Are We Heading For a Recession?

[RiverDog]

It sure looks like it. Inflation last month was at an annual rate of 8.6%. Average gas prices are just a couple pennies short of $5/gallon with no end in sight. There's still a huge labor shortage in nearly every industry, with unemployment at a negligible 3.6%. Consumer confidence is low, with 2/3's of Americans expecting things to get worse before they get better. The Fed is likely to keep raising interest rates by a half point each month. Despite wage growth of a previously unheard of 5.2% to an average of $32/hour, it's not keeping up with inflation. The war in Ukraine hasn't shown signs of ending anytime soon. The stock market is way down, and 401K's are looking more like 201K's. Covid is still around, causing other countries like China to go into lockdowns.

As a retired senior on a fixed income, I can see where it's going to hit seniors the hardest. Social Security recipients got a decent raise of 5.9%, but they also raised Medicare premiums and deductibles by over 14%, resulting in a net SS raise of about 4.4%, easily eaten up by an 8% rate of inflation. Pensions that many retirees depend on do not have cost of living increases. You get what you get. Along with other financial instruments, IRA's are sinking.

So where does it all end? How do we get out of this mess?

[curmudgeon]

The Great Reset……

[mykc14]

Yes.

[RiverDog]

They should never have given us those last 3 stimulus payments or the liberal unemployment supplements. The first stimulus payment was necessary, but by the time they issued the 2nd one, the economy had recovered and most everyone had returned to work. All it did was to keep demand high, caused inflation to rise, and contributed to shortages and a disruption of the supply chain. I'm not blaming the entire crisis on the stimulus payments, but they contributed to the problem.

[mykc14]

They should never have given us those last 3 stimulus payments or the liberal unemployment supplements. The first stimulus payment was necessary, but by the time they issued the 2nd one, the economy had recovered and most everyone had returned to work. All it did was to keep demand high, caused inflation to rise, and contributed to shortages and a disruption of the supply chain. I'm not blaming the entire crisis on the stimulus payments, but they contributed to the problem.

I agree, I was so pissed when they were handing those out. People are going to blame the pandemic and obviously it contributed but it didn't have to cause the situation we are in. Anytime you hand out free money it is going to lead to inflation and we handed out billions. The fact that people could sit at home and cash a check without working contributed to those supply chain issues. A democrat in the office meant oil prices were going to rise, but they skyrocketed, and obviously the invasion of the Ukraine did not help. It also seems like there is a societal shift happening. Higher wages, worker supply issues, major pushback towards landlords and ridiculous housing costs are all a good start to a recession. What happens to our workforce in the next few years is going to be very interesting. As a teacher I have students who normally would be out getting a job refusing to work for $14/hour. It's not worth it they say. In the end their parents have 'enough' (even those on government assistance) to make them comfortable. Kids don't want to buy and fix up cool cars, spend money on dates/hanging out with friends when everything they need/want is at the palm of their hands. They are still using the PlayStation or Xbox their parents got them for Christmas while they walk where they need to go or get a ride from a friend. There are way less kids with jobs in my community (a mostly blue collar community). Kids are living with their parents for much longer. My younger brother by 9 years is a perfect example. He still lives at home and finally got his first job ever last year at 31. When we were growing up I had to work just to help put food on the table or help pay to heat the house, let alone pay for my car and insurance. If I wanted anything I needed to pay for it myself. We were on government assistance my whole life, but when my brother was growing up he had all of the technology a kid could want, had a crappy car to drive, and his insurance was paid for. What changed? Even my wage as a teacher has shot up in the past 4 years by almost 50%. Our government is hemorrhaging money and the more policies that come out the more money we spend without any hope of a return. At one point government assistance was seen as a negative, an embarrassment that you didn't want anybody to know about, now it's a career plan. When social systems motivate, bridge the gap between jobs, or prepare you for a job they can work because the end result should be people putting money back into the government coffers via taxes, but when the people on benefits stay on benefits and no longer put money back into the system this is where we end up. When kids see that there parents are able to sit at home and do nothing, and still have the stuff they want (cars, technology, food, a roof over their heads, clothes, etc) they don't see getting a nice job as a high priority. I see it in my students every year. The more kids who grow up in situations like that the more future life-long social system citizens we are creating.

[Aseahawkfan]

These things are so hard to call.

Employment numbers are still strong.

interest rates are rising which is going to reduce spending for all things including investment in labor, consumer spending, housing, and everything associated with borrowing.

Inflation is insane eating at margins with high gas prices raising the cost of everything as almost everything we do is reliant on transportation and gasoline in some way.

We likely have a recession coming, how deep I don't know. Could be real bad if this inflation isn't brought under control, could be mild if inflation can be brought under control and wage levels stabilize.

Gonna be a bumpy ride for a while. It did not help at all Putin starting a war right after the COVID pandemic. Not at all.

[Aseahawkfan]

I agree, I was so pissed when they were handing those out. People are going to blame the pandemic and obviously it contributed but it didn't have to cause the situation we are in. Anytime you hand out free money it is going to lead to inflation and we handed out billions. The fact that people could sit at home and cash a check without working contributed to those supply chain issues. A democrat in the office meant oil prices were going to rise, but they skyrocketed, and obviously the invasion of the Ukraine did not help. It also seems like there is a societal shift happening. Higher wages, worker supply issues, major pushback towards landlords and ridiculous housing costs are all a good start to a recession. What happens to our workforce in the next few years is going to be very interesting. As a teacher I have students who normally would be out getting a job refusing to work for $14/hour. It's not worth it they say. In the end their parents have 'enough' (even those on government assistance) to make them comfortable. Kids don't want to buy and fix up cool cars, spend money on dates/hanging out with friends when everything they need/want is at the palm of their hands. They are still using the PlayStation or Xbox their parents got them for Christmas while they walk where they need to go or get a ride from a friend. There are way less kids with jobs in my community (a mostly blue collar community). Kids are living with their parents for much longer. My younger brother by 9 years is a perfect example. He still lives at home and finally got his first job ever last year at 31. When we were growing up I had to work just to help put food on the table or help pay to heat the house, let alone pay for my car and insurance. If I wanted anything I needed to pay for it myself. We were on government assistance my whole life, but when my brother was growing up he had all of the technology a kid could want, had a crappy car to drive, and his insurance was paid for. What changed? Even my wage as a teacher has shot up in the past 4 years by almost 50%. Our government is hemorrhaging money and the more policies that come out the more money we spend without any hope of a return. At one point government assistance was seen as a negative, an embarrassment that you didn't want anybody to know about, now it's a career plan. When social systems motivate, bridge the gap between jobs, or prepare you for a job they can work because the end result should be people putting money back into the government coffers via taxes, but when the people on benefits stay on benefits and no longer put money back into the system this is where we end up. When kids see that there parents are able to sit at home and do nothing, and still have the stuff they want (cars, technology, food, a roof over their heads, clothes, etc) they don't see getting a nice job as a high priority. I see it in my students every year. The more kids who grow up in situations like that the more future life-long social system citizens we are creating.

A conservative teacher? Are you in the public education system? I feel like I'm looking at some imaginary creature that I did not know existed.

You must be a private school teacher. No public education teacher talks like this or any government employee. Most are so liberal and so supportive of the Democratic Party, the Democrats could burn the country to the ground and they would make excuses for them and blame the GOP (though of course many GOP members would do the same the other way...they're just not government employees).

[mykc14]

A conservative teacher? Are you in the public education system? I feel like I'm looking at some imaginary creature that I did not know existed.

You must be a private school teacher. No public education teacher talks like this or any government employee. Most are so liberal and so supportive of the Democratic Party, the Democrats could burn the country to the ground and they would make excuses for them and blame the GOP (though of course many GOP members would do the same the other way...they're just not government employees).

