How long will the recession last? Watch

Drogue
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#21
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#21
(Original post by CityMonkey)
Cicero's words seem more relevant now than ever....
Very apt quote. Though I think in the modern age budgets should be balanced over the long term. Extra spending in recession and surpluses in boom-times are sensible, it's just the latter never happens with politicians being driven by short-term public whim.
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President_Ben
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#22
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#22
(Original post by Drogue)
Firstly, could we quit it with the personal comments. There's no need to tell people to grow up or presume you know why they make a certain comment. There's generally a reasonable discussion around many things.

Also, I've made rants before about people who come out having a go at people about anonymous rep. Rep is there to say if something seemed like a good post or a silly one. If people think a post is silly, they can neg it. I've no idea where the idea of signing it comes in, I rarely sign my rep either pos or neg. Actually, I've done it a lot more lately, but mainly to give context, generally I prefer it to be anonymous.


True, although speculators have a very similar effect to short-selling: they adjust the price quicker. If we expect commodity prices to rise in the future for real factors, it'll usually rise with those factors. Speculators just buy a lot now, causing the price to rise faster to it's true value. The same way short-selling hastens the fall of a share price and makes it adjust quicker to it's true value - as people holding the shares may well not be bothered to sell them. However, with both cases, overshooting is quite common, especially if things are bought or sold because people think they will go down, not in reaction to changes in real factors. There's no doubt that commodity prices needed to rise - we have increased demand that isn't likely to subside particularly quickly and a much lesser increase in demand. However because everyone expects them to go up, some speculators are buying because they think it will go up, even if it's not warranted.

Hence speculators are part of the problem in some sense, as they can create bubbles in a way people dealing in futures to get a set price wouldn't do. There's no coincidence, in my mind, that the housing boom took off partly because buy-to-let and the idea of houses as investments grew so hugely. There were fundamental reasons for house prices to rise, but as we're seeing now, there were also elements of a bubble. That bubble was partly caused by speculators, just as this one is. However with both, I'd even argue moreso with commodities, the main factors are fundamental.
Housing is different. They actually bought the houses.

<---------------- Futures contracts [ ] housing ---------------->
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President_Ben
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#23
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#23
(Original post by Drogue)
Very apt quote. Though I think in the modern age budgets should be balanced over the long term.
In that case, they should be net spenders and let long term inflation and productivity be their champion.

Extra spending in recession and surpluses in boom-times are sensible, it's just the latter never happens with politicians being driven by short-term public whim.
Legislate for more automatic stabilisers.
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President_Ben
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#24
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#24
(Original post by Crazster)
TBH, this recession (IMO) is looking to be a decade long.
Sold.

I'm 2 quarters at 8.
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President_Ben
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#25
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#25
(Original post by CityMonkey)
Hmm.. the problem as I see it was down to liquidity.
What you've described isn't liquidity.
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Drogue
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#26
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#26
(Original post by President_Ben)
Housing is different. They actually bought the houses.
Doesn't make a difference. If you buy houses speculatively, as investment, or if you buy housing futures, it has the same effect on price, ie. they go up more than if people were just buying in order to use that house. The same with oil, if you buy oil to hold and appreciate in price or if you buy oil future. The only difference is the reduction in current stock from actually buying and holding the product, however that's a relatively small effect.

(Original post by President_Ben)
Legislate for more automatic stabilisers.
Can't see many MPs understanding why they need it, it'd be seen by whoever's in opposition as an affront to the freedom of elected legislators if they were credible enough to mean future governments couldn't just change them. Economists understand the point of tying our own hands to gain credibility and thus be able to reach an outcome that would otherwise be impossible, but the public don't and thus MPs don't win votes for it.

Moreover, there are severe technical issues with how you'd define a boom-time and a slowdown. We know there's a huge slowdown at the moment but inflation's being pushed up and we've yet to enter a recession. Plus we tend to only know what type of phase we're in after it's changed, as what matters is now where we are compared to previous levels, but where we are compared to what's to come. For all we know, we could start spending now to try and soften the slowdown but the future may be much slower still, meaning we're running up debt when we should be saving for the worse to come.

The only way it'll happen in any realistic, sensible way, is if the general public are educated on basic economics.
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Drogue
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#27
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#27
(Original post by President_Ben)
Sold.

I'm 2 quarters at 8.
Defining recession as a period where the 2 previous quarters have all had lower output, or defining recession as just that quarter's output being lower than the previous? If it's the former, I reckon you're about right. If the latter, I think that's a pretty optimistic assessment.
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President_Ben
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#28
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#28
(Original post by Drogue)
Doesn't make a difference. If you buy houses speculatively, as investment, or if you buy housing futures, it has the same effect on price, ie. they go up more than if people were just buying in order to use that house. The same with oil, if you buy oil to hold and appreciate in price or if you buy oil future. The only difference is the reduction in current stock from actually buying and holding the product, however that's a relatively small effect.
Basis is not constant. The difference between the spot and futures prices need not be a particular value. Although there is convergence at the expiry of the future, this is dependent on supply and demand of the spot or in the case of oil, the physical deliverable.

