
With unprecedented force and speed, a global recession is likely taking hold - pseudolus
https://www.washingtonpost.com/business/2020/03/14/recession-economy-coronavirus-jobs/
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_bxg1
It's important to keep in mind that the current state of things is temporary.
When the virus blows over, there will be a significant rebound. This situation
is V-shaped, it's just unclear how high the right side of the V will be. And
in the meantime businesses will have to weather a period of hardship, and some
of them will fail to.

But there is nothing fundamentally _wrong_ in the long run. The analogy to a
hurricane seemed correct. 2008 was the total collapse of an enormous financial
house of cards. Things _broke_ that could not be repaired. The things that are
broken at this moment, on the other hand, will repair themselves. They'll just
really hurt in the meantime.

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tcbawo
This would be true now, but over several weeks and months serious damage will
be done (layoffs, bankruptcies, regulatory disruption) that will result in a
permanent reduction in economic activity. The economy will repair itself, but
the longer it takes, the less likely we will get a V-shaped recovery and the
more likely it will take us much longer to get back to where we were.

~~~
md_
Yeah. By this rationale, any recession or depression is V-shaped. Which is
true (or has been so far), but it doesn't help those who suffer from it.

I'm also struck by the analogy to the Smoot-Hawley act and the theory that the
breakdown in international trade contributed to the Great Depression. We don't
yet see restrictions on cargo trade, but:

1\. We could. 2\. There seems to be some imperfect analogy to the effect of
remote work (in the case of knowledge workers) and paused work (in the case of
retailers and the like).

The degree to which a number of developed economies have come to a practical
stop in recent days is shocking. Will we recover, like, eventually? Sure,
quite likely. Will there be lasting effects for the economy? Definitely.

(I am, however, heartened by one other analogy to the Great Depression--
perhaps, as in that case, an economic decline now will serve to reduce
skyrocketing inequality, though it's hard to see that as a sufficient silver
lining.)

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ilstormcloud
When US injects 1.5T into the markets, it seems a lot like the US
theoretically can absorb 1.5T of goods and services from the rest of the world
with money that didn't exist the day before. It seems absurd if true. Can
anyone with knowledge on the matter clarify?

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ianai
Money only has meaning during exchange. If it’s sitting in someone’s coffers
and not being traded for goods or services then it is essentially removed from
the market. By dropping 1.5T into the market the fed hoped the financial
system would increase circulation enough to stimulate transactions. They seem
to think that if you’re hoarding X dollars then an additional Y dollars will
be less valuable to you to hoard and more likely to be traded for goods and
services. Except they gave it to the wrong people. It appears that instead
companies bought back stock or otherwise didn’t stimulate trade. People who
have little money to hoard are more likely to spend an additional dollar of
income than people already able to hoard money.

Edit-there are about 128 million households in the US. That 1.5 T would be
about 11,718$ per household if given straight to them.

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SamReidHughes
That money wasn’t given, it is lent overnight. What is a US household going to
do with a collateral-backed $11718 loan made today that they have to repay
tomorrow morning?

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ianai
Continue on with the full details of the loans please.

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Armisael16
What precisely are you looking for? They’re overnight duration and nearly
riskless: they’re repo-market loans collateralized with treasuries, so even if
the bank just runs away with the money the fed still has made a profit.

~~~
mox1
It's a overnight loan, backed by US Treasuries of some type (ie Bond's
guaranteed by US Government). Bank gives Bond, Fed gives $$, swap back a few
hours later.

The closest analogy would be a homeowner offering their house as collateral
for a ~12 hour loan....

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fragmede
Payday loans are another analogy, with some added price gouging on top because
f*ck the poor.

Here's my previous pay check (s), so the payday loan place knows how much
money I make; here's some sort of proof that I haven't been fired yet, so they
believe that my next pay check is coming within a few hours/days; and heres's
some legal-equivalent of the title to my car, for them to repo in case I'm not
able to pay back the loan.

A 12-hour loan of $12k might seem ridiculous but an entire industry has been
built on top of $300 loans for 72-hours, at great profit (until regulations
came in to cap the profit).

~~~
ianai
They’re not really apples for apples comparisons as people don’t have the same
abilities to make money in 12 hours that businesses do. Overnight loans serve
a purpose to businesses that people or households don’t have a direct analog
to use. I’d recon it’s more useful to offer a household or person a 1-3 month
loan or credit line to help cover any lost wages due to sickness or fallout
from the covid response.

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m0llusk
Paywall prevents me from reading the article, but from what the title implies
I'd like to posit that there is precedent for the scale of this shift.

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johnmarcus
Bummed I didn't see this so obviously before my 401k lost 25% :(

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ornornor
Are you retiring tomorrow? If not, it doesn't really matter does it.

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johnmarcus
Some people are. And I will one day, so not sure why you think it doesn't
matter. Will it return? Sure. But that still leaves 1-2 years with no growth.

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toomuchtodo
Your portfolio should already be no more than 60% equities if you’re near
retirement.

If you’re not ready to retire, you have much time for the value of your
portfolio to recover and continue to grow.

“Time in the market” is the primary consideration, but also proper
diversification (less growth, but also less risk) as you get closer to
retirement.