Unfortunately I agree with this, our national and state union make me sick. I do work in a public school and actually at the HS I work at (small rural) about 3/4 of the teachers are conservative. If you look at our whole district it is closer to 50/50 or 60/40 Liberal. The union overall has caused teachers to lazy and entitled- which really pisses me off. Ironically I am on the negotiating team!

[RiverDog]

These things are so hard to call.

Employment numbers are still strong.

interest rates are rising which is going to reduce spending for all things including investment in labor, consumer spending, housing, and everything associated with borrowing.

Inflation is insane eating at margins with high gas prices raising the cost of everything as almost everything we do is reliant on transportation and gasoline in some way.

We likely have a recession coming, how deep I don't know. Could be real bad if this inflation isn't brought under control, could be mild if inflation can be brought under control and wage levels stabilize.

Gonna be a bumpy ride for a while. It did not help at all Putin starting a war right after the COVID pandemic. Not at all.

The employment numbers are irrelevant. The number of unfilled job openings is. My former employer, the largest producers of potato products in North America, has at least 100 job openings at every one of their dozen or so facilities, and according to my former boss, the engineers and salesmen are itching to expand because the demand for our products is strong. It's insane.

IMO this bumpy road is going to last for 10 years or so until the baby boomers start dying off and the age demographics of the country gets back into some sort of balance. It's pretty hard to sustain an economy that has the social services for older people, like Social Security and Medicare, when the worker to retiree ratio is so out of whack.

[RiverDog]

A conservative teacher? Are you in the public education system? I feel like I'm looking at some imaginary creature that I did not know existed.

You must be a private school teacher. No public education teacher talks like this or any government employee. Most are so liberal and so supportive of the Democratic Party, the Democrats could burn the country to the ground and they would make excuses for them and blame the GOP (though of course many GOP members would do the same the other way...they're just not government employees).

Unfortunately I agree with this, our national and state union make me sick. I do work in a public school and actually at the HS I work at (small rural) about 3/4 of the teachers are conservative. If you look at our whole district it is closer to 50/50 or 60/40 Liberal. The union overall has caused teachers to lazy and entitled- which really pisses me off. Ironically I am on the negotiating team!

Yeah, I always thought that your POV was rather unique for a teacher. Although they have their place, I've never been fond of unions in general and teachers unions in particular. I've found them to be more interested in the advancement of the union, doing things like using membership dues to support political candidates without the consent of their members. It should be like the state parks donation on our car registrations, where you check a box to opt in to agree to allow a defined portion of your dues to be used for political causes supported by the union. The way they operate is the opposite philosophy of no taxation without representation.

But that's another topic.

[NorthHawk]

They should never have given us those last 3 stimulus payments or the liberal unemployment supplements. The first stimulus payment was necessary, but by the time they issued the 2nd one, the economy had recovered and most everyone had returned to work. All it did was to keep demand high, caused inflation to rise, and contributed to shortages and a disruption of the supply chain. I'm not blaming the entire crisis on the stimulus payments, but they contributed to the problem.

It’s not just an American issue. It’s world wide so any stimulus payments wouldn’t affect other countries.

We’re at the precipice of change and it could go either way. The Russians invading Ukraine is further
disrupting food supply chains and fuel in the form of oil is more expensive than before because of
sanctions against Russia. Covid disrupted other supply chains and they still haven’t recovered.
Basically we’re at the beginning of what might be a perfect storm. Will it become a recession?
It’s more probable than not but how deep it might become is a concern.
Recession, stagflation or some other economic challenge seems to be what we are facing.

[RiverDog]

They should never have given us those last 3 stimulus payments or the liberal unemployment supplements. The first stimulus payment was necessary, but by the time they issued the 2nd one, the economy had recovered and most everyone had returned to work. All it did was to keep demand high, caused inflation to rise, and contributed to shortages and a disruption of the supply chain. I'm not blaming the entire crisis on the stimulus payments, but they contributed to the problem.

It’s not just an American issue. It’s world wide so any stimulus payments wouldn’t affect other countries.

I'm not following you. Could you articulate a little more on that thought?

We’re at the precipice of change and it could go either way. The Russians invading Ukraine is further disrupting food supply chains and fuel in the form of oil is more expensive than before because of sanctions against Russia. Covid disrupted other supply chains and they still haven’t recovered.

Basically we’re at the beginning of what might be a perfect storm. Will it become a recession? It’s more probable than not but how deep it might become is a concern. Recession, stagflation or some other economic challenge seems to be what we are facing.

The economy is actually very overheated. The end of the pandemic released a huge, pent up demand that has kept prices high. Hopefully by the end of the summer after the vacation season is over, we'll see a slackening in demand and we'll get some price relief. People need to quit spending and quit traveling and start saving in order to bring demand down so it more closely matches supply and allows the supply chain issues to straighten themselves out, but I don't see it returning to normal, ie 2-3% inflation rate, for quite some time. The labor shortage alone will keep an upward pressure on prices.

[Aseahawkfan]

The employment numbers are irrelevant. The number of unfilled job openings is. My former employer, the largest producers of potato products in North America, has at least 100 job openings at every one of their dozen or so facilities, and according to my former boss, the engineers and salesmen are itching to expand because the demand for our products is strong. It's insane.

IMO this bumpy road is going to last for 10 years or so until the baby boomers start dying off and the age demographics of the country gets back into some sort of balance. It's pretty hard to sustain an economy that has the social services for older people, like Social Security and Medicare, when the worker to retiree ratio is so out of whack.

The main reason I bring them up is we have a sort of competing metric. We don't usually have a recession with strong employment numbers and a strong job market. But we've also had many recessions with higher interest rates and strong inflation numbers. Which one of these metrics gives first? Hard to tell. Will we start seeing far more layoffs of the inflation keeps spiraling out of control and the interest rates put downward pressure on investment and spending? Or will we reach equilibrium where wages, prices, and interest rates reach a point of slower, but steadier and more stable growth? Hard to say.

The real change in the labor market is going to come from automation. Private industry will start to use heavy automation at places like your potato plant to account for increased demand. There is no single article to cover the sheer volume of automation coming to the world, so I'm not going to attempt to post one. And you may not see it as you'll be dead. Automation is going to going to fill the labor market demand long before we have to worry about needing more people. Robotaxies, automated warehouse pickers, loaders, trucking, burger flipping, and the like are coming relatively soon and they're going to reduce the need for human labor substantially.

We won't need a whole generation to die off. We'll need less people and have more robots making life even easier.

It's why some nations are planning for a shorter work week, universal basic income, and the like. The economic change from automation is coming and it's coming faster than people think.

Even mykc's profession will be hit by automation if it hasn't already. Where he as a teacher will likely have students who receive their lessons form interactive AI-driven software with a human sounding voice, where his primary job will be to assist students who have questions the software can't answer or provide examples of. Classrooms will be able to teach hundreds of students with a only a single or a couple of teachers assisting as needed.

Job displacement from automation is going to fill the void you are expecting. Companies are investing heavily in automating systems so they are less reliant on human labor.

It's not an if at this point, it's a when.

[Aseahawkfan]

The economy is actually very overheated. The end of the pandemic released a huge, pent up demand that has kept prices high. Hopefully by the end of the summer after the vacation season is over, we'll see a slackening in demand and we'll get some price relief. People need to quit spending and quit traveling and start saving in order to bring demand down so it more closely matches supply and allows the supply chain issues to straighten themselves out, but I don't see it returning to normal, ie 2-3% inflation rate, for quite some time. The labor shortage alone will keep an upward pressure on prices.

The primary drivers of inflation right now are energy prices and the measures taken against Russia and the Ukraine War. Russia was a massive supplier of various natural resources including natural gas and oil as well as fertilizer.