Can't see many MPs understanding why they need it, it'd be seen by whoever's in opposition as an affront to the freedom of elected legislators if they were credible enough to mean future governments couldn't just change them. Economists understand the point of tying our own hands to gain credibility and thus be able to reach an outcome that would otherwise be impossible, but the public don't and thus MPs don't win votes for it.
I'm pretty sure they can understand why they need them. Plenty of backdoors in politics.

Moreover, there are severe technical issues with how you'd define a boom-time and a slowdown. We know there's a huge slowdown at the moment but inflation's being pushed up and we've yet to enter a recession. Plus we tend to only know what type of phase we're in after it's changed, as what matters is now where we are compared to previous levels, but where we are compared to what's to come. For all we know, we could start spending now to try and soften the slowdown but the future may be much slower still, meaning we're running up debt when we should be saving for the worse to come.

The only way it'll happen in any realistic, sensible way, is if the general public are educated on basic economics.
Trend growth, bit of variance as a function of observed productivity. Good enough estimate.
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President_Ben
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#29
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#29
(Original post by Drogue)
Defining recession as a period where the 2 previous quarters have all had lower output, or defining recession as just that quarter's output being lower than the previous? If it's the former, I reckon you're about right. If the latter, I think that's a pretty optimistic assessment.
You did AS level right? A recession has a precise definition. It isn't a slowdown.
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Teenage Pirate
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#30
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#30
(Original post by President_Ben)
You did AS level right? A recession has a precise definition. It isn't a slowdown.
The NBER doesn't use the 2 consecutive quarters definition... it isn't the only one or the most "important" one.
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Drogue
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#31
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#31
(Original post by President_Ben)
Trend growth, bit of variance as a function of observed productivity. Good enough estimate.
Nope, as soon as it's wrong once, it'll be stopped due to public outcry. Also, I'm not sure how you could pass legislation that can't be undone. Even the US constitution can be amended.
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President_Ben
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#32
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#32
(Original post by Drogue)
Nope, as soon as it's wrong once, it'll be stopped due to public outcry. Also, I'm not sure how you could pass legislation that can't be undone. Even the US constitution can be amended.
It'd be a pain to undo.

Quite hard for it to be wrong when it follows a defined rule...
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President_Ben
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#33
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#33
(Original post by Teenage Pirate)
The NBER doesn't use the 2 consecutive quarters definition... it isn't the only one or the most "important" one.
But it is 'the one'.
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Drogue
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#34
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#34
(Original post by President_Ben)
Quite hard for it to be wrong when it follows a defined rule...
No, as you said "it's a good enough estimate". It won't always be right. At times, even though something exhibit's the right trend growth or variance it will actually get worse when we the rule tells us we're in a recession or a slowdown. As such, the rule would increase public spending exactly when we need to cut it to pay for the increase needed when it is at its worse. No rule will be perfect, that was my point. And good enough to be better isn't enough to placate the masses when it's wrong.

No politician will agree to something that is unchangable and not perfect, even if it gets a better long-term result.
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Teenage Pirate
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#35
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#35
(Original post by President_Ben)
But it is 'the one'.
Maybe. It is 'the one' that is taught to most students of economics at the very least.

But when you look back upon previous 'recessions' in the United States, you don't look for all the periods of 2 consecutive quarters of falling GDP; you look at the NBER list. I mean I'm not a student of economic history or anything, but I've seen the NBER referred to quite a lot when it comes recessions.
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President_Ben
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#36
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#36
(Original post by Drogue)
No politician will agree to something that is unchangable and not perfect, even if it gets a better long-term result.
This is plainly, not true... politicians do this all the time.

No policy is perfect. Ever. Changeable or not, this fact isn't.
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Drogue
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#37
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#37
Name a single unchangable policy politicians have agreed to? I agree, no policy is ever perfect, which is why they never agree to policies they cannot later change, if needs be.
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President_Ben
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#38
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#38
(Original post by Drogue)
Name a single unchangable policy politicians have agreed to? I agree, no policy is ever perfect, which is why they never agree to policies they cannot later change, if needs be.
Murder should be punished? Treason too?
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CityMonkey
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#39
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#39
(Original post by President_Ben)
What you've described isn't liquidity.
Cheap money and petrodollars driving liquidity.
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Drogue
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#40
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#40
(Original post by President_Ben)
Murder should be punished? Treason too?
That's something they can change. If a new government gets elected and wants to change the law on murder, they can. Indeed, the law has changed many times. Lately there's been the law about anonymous witnesses and discussions about double jeapody. In the past there's been discussions (and changes) about the use of the death penalty and the use of DNA evidence.

But for any automatic response to be credible, given that at times it will be against the public's whim, giving politicians and incentive to 'cheat' and not run a surplus in boom-times, it has to be unchangable by politicians. That is the bit they won't agree with.

No politician will ever agree to a policy they can never change.
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