Even assuming there's some proportion of foreign debt holders, they're getting paid back in the currency of the issuing state, which currency has generally deflated more than the bond rate over time, in other words effectively an interest free loan. If you could get a less than base inflation rate loan for 20, 30, 50, 100 years wouldn't you take it? Even assuming the 100 year horizon and thus the loan was to paid back by your estate, don't you think there's a good chance your estate would come out ahead after having paid back that low interest loan than if you had never taken the loan in the first place?
I'm just saying I'm not fully convinced that taking on national debt is universally bad, if it's payable in the sovereign currency.
I don't disagree with your overall point about sacrificing future generations for the current, but this specific point is probably true regardless as luxury often takes time to acquire.
When rates are hiked, a home with a mortgage, using credit cards or seeking loans to start a business become much more expensive. That results in people stopping purchasing homes, cut down on spending, think twice about starting a business. In addition to that companies will lay off workers and enact hiring freezes.
Everyone says it, the signs are obvious, and people here still think we won’t land in a recession.
Kinda feels similar to the irrationality of tesla investors, where everyone knew that the company is overvalued and needs to come down. Yet people continued buying or didn’t want to sell. Why? I would like to know.
A likely recession does not mean that selling stocks is advisable either.
Right now we face an energy, food, and fertilizer shortage. Will that cause a recession? Almost certainly. Or at least it’s a downwards effect. Maybe you think the economies will grow more than they shrink in spite of this for other reasons. But this is a rare easily observed negative pressure for everyone.
There's nothing particularly notable here. Speculation markets got overheated[1], now they're correcting and as a side effect money ends up more expensive to do "normal" activity too. Then we'll do it all over again until 2030 or whenever when we come back to write this kind of stuff as if it was a surprise.
[1] For lots of interacting reasons, I'm sure. There's good economics to be done to understand this stuff, but "ZOMG Recession" coverage is just tiresome.
[1] Which an economy is, almost by definition: spending makes the people who sold you stuff richer, who then spend; tight purses mean the producers are poorer too.
But some people take it too far and think if there was no Fed there wouldn't be any oscillation. That is not true. Bitcoin also "oscillates".
Oscillations happen because of a time lag that leads to an overshooting of the target which then leads to overshooting on the way back and so on.
The economy never becomes perfectly stable but there is no rule that the oscillation can't be smoothed out until it is no longer a problem. We aren't that far yet.