Wage growth had already started to slow prior to the Russia-Ukraine war due to labor supply slowly increasing.

Your pet labor theory is not what was driving inflation. You clamped on to that like a bulldog and want to keep pushing it. As an investor, the numerous articles discussing inflationary pressures revolve around energy.

There is pent up travel demand and the like, but that is getting drained quickly. It wasn't the thousand dollar stimulus payments driving demand, it was the 600 and 300 dollar unemployment payments and early child tax payments people were saving and building up. Those one time stimulus payments went through the system pretty quickly, the enhanced unemployment and early child tax credits allowed people to build up substantial savings. Gains in stock market, crypto, and the like also built up a massive amount of surplus income, but a lot of that surplus income has disappeared with the stock market downturn. That's why consumer confidence is dropping because all those folk making a killing from inflated stock, housing, and crypto prices are no longer making that money.

I know you have your pet theory that you think will play out. We'll have to wait years to see if your theory is right. As a follower of the stock and financial markets, your labor theory is but one small piece of a very complex situation involving a pandemic and a war that we won't be sure of for a few years at least. Trying to determine what will happen in the next 10 years given changing technology built around the idea of human labor isn't what I would make a financial bet on myself. I think we will be far, far less reliant on human labor in ten years. This whole COVID driven labor shortage is going to accelerate automation out of necessity.

Right now I'm mostly cash. Even with inflation eroding my cash. It's still better than these huge losses from being in the wrong stocks. I have been picking up a few big players like GOOGLE in the short-term. I'm waiting to see how employment plays out. If unemployment starts increasing due to companies slowing investment in expansion, we're really gonna see a stock market panic.

Even as your food production employer expands, other places are slowing or reducing their work force due to a downturn in demand. Target and Walmart, two huge retailers, have indicated their inventories are rising which is a huge sign of slowing demand in the economy.

https://www.eatthis.com/news-walmart-target-latest-inventory-issue-benefit-shoppers/

What items are slowing down? That requires a deeper look. Food prices still seem high, but maybe consumer electronics is dropping.

Lumber prices just crashed hard. Housing is slowing. Used cars just crashed hard too. Will the layoffs follow?

Lots of moving pieces to keep track of. Watch your money close. Be ready to deploy it if you see some real deals in the stock market. I'd love to see NVDA and GOOG drop even more, maybe see TSLA drop a lot too. I want some stock bargain. Stock have been insanely inflated since the 2020 COVID crash where you could borrow money cheap and make a huge return investing it. Now you can't do that. So if unemployment starts rising, stock markets will crash even harder and make for bargain shopping.

[Aseahawkfan]

Unfortunately I agree with this, our national and state union make me sick. I do work in a public school and actually at the HS I work at (small rural) about 3/4 of the teachers are conservative. If you look at our whole district it is closer to 50/50 or 60/40 Liberal. The union overall has caused teachers to lazy and entitled- which really pisses me off. Ironically I am on the negotiating team!

I'm glad to see a conservative teacher in the public system. It used to be far more common. These young'un's still need a dose of reality with all the steaming garbage they get fed by the left about fairy tale land where you graduate and it's just how hard you tried that makes you enough money to live well. The more I watch this younger generation, the more I see them heading towards a rejection of the current liberal philosophy which is a path to nowhere and nothing but a lazy society of low productivity with an even bigger divide between the haves and have nots because one group of young people were taught that a good work ethic and real competence will always beat out "I've done my best" when you haven't and never experience the discomfort of a hard day of work and high expectations. The liberals are setting an entire younger generation up for abject failure as they find out the hard way that companies don't hire people for trying or worry about how good they feel while at work. Job needs to get done. Get it done is the mentality with no whining.

It used to be that even liberals like c-bob had kind of work ethic. The old Kennedy style Democrats who were pro labor, but also hard workers themselves with a good work ethic. This new AOC breed of workers built around the idea of being victims is just sad. A work ethic is an extremely important teaching and it's been tossed by the way side in liberal politics in favor of victim politics. You're just a victim of the system and you can't possibly work your way to a better life is a modern Democratic selling point, which is just sad. Democrats didn't used to be that way. Just like Republicans didn't used to be sycophants following a lunatic reality TV celeb. Just a damn shame to watch these two parties fall into weird viewpoints. I feel bad for the young folks with this terrible leadership.

[RiverDog]

The main reason I bring them up is we have a sort of competing metric. We don't usually have a recession with strong employment numbers and a strong job market. But we've also had many recessions with higher interest rates and strong inflation numbers. Which one of these metrics gives first? Hard to tell. Will we start seeing far more layoffs of the inflation keeps spiraling out of control and the interest rates put downward pressure on investment and spending? Or will we reach equilibrium where wages, prices, and interest rates reach a point of slower, but steadier and more stable growth? Hard to say.

We've never had a situation where we've had twice as many job openings as unemployed, either.

The real change in the labor market is going to come from automation. Private industry will start to use heavy automation at places like your potato plant to account for increased demand. There is no single article to cover the sheer volume of automation coming to the world, so I'm not going to attempt to post one. And you may not see it as you'll be dead. Automation is going to going to fill the labor market demand long before we have to worry about needing more people. Robotaxies, automated warehouse pickers, loaders, trucking, burger flipping, and the like are coming relatively soon and they're going to reduce the need for human labor substantially.[/quote]

Automation doesn't happen overnight. Amazon has been talking about using drones to deliver packages for years. Uber has been talking about autonomous vehicles for nearly as long. One of the problems is going to be society's acceptance of them. Even if an autonomous vehicle is proven to be safer than a human operated one, all it's going to take is one fatal accident where an autonomous vehicle malfunctioned and it will set the effort back years.

We won't need a whole generation to die off. We'll need less people and have more robots making life even easier.

It's why some nations are planning for a shorter work week, universal basic income, and the like. The economic change from automation is coming and it's coming faster than people think.

Even mykc's profession will be hit by automation if it hasn't already. Where he as a teacher will likely have students who receive their lessons form interactive AI-driven software with a human sounding voice, where his primary job will be to assist students who have questions the software can't answer or provide examples of. Classrooms will be able to teach hundreds of students with a only a single or a couple of teachers assisting as needed.

Job displacement from automation is going to fill the void you are expecting. Companies are investing heavily in automating systems so they are less reliant on human labor.

It's not an if at this point, it's a when.

The oldest baby boomers, born in 1946, are 76 years old, right at the average life expectancy, so the next few years will see an increase in the death rate. Consequently, the oldest of the following generation was born in 1960 so they are just now hitting 62 or Social Security's early retirement age. If you look at the historical on the birth rate, it dropped off a cliff starting in 1960 and the introduction of "the pill". That's going to help the worker/retiree ratio as the exodus from the job market should begin to slow while the death rate increases, but like the automation solution, it's not going to happen overnight. Another potential solution is increasing immigration, but that's not politically viable. Outsourcing more work might be an option if we don't get into a war with China.

I realize that I've beat this labor shortage issue like a drum, but I just don't see any quick and easy solutions. IMO the economy is going to have to start moving away from goods and services that are labor intensive. Eating at home instead of dining out. Changing your own car oil. Do it yourself instead of contracting. Fewer trips to the doctor's office. Using a kiosk instead of a teller. Those sorts of things.

[Aseahawkfan]

We've never had a situation where we've had twice as many job openings as unemployed, either.

There's a lot of unprecedented economic occurrences right now. That is but one of them. I just know prior to the Ukraine War, wage levels were leveling off and the fear of the Wage-Price Spiral was lessening. Then good old Putin decided to start a war.

