The next recession

[brennan]

I notice that there have been a few reports that some economists are predicting a new global downturn. Troubles in the commodities market, slowdown in China, fragility in most advanced economies and the fact that everyone has borrowed their way out of trouble and not yet paid the borrowing off are all causes of concern. As is the fact that it is already longer than we'd expect to go without a recession (not a very persuasive argument imo).

Here are some of the articles i've read in the last week or so on the subject:

http://www.theguardian.com/business/2015/sep/09/global-recession-two-years-likely-economist-buiter
http://www.bloomberg.com/news/articles/2015-09-11/here-s-when-economists-expect-to-see-the-next-u-s-recession
http://www.economist.com/news/leaders/21654053-it-only-matter-time-next-recession-strikes-rich-world-not-ready-watch
http://www.washingtonpost.com/news/wonkblog/wp/2015/10/23/economists-are-starting-to-sound-alarm-about-the-risk-of-a-new-u-s-recession/
http://www.forbes.com/sites/billconerly/2014/11/13/the-next-recession-cause-and-timing/

So are we going to see a downturn in the next couple of years?

Could it be a full on recession or, given that a recession is supposed to be a contraction following more growth than the economy can sustain and we've not seen all that much growth; is it just going to be a slowdown?

What can governments do about it?

What will be the effect of another downturn politically? In the UK particularly the last recession is widely seen (incorrectly) as Labour's fault, would a downturn on the Tory watch terminally damage their unearned reputation for competence?

Am I a clueless idiot who doesn't understand the first thing about economics?

 

[Borachio]

There's certainly a worrying downwards trend in the global price of steel, at the moment.

 

[Cutlass]

a contraction following more growth than the economy can sustain

This is not a thing........

 

[Birdjaguar]

Pre recession indicators:

Accelerating inflation: not happening. Fed can't get it to its target of 2%
Declining employment: We have the opposite; employment gains averaging 200,000 per month for 2015; unemployment lowest since 2008, 5.1%.
Rising unemployment claims: Not happening; 4 week moving average close to lowest level since 2000.
Inverted yield curve: currently, a clear upward slope
Leading economic Index: still rising 4.7% 6 month annualized

US market.

 

[Zelig]

There's certainly a worrying downwards trend in the global price of steel, at the moment.

What's worrying?

Lower commodity prices are generally a net gain, they let us build useful things (in the case of steel, bridges, cars, buildings, etc.) more cheaply.

I don't know the numbers for steel, but for oil, every 10% drop in price boosts world GDP by about 0.2%.

 

[Zkribbler]

Am I a clueless idiot who doesn't understand the first thing about economics?

That's okay. Neither do economists.

 

[Hygro]

Recessions are almost always precipitated by the Fed raising interest rates and/or taxes on the private sector (that's us) goes above domestic spending. Recessions come on average once a decade, rarely more than a baker's dozen and sometimes within a couple years. We haven't changed out of the boom and bust cycle, and it's been about 7 years since the last one. So it could happen in 6 months or it could happen in 6 years. It could be mild (as recessions go, there will still be articles about the end of capitalism as always) or it could be severe.

 

[Leoreth]

That's okay. Neither do economists.

Now, don't be too hard on marcoeconomists. They have correctly predicted 9 out of the last 3 recessions.

 

[Hygro]

We usually reserve that joke for the Austrians ;D