usa is eating euro businesses, why on earth would they enter recession. They can either get some credit shock (likely, but same as every other year) or implosion of consumption by way of eu recession (seems unlikely, but who knows what eu will do)
Maybe because they’re spread out too thin and quickly losing control over the global south, the place they have raped and pillaged for all their wealth for as long as capitalism has plagued the world.
Global south is getting dicked by interest rates, so they are ready to sell commodities at cheap-ish prices, and buy dear, same as usual. Nobody is wilding out at the system (defaulting/ignoring ip laws etc)
lol I’ve been hearing this from right wing neoclassical economists for the past 2 years.
sorry but at 8% budget deficit there is no way that the US will enter recession. Even if you take into account the fact that the vast majority of the deficits went into rich people’s pockets, because of the absolute behemoth of the size of US economy, there are still enough crumbs to keep people from not spending enough to trigger a spiral into recession.
i will give a hint though: when the Fed rate starts to drop, that’s when the US will truly enter a high risk of recession. Still, it will take time for the excess money to dry up so the impact is likely not immediate, and may last for many months or so.
there is another risk with such high interest rates though: the banking sector runs the risk of collapsing and we actually saw a small scale banking crisis back in March 2022 with the silicon valley bank and such, but it had been well mitigated. This is the true wild card though, and I don’t think anyone can predict that with confidence.
In summary, the US monetary policy has created the conditions where the economy has entered a quandary that it will find itself increasingly difficult to get out of. Keep running high interest rates and the banking system might run into crisis, and lowering the interest rates would inevitably cause a recession (because a lot of the deficit spending came from interest payments i.e. handout to the rich people). It’s kind of stuck at around 5% now and Biden is basically betting that it will be enough to keep the economy afloat until election day.
Not being rhetorical, but shouldn’t lowering rates be good for the economy? Money that otherwise is making 5pct doing nothing in the bank will need to go be invested somewhere else.
Yes, except that US treasuries are such a behemoth that raising the interest rates ended up creating more money into the economy as interest payments (for example, in 2023 alone the interest income payment was more than $1 trillion! mostly to the rich people though, it’s just that the trickle down from such huge quantity of money has still, so far, been able to keep the economy afloat). It is the most regressive way to keep the economy moving.
The problem here, as you’d have noticed, is that the interest payments comprised quite a substantial portion of the budget deficit, so when the rates start to go down, the budget deficit will go down as well. That means less money are being injected into the economy, and you actually ended up with less money to move around.
So, yes, it is true, on conventional terms, that lower interest rates is better. In fact, it should be 0%. But if they want to lower the rates without breaking the economy, they will have to offset it by pumping more money into the economy, but that’s socialism so it’s not allowed!
I see, very interesting, thanks very much for the color.
How do i learn about this? I feel like i dont even understand the basics
To be clear, what I have written is unorthodox (heterodox) economics based on modern monetary theory (MMT), so it’s not mainstream understanding of how the economy works, but I have got to say it’s the most accurate prediction (and quite honestly, makes far more sense that neoclassical theory) of how the economy has managed to behave so far.
For basic understanding of MMT, I recommend Stephanie Kelton’s The Deficit Myth as a primer for how money works. For dollar hegemony, anti-imperialist geopolitical takes and how the monetary policy results in banking crisis, read Michael Hudson’s work on the subjects. He had plenty of articles last year talking about how the high interest rates raised the risk of banking crisis that precipitated in the Silicon Valley bank collapse.
Er, which Financial Crisis was the “Great” one?
surely this will be the crisis that finally causes capitalism to completely collapse in on itself
oh, well, nevertheless
What? “Capitalists actually benefit from crises and the immediate shock doctrines that follow them” ? Pff, absurd!
just a few more years comrade. there will be a proletarian revolution after the great famine of 2029 - mark my words!
I honestly wonder what comes after this iteration of capitalism. Are they going to find a way to reinvent it or is it going to collapse into fascism again?
Depend. Currently we are in the 4th imperialism cycle (1900/WW1, interwar/WW2, ColdWar/Destruction of USSR, EndOfHistory/???) and each of 3 previous cycles ended with huge redistribution of spoils and contentration of imperialism.
Right now we see concentration of imperialism in real time, with US cannibalising it sub-imperialist vassals in EU and UK, but there is so far no huge spoils to divide with Russia defending itself successfully and future China war perspectives not looking good for US.
So maybe finally it will crash this time.
Zero chance of recession this year.
Here’s the explanation. Most recent recessions have been self-manufactured through credit expansion and rapid deflation through interest rate rises. Right now they’re holding steady. If they raise interest rates this year, there would be a chance of recession. But here’s your explanation of why they won’t raise rates this year: the fed’s job is to be seen as a non political actor. If they manufacture a recession in an election year, they come off as favouring the challenger, instead of the incumbent. So, they’re not going to meddle with interest rates this year.
I like the saying “Economists have successfully predicted nine of the last five recessions.”
Economists - “We can predict a collapse but do absolutely nothing to prevent it. After all the economy is an elemental force we simply cannot constrain.”
I dont think theres gonna be a recession on an election year, but the measures to postpone it will cause the 2025v recession to be really bad
“Next quarter bro i swear there’s a recession coming next quarter i swear bro dont ask for a raise bro” – economists for the last 3 years
Someone’s jumping ship a bit. Amazon founder Jeff Bezos sells shares worth over $4bn
Share price drops
Bezos repurchases the same amount of stock for less
Probably.
Imma be honest it feels like we’ve been in a recession for like 4 years now
The economy has been in a recession ever since capitalism was invented. Just been downhill the whole time.
Money printer broke (not really but the people running it think they have to pretend it is)
It sure is a great idea to become an even more overt colony of the US right at this time