Automation doesn't happen overnight. Amazon has been talking about using drones to deliver packages for years. Uber has been talking about autonomous vehicles for nearly as long. One of the problems is going to be society's acceptance of them. Even if an autonomous vehicle is proven to be safer than a human operated one, all it's going to take is one fatal accident where an autonomous vehicle malfunctioned and it will set the effort back years.

This has been pretty far from overnight. They have been running FSD programs for a decade now at least. A few places like Frisco and some places in China are finally starting to let them run. Automated trucking has also been something being worked on for years. Just as EVs didn't happen overnight. It's been years of a company like Tesla building out manufacturing and charging infrastructure for this to occur. Boston Dynamics has been working on their robots for decades. They are not deploying robots for equipment checking and safety fairly recently that scan and report any safety issues to a human maintenance staff.

This has been building for years. Which is why I say it is coming faster than people think because we have reached the deployment phase after a long development phase. So you're right, automation doesn't happen overnight. It's taken decades of research, development, and investment to reach this point where full deployment is the next phase. We've already had some crashes with self-driving cars, but the data all points to self-driving cars as safer than human operated cars. We'll see how that goes with a larger fleet. Main advantages is self-driving cars don't drink, do drugs, or have health issues or spend their time texting or fall asleep or lose focus. They are built to drive and that is what they do.

https://iot.eetimes.com/the-4-cities-competing-to-fully-implement-autonomous-vehicles/

The oldest baby boomers, born in 1946, are 76 years old, right at the average life expectancy, so the next few years will see an increase in the death rate. Consequently, the oldest of the following generation was born in 1960 so they are just now hitting 62 or Social Security's early retirement age. If you look at the historical on the birth rate, it dropped off a cliff starting in 1960 and the introduction of "the pill". That's going to help the worker/retiree ratio as the exodus from the job market should begin to slow while the death rate increases, but like the automation solution, it's not going to happen overnight. Another potential solution is increasing immigration, but that's not politically viable. Outsourcing more work might be an option if we don't get into a war with China.

I realize that I've beat this labor shortage issue like a drum, but I just don't see any quick and easy solutions. IMO the economy is going to have to start moving away from goods and services that are labor intensive. Eating at home instead of dining out. Changing your own car oil. Do it yourself instead of contracting. Fewer trips to the doctor's office. Using a kiosk instead of a teller. Those sorts of things.

I don't see the same issue you do when investing. The bigger fear is a drop in population and consumption causing a severe economic retraction versus a labor supply shortage. Apparently China is supposed to go from 1.4 billion people to 840 million by 2030 or so. This population shrink worldwide is going to cause a massive drop off on consumption which will lead to a big economic contracts slowly. One thing robots don't do is earn a wage and consume. So even if you automate, you'll still be losing consumers as the older generation dies off.

That is one of the big fears right now. That we'll see a huge drop in consumption over time. If companies adopt automation to keep up with demand that is expected to fall substantially, they'll have to adjust investing to a world with less people. We'll see if that plays out.

It's going to be real interesting to see who is right. I have a real hard time believing China is going to drop by nearly 600 million people, but who knows. Japan has a negative birth rate. I think the United States would have negative population growth if not for robust immigration. I'd bet even you would tell me you had fewer kids than your parents and grandparents. I know I and my brother did. Eventually that type of behavior leads to a smaller population. A smaller population should naturally lead to less stress on resources and an overall better world once the capitalist environment adjusts.

That's another reason why socialism and communism are terrible. They don't adapt as fast as capitalism because they aren't built to. Whereas capitalism is built to adapt quickly to changing conditions otherwise your business dies and gets replaced by a new business that has adapted.

My feeling is our capitalist economy will adapt quickly to a changing labor environment with some of the usual growing pains.

[RiverDog]

I don't see the same issue you do when investing. The bigger fear is a drop in population and consumption causing a severe economic retraction versus a labor supply shortage. Apparently China is supposed to go from 1.4 billion people to 840 million by 2030 or so. This population shrink worldwide is going to cause a massive drop off on consumption which will lead to a big economic contracts slowly. One thing robots don't do is earn a wage and consume. So even if you automate, you'll still be losing consumers as the older generation dies off.

We're going to have to agree to disagree on automation. I just don't see it advancing as quickly as you do, at least not fast enough to make an impact on the labor market. There's just too many job openings in areas that can't easily be automated. Truck drivers, for example. One of the things driving the high gas prices is a shortage of commercial truck drivers. They can't get gas from the refineries to the distributors.

You mentioned autonomous vehicles. Do you remember a few years ago when Uber was testing semi automated cars when one of their operators was screwing with her phone and hit/killed a pedestrian that was outside of a crosswalk?

In May 2018, when Elaine Herzberg was killed, confidence in autonomous vehicle technology was at an all-time high. Everyone from Elon Musk to the British Chancellor Philip Hammond was telling us that robo-taxis and other autonomous vehicles would be on the roads within a couple of years, cutting congestion and delivering a big boost to road safety. But the accident in Arizona punctured that confidence.

It showed that however smart the machine learning in the autonomous systems, mixing robots with humans as cars made the journey towards full autonomy was going to prove a real challenge.

Not only did Uber have to halt its testing programme for a while, but rivals such as Google's Waymo became notably more cautious in their trials. Only today it is being reported that the Chinese tech giant Baidu is pushing back the full rollout of its robo-taxis until 2025, partly because of confusion about regulations.

Following the crash, authorities in Arizona suspended Uber's ability to test self-driving cars on the state's public roads, and Uber ended its tests in the state.

https://www.bbc.com/news/technology-54175359

Due to the public's reluctance to embrace new technology, companies will be reluctant to put robots, drones, and autonomous vehicles in areas where a failure could result in a human death and a huge lawsuit. Additionally, the government is going to have to make a huge investment in infrastructure for them to have a real impact on the labor market, like putting sensors in roadways and transmitters in highway signs for autonomous vehicles. Some states may insist that they have dedicated lanes/roadways and limit them to rural freeways like they have with 'triples', ie trucks with 3 vans. It's not going to happen overnight. There's going to be lots of starts, resets, and delays.

There are a few things that we should be considering. One is to eliminate early retirement for SS recipients. It would help make the system more sustainable while adding workers to the labor force. We can liberalize the child labor laws to let kids under 18 work longer hours and a wider variety of jobs (with some strings attached). I used to work 80+ hours a week in the summers when I was in HS, now kids are limited to 40 hrs. 16 year olds can easily operate today's farm equipment but they're prevented from operating heavy machinery even though they can drive a car. It would be a lot quicker solution than waiting 5-10 years for automation to have an effect. And, of course, we can admit more immigrants if we'd just get over this racial and ethnic paranoia.

That is one of the big fears right now. That we'll see a huge drop in consumption over time. If companies adopt automation to keep up with demand that is expected to fall substantially, they'll have to adjust investing to a world with less people. We'll see if that plays out.

It's going to be real interesting to see who is right. I have a real hard time believing China is going to drop by nearly 600 million people, but who knows. Japan has a negative birth rate. I think the United States would have negative population growth if not for robust immigration. I'd bet even you would tell me you had fewer kids than your parents and grandparents. I know I and my brother did. Eventually that type of behavior leads to a smaller population. A smaller population should naturally lead to less stress on resources and an overall better world once the capitalist environment adjusts.

My HS graduating class, ie 1973, was the largest in school history, 588. Despite the fact that the community has actually grown slightly and still has just the one public high school, their graduating classes are but 60-70% of ours. The local Catholic high school had 300-400 in 3 grades during that period of time. Now they have 88 in 4. It used to be that families with 5+ kids was not unusual. One family had 9 kids. No one in my class that I talked to had more than 3 kids, with most of us having one or two. It's a dramatic change.

