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Comment by LargeTomato | Hacker News Reader

We were so convinced of an upcoming recession. The pandemic, domestic politics, a trade war, inflation, all of these things were signaling a downturn. We got articles like [1] "100% probability of U.S. recession in coming year, according to Bloomberg Economics forecast model".

Except the underlying foundation for the economy was strong. All the people who said it was strong were shouted down but here we are now, with a roaring economy. https://www.marketwatch.com/story/100-probability-of-u-s-rec...

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No one will know until we are in it, but I have read that historically the recession starts once the Fed pivots and starts lowering interest rates.

If we make it out of this with a true soft landing, then Powell should go down as one of the best Fed Chairs in history.

Although, with inflation so high it wouldn't shock me to revise the definition of recession to include some inflation component. Because even though GDP is still growing, the average consumer definitely feels like they are in one.

People also say literally the opposite: that raising interest rates is what causes the recession. People even said that the fed was deliberately trying to induce a recession by raising rates. It cannot be both things, that both raising and lowering rates causes recessions.

Heck, isn't lowering rates what the fed does to juice the economy in the face of recession?

It's almost like they don't have a clue what's going on and their models are a waste of time.

but it can be, of course. overstimulation of the economy leads to unsustainable bubbles, which when burst lead to recessions, and an unexpected and unnecessary understimulation can very well cause a recession. (case in point in 2008 the Fed likely overreacted[0], because everyone was so scared of the insane housing prices, claiming there's no economical reason for them, whereas now it's clear that there are multiple serious factors cooperating to keep housing prices absurdly high.)

[0] https://www.fullstackeconomics.com/p/the-2000s-housing-bubbl...

I guess what I'd ask people who say "the recession is just around the corner, look at datapoint X" to also say what datapoint they'd use to determine that the recession is not just around the corner. Because it feels like the reasoning for why the recession is just around the corner simply fluidly moves between metrics as things change but the "just-around-the-corner-ness" never does.

> foundation for the economy was strong.

There were and increasingly are some major concerns about the economy. For starters we're still seeing very low unemployment with rapidly decreasing personal saving rate (near record lows) [0], increased tapping into 401ks early[1], and record credit debt [2].

More people are working and yet are less able to pay for things. Even if you completely ignore inflation, something seems very concerning about this.

The fact that the market is divorced from reality doesn't mean that our economic fundamentals are strong.

That doesn't even touch on the looming crisis with commercial real estate impacting the already unstable small banks which is just starting to unravel now [3], or the major threats to the insurance industry that are starting to appear with increased effects of climate change [4].

What's going on right now economically is strange, and it's a far better to question "wait, why aren't we in a recession?" than it is to mock those who claimed we would be (though I do tend to avoid 100% claims).

[0] https://www.finder.com/personal-saving-rate#:~:text=The%20pe....

[1] https://finance.yahoo.com/news/workers-are-still-raiding-the...

[2] https://www.cnn.com/2023/08/08/economy/us-household-credit-c...

[3] https://www.wsj.com/real-estate/commercial-real-estate-regio...

[4] https://www.wsj.com/finance/insurance-catastrophe-reinsuranc...

You might be right but I'm gonna hold judgment until the interest rates are back down to something more normal for a while. Recession or not, the situation doesn't feel normal, and the current situation doesn't feel sustainable.

Edit: In reply to those who feel "normal" isn't a thing: replace it with "sustainable".

By historical standards, we just got back to normal interest rates, the last 15 years was not normal - https://fred.stlouisfed.org/series/fedfunds

I'm thinking this might be healthier. When I was a kid it seemed normal that money in the bank would accrue real interest. Now that mine's doing that, something just feels right about it, like things are back in balance. Take my money, loan it out, pay me a little something back.

This is normal interest rates, at least historically. The zero interest - savers have no choice but to buy equities / invest in technology ventures - environment post 2010 was the anomaly.

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

What if the interest rates are normal now? How in the hell are 2.5% interest rates "normal." No one would ever relinquish their capital for that return. They were artificial...that is why we ran into problems.

Although I agree, fuck was not required to get your point across.

What do you consider normal? Normal may be different depending on your age.

Interest rates are at their historical average. We are coming off 15 years of absurdly low rates, which is why it doesn’t feel normal to you. 2008 wasn’t normal, and the economic affects that followed are the outliers.

I love the idea that my 1.875 mortgage is normal. Historically it's as low as they got in 100+ years. Normal by historical standards is 7-15%.

I would rather that the calculation method was different so that people could afford "8%" interest.

What do you mean?

There's no such thing as normal. The 70s weren't normal what with the oil embargos and stagflation and the end of the Vietnam war. The 80s had banking crises and the beginning of Reaganomics. In the 90s, computers were really beginning to eat the world and geopolitics were realigning with the end of the USSR. The 2000s surely weren't normal—the dotcom bubble burst, 9/11 kicked off wars, the housing market imploded, etc. 2010s had really bizarrely low sustained interest rates. 2020s kicked off with some unusually stringent travel restrictions worldwide and a massive uptick in remote work.

I agree with the feeling everything still seeming to be unsettled, but the interest rate environment is actually closer to "normal" today than the recent past. The extreme low-rate environment was the outlier, not today. The change itself though is certainly a cause of market shock.

We didn't go through a recession nationally or globally but there has definitely been a micro tech recession as the VC valuation bubble burst.

Its a good thing though, it means tech and normie salaries will converge. Economic data says post-covid the bottom 25% of society has had the biggest salary gains.

Which was pennies and thirty years too late. Hence, why the salary increases are just barely keeping thier noses above water. Sprinkle in the creeping erosion and you have people going under unexpectedly. Auto repairs are billed at $140 an hour--doesn't matter if its a brake job or a CAN BUS nightmare. Automobile quality has nose-dived as their costs have increased dramatically. The people at the lower end of pay scales cannot afford automotive transportation at all. They are going under just from that.

What a downer comment. If we never celebrate wins, what's the point? Life has sucked since the dawn of time, its only through the stride of civilization that people have hope of better lives now.

I feel there was a lot of goalpost moving to convince us that we didn't just go through a recession such as during the first two quarters of 2022.

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