The decline in birth rate in and of itself isn't the problem. The problem is the imbalance between young and old. That will eventually straighten itself out, but it's going to be rough. My generation is driving the housing crisis because we're not moving out of our homes while the pandemic caused more people to work at home instead of living in an urban apartment close to their offices. When the boomers start dying and moving out of our homes, it's going to cause a big real estate crash with a flood of houses going onto the market as there won't be nearly as many new home buyers.

I'm not predicting the end of the world, but it's going to be rough for the next 5 years or so. I don't expect inflation to drop below 5% for quite a while.

[RiverDog]

The National Bureau of Economic Research, a non profit that according to their webpage, is comprised of "a Board of Directors consisting of 51 members from leading North American research universities, economics professional organizations, and the business and labor communities", is the authority that declares if and when we are in a recession.

But we just posted our 2nd consecutive quarter of negative GDP growth, so by that definition, we're in a recession.

https://www.reuters.com/markets/us/view ... 022-07-28/

To hear the Biden Administration spin it, we're not in one because the labor market is still strong. But that logic simply does not work anymore as the 'new normal' is a labor shortage in nearly every industry that isn't' going away for years until the age demographics begin to shift, we admit more immigrants, raise the retirement age, relax child labor laws, or automation begins to have an effect. If a worker loses his/her job because some factory had to shut down due to low demand, it's no problem for them as there are so many industries that are shorthanded that finding a job isn't a problem.

It's here. We're in a recession.

[c_hawkbob]

It's not the health of the market that is keeping us from officially being in a recession, what I keep hearing is that it's the low unemployment numbers.

[curmudgeon]

Transformation of definitions, transformation of the economy, transformation of energy, transformation of America. Joe Biden is the greatest American President in history….

[RiverDog]

It's not the health of the market that is keeping us from officially being in a recession, what I keep hearing is that it's the low unemployment numbers.

That's exactly right, and with the acute labor shortage in nearly every industry, unemployment will remain relatively low. There may be some incidental unemployment as there will be employees that get laid off in industries experiencing a severe reduction in demand as some will opt not to take available work and instead, file for unemployment so they can collect the free benefits but there will be plenty of job openings that exceeds the number of unemployed.

It's a different type of recession that we haven't seen before as it doesn't hurt the worker, or at least doesn't hurt him as much as ones in the past have. But it's still a recession.

[Aseahawkfan]

It's interesting to watch. It doesn't feel like a recession, but technically it is a recession. The unemployment is so low hard to imagine a serious crash. Money is getting focused into certain companies which is why the market is seeing some stocks up 20 percent while others drop 20 percent. People haven't stopped spending. I don't expect a huge economic event, but we are seeing some troubling signs in China and some slowing for certain companies. Hiring is supposedly slowing. We'll see how that impacts the economy. Europe may take this harder than America. The Fed likely will keep pushing up interest rates to bring inflation down, which should continue to slow spending.

[RiverDog]

It's interesting to watch. It doesn't feel like a recession, but technically it is a recession. The unemployment is so low hard to imagine a serious crash. Money is getting focused into certain companies which is why the market is seeing some stocks up 20 percent while others drop 20 percent. People haven't stopped spending. I don't expect a huge economic event, but we are seeing some troubling signs in China and some slowing for certain companies. Hiring is supposedly slowing. We'll see how that impacts the economy. Europe may take this harder than America. The Fed likely will keep pushing up interest rates to bring inflation down, which should continue to slow spending.

Yep, I agree. It highlights my pet peeve about the labor shortage. When I was just getting out of college in 1977, the economy was in recession, with double digit inflation, double digit interest rates, and unemployment near 10%. I was worried that I wouldn't be able to find a job in the field in which I graduated in. There's no such worry in this market.

The problem is inflation. You're right, the Fed will keep bumping interest rates at least a half a point every 6 weeks or so. It's the only thing that can do to restrict the supply of money. Housing has already started to crash. People won't be able to buy that new car they've wanted. So while people are not out of work, they won't be spending as much money as their dollar won't go as far.

That's why I was against all but the first economic stimulus payment. By the time they gave out the 2nd one, the economy had already recovered and most people were back to work. All it's done is caused shortages as people kept buying because they had all this free money. It was a major contributor to the problems we have today.

[Aseahawkfan]

Yep, I agree. It highlights my pet peeve about the labor shortage. When I was just getting out of college in 1977, the economy was in recession, with double digit inflation, double digit interest rates, and unemployment near 10%. I was worried that I wouldn't be able to find a job in the field in which I graduated in. There's no such worry in this market.

The problem is inflation. You're right, the Fed will keep bumping interest rates at least a half a point every 6 weeks or so. It's the only thing that can do to restrict the supply of money. Housing has already started to crash. People won't be able to buy that new car they've wanted. So while people are not out of work, they won't be spending as much money as their dollar won't go as far.

That's why I was against all but the first economic stimulus payment. By the time they gave out the 2nd one, the economy had already recovered and most people were back to work. All it's done is caused shortages as people kept buying because they had all this free money. It was a major contributor to the problems we have today.

What I find odd is we're basically in a stagflation type of environment where we have high inflation and no GDP growth, but the employment is still high. So does employment follow the normal path for stagflation or does the labor market sustain the economy until inflation is under control and we return to growth?

[RiverDog]

What I find odd is we're basically in a stagflation type of environment where we have high inflation and no GDP growth, but the employment is still high. So does employment follow the normal path for stagflation or does the labor market sustain the economy until inflation is under control and we return to growth?

I don't think that it's odd that unemployment is low given the labor shortage that we've talked about at some length.

IMO the latter part of your sentence is what is likely to happen. Growth will remain flat until we get inflation under control. The Fed is making the absolute correct move in raising interest rates and limit the supply of money. It's going to hit some industries harder than others, particularly housing and automobile sales, boats, etc, areas where people have to borrow money to make a purchase.

There's also the psychological aspect to consider. In past recessions, people were afraid of losing their jobs or getting laid off, so they cut back on their spending in the event that they got laid off due to a slack in demand. I can remember my own mindset in the late 70's. Due to the economy, I was deathly afraid of not being able to find a job due to the economy. The old saying back then was that a recession is defined as when your neighbor loses his job and a depression is when you lose your job.

In this recession, jobs are still plentiful, so people don't fear losing their job. Will they continue to spend? They won't be buying the big ticket items that they have to borrow money for, but they may keep making discretionary spending decisions...taking their families to dinner, taking a vacation to a theme park, etc, that in past recessions people didn't make.

In any event, it will be curious to see how this plays out. IMO it might take some time to get inflation back down to their 3% target if people continue to spend.

[Aseahawkfan]

I don't think that it's odd that unemployment is low given the labor shortage that we've talked about at some length.

IMO the latter part of your sentence is what is likely to happen. Growth will remain flat until we get inflation under control. The Fed is making the absolute correct move in raising interest rates and limit the supply of money. It's going to hit some industries harder than others, particularly housing and automobile sales, boats, etc, areas where people have to borrow money to make a purchase.

There's also the psychological aspect to consider. In past recessions, people were afraid of losing their jobs or getting laid off, so they cut back on their spending in the event that they got laid off due to a slack in demand. I can remember my own mindset in the late 70's. Due to the economy, I was deathly afraid of not being able to find a job due to the economy. The old saying back then was that a recession is defined as when your neighbor loses his job and a depression is when you lose your job.

In this recession, jobs are still plentiful, so people don't fear losing their job. Will they continue to spend? They won't be buying the big ticket items that they have to borrow money for, but they may keep making discretionary spending decisions...taking their families to dinner, taking a vacation to a theme park, etc, that in past recessions people didn't make.

In any event, it will be curious to see how this plays out. IMO it might take some time to get inflation back down to their 3% target if people continue to spend.

It is a unique situation. Which doesn't surprise me since the last few years were a unique situation. That's why I find this whole situation hard to figure out. We don't have much precedent to go on other than the 1918 Flu Pandemic and even then they did not stimulate the economy like they did the last few years and we did not have a digital economy. So far it is looking like we will make a soft landing due to high employment. But a few more interest raises and we the housing market should take a hit and the car market, but how much will affect other areas?

Right now housing is priced based on how much money a person can borrow over 30 years, which is why we have such an inflated market on top of supply-demand issues. If a certain segment of the employed population, especially couples, can continue to pay higher and higher amounts based on how much they can afford over 30 years the housing market may stay stable or keep rising. Low unemployment might keep wages going up, which further increases the amount of a person can borrow.

It all feeds into the overall issues that might further exacerbate the wealth gap leading to more long-term issues. It's all hard to read.

[RiverDog]

It is a unique situation. Which doesn't surprise me since the last few years were a unique situation. That's why I find this whole situation hard to figure out. We don't have much precedent to go on other than the 1918 Flu Pandemic and even then they did not stimulate the economy like they did the last few years and we did not have a digital economy. So far it is looking like we will make a soft landing due to high employment. But a few more interest raises and we the housing market should take a hit and the car market, but how much will affect other areas?

Right now housing is priced based on how much money a person can borrow over 30 years, which is why we have such an inflated market on top of supply-demand issues. If a certain segment of the employed population, especially couples, can continue to pay higher and higher amounts based on how much they can afford over 30 years the housing market may stay stable or keep rising. Low unemployment might keep wages going up, which further increases the amount of a person can borrow.

It all feeds into the overall issues that might further exacerbate the wealth gap leading to more long-term issues. It's all hard to read.

Agreed. Some of this might be a good thing as it might cause people to save more and think twice before 'biting off more than they can chew' by borrowing to buy new cars and boats that they don't need or can get by with a cheaper alternative. It always used to amaze me when I drove through our parking lot at work and seeing all the new hot cars and knowing what wages they were getting paid. Cars are a status symbol to the young. Thankfully, my daughter never fell into that trap and didn't buy her first new car until she had been working full time for over a year as a well paid nurse.

One of the things that has been driving the housing market is us baby boomers. We're living longer, healthier lives than our predecessors and we're not going into nursing homes or downsizing as early. But that will soon change, and when it does, there'll be a flood of houses put back on the market. If I were to advise a potential house buyer, I'd tell them to figure out what they can afford then buy the cheapest house in the most expensive neighborhood that they can afford so the values of the homes around them support theirs. It would also give them a better opportunity to increase their home value by making improvements.

Hopefully, this teaches a lesson to those that thought that this free money they were handing out has its consequences. I remember us talking about it back in 2020, that we didn't need it and that it was inflationary. When the pandemic first hit, companies anticipated a slackening in demand, so they made decisions anticipating slower sales that never happen and contributed to the supply chain problems, which drove prices up even further. It's been 40 years since we had to worry about inflation. It's truly a genie that has to be kept in its bottle.

[Aseahawkfan]

Agreed. Some of this might be a good thing as it might cause people to save more and think twice before 'biting off more than they can chew' by borrowing to buy new cars and boats that they don't need or can get by with a cheaper alternative. It always used to amaze me when I drove through our parking lot at work and seeing all the new hot cars and knowing what wages they were getting paid. Cars are a status symbol to the young. Thankfully, my daughter never fell into that trap and didn't buy her first new car until she had been working full time for over a year as a well paid nurse.

One of the things that has been driving the housing market is us baby boomers. We're living longer, healthier lives than our predecessors and we're not going into nursing homes or downsizing as early. But that will soon change, and when it does, there'll be a flood of houses put back on the market. If I were to advise a potential house buyer, I'd tell them to figure out what they can afford then buy the cheapest house in the most expensive neighborhood that they can afford so the values of the homes around them support theirs. It would also give them a better opportunity to increase their home value by making improvements.

Hopefully, this teaches a lesson to those that thought that this free money they were handing out has its consequences. I remember us talking about it back in 2020, that we didn't need it and that it was inflationary. When the pandemic first hit, companies anticipated a slackening in demand, so they made decisions anticipating slower sales that never happen and contributed to the supply chain problems, which drove prices up even further. It's been 40 years since we had to worry about inflation. It's truly a genie that has to be kept in its bottle.

If the economy slows, they're just going to do the same thing. They've been doing it since 2008 and maybe since the Tech Bubble burst. Cheap money via low interest rates seems to be the new normal when the economy tanks. That is a major reason we keep getting these bubbles in risk assets. When you can borrow at a super low rate and make gains in the market or other risk assets above what you pay in interest, you just encourage borrowing and investing which creates an economy based on credit growth which eventually reaches its debt limit and causes massive unsustainable growth in short periods that pops leading to markets like we're in right now or even worse like the 2008 or 2001 Tech Bubble.

People have lost a ton of money on the market collapse. The main people benefitting from the market rise are those with money to buy the cheaper assets. They wait for this to happen knowing they can make immense money when these bubbles pop and normal working folk who get caught up in the hype lose their asses.

It's not a healthy way to run an economy in my opinion.

[I-5]

I find recession to be a more abstract concept than inflation...I know in general terms it is an economic slowdown, but can someone explain to me how a recession affects your life at an individual level, outside of losing your job? Does it mean a decrease in your current salary, and increase in the cost of goods and services, rising interest rates for home loans? Or is it a mindset that makes people afraid to spend?

[RiverDog]

I find recession to be a more abstract concept than inflation...I know in general terms it is an economic slowdown, but can someone explain to me how a recession affects your life at an individual level, outside of losing your job? Does it mean a decrease in your current salary, and increase in the cost of goods and services, rising interest rates for home loans? Or is it a mindset that makes people afraid to spend?

What you're talking about is consumer confidence. It's a number that they track, and it's been falling:

The Conference Board Consumer Confidence Index® decreased in July (2022), following a larger decline in June. The Index now stands at 95.7 (1985=100), down 2.7 points from 98.4 in June. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell to 141.3 from 147.2 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—ticked down to 65.3 from 65.8.

“Consumer confidence fell for a third consecutive month in July,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The decrease was driven primarily by a decline in the Present Situation Index—a sign growth has slowed at the start of Q3. The Expectations Index held relatively steady, but remained well below a reading of 80, suggesting recession risks persist. Concerns about inflation—rising gas and food prices, in particular—continued to weigh on consumers.”

“As the Fed raises interest rates to rein in inflation, purchasing intentions for cars, homes, and major appliances all pulled back further in July. Looking ahead, inflation and additional rate hikes are likely to continue posing strong headwinds for consumer spending and economic growth over the next six months.”

https://www.conference-board.org/topics ... confidence

As far as it affecting our lives, it used to be the fear of losing your job, but now, those fears aren't present as the job market is still red hot, adding 500K jobs in July and wages still on the rise. It seems to be what was mentioned in that article: Concerns about rising food and gas prices.

It sounds counter intuitive, but people are going to have to quit spending and start saving if we are to get inflation under control. A strong demand for goods and services will continue to put upward pressure on prices and fuel inflation. That's why the Fed is raising interest rates, an attempt to limit the supply of money and slow down the economy. I heard the other day that the Fed expects to have to raise interest rates by .5%-.75% every 6 weeks until April of 2023.

[Aseahawkfan]

I find recession to be a more abstract concept than inflation...I know in general terms it is an economic slowdown, but can someone explain to me how a recession affects your life at an individual level, outside of losing your job? Does it mean a decrease in your current salary, and increase in the cost of goods and services, rising interest rates for home loans? Or is it a mindset that makes people afraid to spend?

We're in an unprecedented period right now. We have extremely low unemployment, high inflation, and a slight retraction of the GDP. The entire past few years is completely unprecedented. That is why it's extremely difficult to see.

Normally a recession would indicate a drop in spending and production which would normally lead to higher unemployment and a drop in corporate earnings. Economic contractions lead to drops in the stock market and other risk assets short-term as well as drops in corporate earnings. This causes layoffs and can as with 2008 and 2001 cause real economic issues that can affect people's lives whether the loss of their homes or cause them to have learn new skills to find a job. It can be extremely stressful and difficult. I recall years after the 2008 recession we were able to hire overqualified people for the job quite easily at a low wage just because these folks needed a job so badly. But after unemployment started to drop and the economy picked back up, these overqualified folks started to find jobs in their original fields for more pay. Our particular labor pool started to shrink and our candidates weren't as high quality as previously hired.

But this situation is very odd. We're not sure how many people retired from the workplace during the pandemic and are not returning to the workforce. We had much lower immigration during the pandemic which we use to fill out the workforce and act as a deflationary measure for wages. We had supply chains from other nations shut down. Now we have the Russia situation and the China situation. It's a lot of variables affecting the economy. But as long as employment stays high, we should be able to weather it. If employment starts to drop driving down demand and causing producers to cut back on supply leading to layoffs and lower corporate earnings, then we might see a real recession which would be felt a bit.

I'm watching all this right now play out. It's an unprecedented situation. Never seen it before. Not during the Tech Bubble or 2008 housing crash or the savings and loan crash. Not during 1970s stagflation. This is a very weird economy.

Another factor that seems to have helped us with a soft landing is the high property prices. The increase during COVID has made it so a bunch of people who would have lost their homes in a housing crisis type of crash or been stuck under deferred mortgage payments have been able to sell their houses, pay off the deferred mortgage, and still made a healthy profit to buy a new house often moving to a new cheaper area. I thought the deferred mortgage payments would hurt people more, but the rising home prices saved them. We still might have problems with deferred rents, but that will get sorted out within the next year or two. A lot of landlords may just write it off and move on.

[RiverDog]

I find recession to be a more abstract concept than inflation...I know in general terms it is an economic slowdown, but can someone explain to me how a recession affects your life at an individual level, outside of losing your job? Does it mean a decrease in your current salary, and increase in the cost of goods and services, rising interest rates for home loans? Or is it a mindset that makes people afraid to spend?

We're in an unprecedented period right now. We have extremely low unemployment, high inflation, and a slight retraction of the GDP. The entire past few years is completely unprecedented. That is why it's extremely difficult to see.

Normally a recession would indicate a drop in spending and production which would normally lead to higher unemployment and a drop in corporate earnings. Economic contractions lead to drops in the stock market and other risk assets short-term as well as drops in corporate earnings. This causes layoffs and can as with 2008 and 2001 cause real economic issues that can affect people's lives whether the loss of their homes or cause them to have learn new skills to find a job. It can be extremely stressful and difficult. I recall years after the 2008 recession we were able to hire overqualified people for the job quite easily at a low wage just because these folks needed a job so badly. But after unemployment started to drop and the economy picked back up, these overqualified folks started to find jobs in their original fields for more pay. Our particular labor pool started to shrink and our candidates weren't as high quality as previously hired.

But this situation is very odd. We're not sure how many people retired from the workplace during the pandemic and are not returning to the workforce. We had much lower immigration during the pandemic which we use to fill out the workforce and act as a deflationary measure for wages. We had supply chains from other nations shut down. Now we have the Russia situation and the China situation. It's a lot of variables affecting the economy. But as long as employment stays high, we should be able to weather it. If employment starts to drop driving down demand and causing producers to cut back on supply leading to layoffs and lower corporate earnings, then we might see a real recession which would be felt a bit.

I'm watching all this right now play out. It's an unprecedented situation. Never seen it before. Not during the Tech Bubble or 2008 housing crash or the savings and loan crash. Not during 1970s stagflation. This is a very weird economy.

Another factor that seems to have helped us with a soft landing is the high property prices. The increase during COVID has made it so a bunch of people who would have lost their homes in a housing crisis type of crash or been stuck under deferred mortgage payments have been able to sell their houses, pay off the deferred mortgage, and still made a healthy profit to buy a new house often moving to a new cheaper area. I thought the deferred mortgage payments would hurt people more, but the rising home prices saved them. We still might have problems with deferred rents, but that will get sorted out within the next year or two. A lot of landlords may just write it off and move on.

I agree with ASF. I have not seen a recession like the one we're likely heading into. There's a lot of factors, many that we haven't seen before, that's entering into the equation: The labor shortage, the war in Ukraine, the pandemic, the age disparity. The one thing that the stock market doesn't like is uncertainty, and we have plenty of that today.

Right now, I'm worried about inflation. It's a genie that has to be put back in its bottle. There's no way that wage increases can keep up as by the time a worker sees that raise, higher prices have already eaten it up. Wages rose over 5% from this period last year, which is a lot, more than we've seen since the early 80's, but inflation was over 8% last month. That's why I was against all but the first economic stimulus payments in 2020. We didn't need that money as nearly everyone was either back to work or enjoying liberal unemployment benefits. All it did was keep demand high when supply was being contracted due to the pandemic. Now, the chickens have come home to roost and the Fed is having to fight inflation by raising interest rates. That's one reason why I'll never be a reliable Dem voter, because Dems/libs can't seem to figure out that simple equation, ie low supply + high demand = higher prices.

I read the other day that SS recipients could get as much as a 10.5% benefit increase in 2023. The raise is fixed by law and based on a combination of various indexes. That sounds great to those receiving benefits, but it, too, will get eaten up by an increase in Medicare premiums, which are deducted straight from monthly SS checks, rising rents and food prices, increases in medical care, all items that are going up higher than the rate of inflation. Plus it's going to put even more stress on a fund that even without this large benefit raise, was projected to run out of money in 10 years. At some point, the chickens will come home to roost and we'll be faced with one of two options: Raising taxes or reducing benefits. The more the politicians kick the can down the road, the bigger that problem will be when it arrives. It's one of those "a stitch in time saves nine" things, as if, for example, they were to cut benefits now, it would mean a smaller cut 8 or 10 years from now when the fund runs out of money.

We'll have to see how it all plays out, but I'm not liking what I'm seeing as I don't think our politicians have the balls to make the tough choices.

[NorthHawk]

The classic description of inflation is an increase in the money supply.
Price inflation which I think is what has been discussed is described as too much money chasing too few goods.

We'll have to see how it all plays out, but I'm not liking what I'm seeing as I don't think our politicians have the balls to make the tough choices.

As the thread has been discussing, we've not been in this situation before, so what tough choices should they make?
If there are too few goods available, then removing tariffs could help, if there is too much money in the system, massive gov't spending might be an answer to soak up the excess capital.
Would cutting all excess spending by Gov't work? Maybe, but how would that deplete the extra money in the system?
How about adding more immigrants to consume more and produce more?

So any politician is in a big bind at this point and nobody really knows how to best tackle the situation. This past month over 500,000 jobs were created. What does that mean within the
current economic scenario? We really won't know what the best course of action is until after it's over.

One of my Econ Profs in the '70s concluded the year with the comment (paraphrasing) 'This is all BS. If we really knew what is going on and how each factor will affect the economics, we
wouldn't be in this mess.'
We all laughed at the time, but that comment is proving true more often than not.

[RiverDog]

The classic description of inflation is an increase in the money supply.
Price inflation which I think is what has been discussed is described as too much money chasing too few goods.

That's exactly right! And the only realistic way to control the supply of money in a free market is to raise interest rates, forcing the consumer to conserve and/or cut government spending.

We'll have to see how it all plays out, but I'm not liking what I'm seeing as I don't think our politicians have the balls to make the tough choices.

As the thread has been discussing, we've not been in this situation before, so what tough choices should they make?

The subject I was referring to was Social Security, and there's just two choices: Cut benefits or increase taxes, both that would be extremely unpopular. That's why they've been kicking the can down the road instead of addressing it early before it becomes an even larger problem.

IMO they should have cut the pre-65, now graduated to pre-67, early SS withdrawal long ago. Had they done so 20-25 years ago, it's unlikely that we'd have been in the situation we find ourselves today.

If there are too few goods available, then removing tariffs could help, if there is too much money in the system, massive gov't spending might be an answer to soak up the excess capital. Would cutting all excess spending by Gov't work? Maybe, but how would that deplete the extra money in the system?

How about adding more immigrants to consume more and produce more?

So any politician is in a big bind at this point and nobody really knows how to best tackle the situation. This past month over 500,000 jobs were created. What does that mean within the current economic scenario? We really won't know what the best course of action is until after it's over.

One of my Econ Profs in the '70s concluded the year with the comment (paraphrasing) 'This is all BS. If we really knew what is going on and how each factor will affect the economics, we wouldn't be in this mess.' We all laughed at the time, but that comment is proving true more often than not.

You're exactly right. Price is a function of supply (goods) and demand (too few). But you don't want to infuse the economy with more government spending as that would just fuel demand without addressing supply. In fact, you have to do the exact opposite, cut government spending and take money out of the system. That's one of the things that Reagan did back in 1981 that brought inflation under control.

I've always been a strong advocate of free trade. It increases competition here at home and forces companies to be efficient. I'm a product of the 70's, and can remember when the Big 3 auto makers turned out pure garbage for cars, gas hogging monsters. Fords and Chevys were far inferior to Hondas and Toyotas. It was international competition, mostly from the Japanese, that helped bring Detroit in line and forced them to build a better product. Plus, it has the added benefit of creating good will and make war less likely.

Allowing more immigration to occur would address the labor shortage somewhat and help employers hold the line against wage increases especially in areas where we need it most, like truck drivers, electricians, construction workers, and other blue-collar jobs that native-born stuck-up Americans won't do. But as we all know, it's politically unpopular.

[NorthHawk]

Free trade can work well with countries of similar nature. Meaning similar laws, regulations, economic structures like social programs, etc. But it doesn't work as well with countries that are different in those respects.
I think that's why we have such a problem with China. They have a vastly different agenda and their laws are determined by the current or long term goals of the gov't. As well they have rules that in cases of technologies
that they target, companies that want to sell into their market have to start a business there and produce some of their product in China. Of course it's then sold back to us at a cheaper price but we lose our business to
them and they then steal the technology. They know full well western companies will sell their soul for a few extra sheckles.

[Aseahawkfan]

Free trade can work well with countries of similar nature. Meaning similar laws, regulations, economic structures like social programs, etc. But it doesn't work as well with countries that are different in those respects.
I think that's why we have such a problem with China. They have a vastly different agenda and their laws are determined by the current or long term goals of the gov't. As well they have rules that in cases of technologies
that they target, companies that want to sell into their market have to start a business there and produce some of their product in China. Of course it's then sold back to us at a cheaper price but we lose our business to
them and they then steal the technology. They know full well western companies will sell their soul for a few extra sheckles.

They won't sell their souls, but they are definitely globalists who view morality as a matter of culture and location. To them running a multinational corporation is just a matter of adapting the business to local laws and culture regardless of how the people are treated with rare exception.

Elon Musk is a prime example of this hypocrisy. In America he's a free speech absolutist. In China he's quiet as a church mouse as to how they manage free speech and their people.

Richard Nixon opened the door to China and everyone else Republican and Democrat hopped on after he did so building China into the economic monster they are while never bothering to ask, "Is this a good idea? To let a Communist nation who maintains extreme control over their people and business to be funded by American money until they are a competitor in the global power game?" Same as Europe's need for oil and natural gas funded the very war so many are now against with Russia versus Ukraine. To a globalist, it's all just business and complying with local laws and customs. Unfortunately, the socialists were even worse because they were complicit in supporting terrible regimes that also claimed socialism or communism, but were nothing but dictatorships.

The main advantage of capitalism is you can cut them off without a war and force them to make a choice: adapt to the modern day or your economy will die. That is the pressure more and more on China. I think if we are patient, each successive generation will want that Communist control less and less as they are tasting the advantages of capitalism and I doubt they ever go back to the old way. So hopefully long-term it will have turn out to be a good decision.

[RiverDog]

They won't sell their souls, but they are definitely globalists who view morality as a matter of culture and location. To them running a multinational corporation is just a matter of adapting the business to local laws and culture regardless of how the people are treated with rare exception.

Elon Musk is a prime example of this hypocrisy. In America he's a free speech absolutist. In China he's quiet as a church mouse as to how they manage free speech and their people.

Richard Nixon opened the door to China and everyone else Republican and Democrat hopped on after he did so building China into the economic monster they are while never bothering to ask, "Is this a good idea? To let a Communist nation who maintains extreme control over their people and business to be funded by American money until they are a competitor in the global power game?" Same as Europe's need for oil and natural gas funded the very war so many are now against with Russia versus Ukraine. To a globalist, it's all just business and complying with local laws and customs. Unfortunately, the socialists were even worse because they were complicit in supporting terrible regimes that also claimed socialism or communism, but were nothing but dictatorships.

The main advantage of capitalism is you can cut them off without a war and force them to make a choice: adapt to the modern day or your economy will die. That is the pressure more and more on China. I think if we are patient, each successive generation will want that Communist control less and less as they are tasting the advantages of capitalism and I doubt they ever go back to the old way. So hopefully long-term it will have turn out to be a good decision.

This I agree with, especially the last paragraph. That's what I was referring to as a side benefit of trade, that it develops relationships and creates a dependency that makes war less likely. It also has the effect of putting us all in the same boat, opening more doors to a solution.

[Aseahawkfan]

This I agree with, especially the last paragraph. That's what I was referring to as a side benefit of trade, that it develops relationships and creates a dependency that makes war less likely. It also has the effect of putting us all in the same boat, opening more doors to a solution.

Anti-capitalists would never admit this advantage of capitalism. They believe in some kumbaya world where we all just help each other out of the goodness of our heart. So against human nature that I don't know how any one buys into socialism or communism.

Regulated capitalism is the best means of creating co-dependent relationships that force consumers and producers to rely on each other. The producer can't make money without a large group of well-funded consumers. Whereas we've seen in socialism and communism the government can get by just fine by forcing everyone to live in small, state-owned apartments with no chance of advancement that everyone is supposed to love living in because now we're all equally poor and equally deprived, so we don't have anyone trying to compete against each other. Too bad humans don't like that state of existence and never will. That's why anti-capitalists just amaze me. I'm not by any means a fan of unregulated capitalism, but at the same time I understand why it's the best economic system ever made that takes the negative traits of humanity like greed and turns it into a co-dependent relationship that creates value for the consumer and producer. That's one of its strongest traits and it works across the entire world.

[RiverDog]

It's looking more and more like we're heading for a recession.

Wall Street crashed yesterday, the biggest single day drop in over two years, due to a worse than expected report on inflation, still over 8%. Gas prices have steadily come down over the past 12 weeks, so the hope was that we'd get some relief from price increases, but it didn't happen. Electricity and food both posted double digit percentage increases. The Fed is certain to raise interest rates by another 3/4 of a point in the coming days in an attempt to reduce demand. Plus there is a pending railroad strike that could create more bottlenecks in the supply chain and put even more pressure on prices.

This is bad news for the Dems, who have been hoping to capitalize on SCOTUS's abortion decision in the upcoming midterms less than 2 months away. People have the tendency to vote their pocketbooks.