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Recession predictions

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Comments

  • Registered Users Posts: 8,239 ✭✭✭Pussyhands


    It's a pretty common talking point now on news. Sky News were asking the question earlier. Could be self fulfilling anyways but a lot of indicators are pointing to a contraction.



  • Registered Users, Registered Users 2 Posts: 1,379 ✭✭✭SortingYouOut


    This prediction thread is fairly lively now that a recession seems inevitable. I'm a child of the 2008 crash that seen deflation and my parents left with little money to take advantage of that, like many. What implications will an inflationary recession have? I've a bit of cash there and not a notion what to do with it but hate the thought of it losing value. Will it ever come down or do we just adjust and my devalued cash remains as such?

    Beverly Hills, California



  • Registered Users Posts: 8,239 ✭✭✭Pussyhands


    🚨🚨🚨🚨🚨🚨🚨

    Over 10% of Paypals Irish workforce are being cut!




  • Posts: 0 [Deleted User]


    Not to discount it as a recession indicator, but I've been wondering what PayPal's future is in the face of services like Revolut or Google Pay. Even in the best of times I think their days are numbered.



  • Registered Users Posts: 4,994 ✭✭✭c.p.w.g.w


    The biggest concern I would have...our current economic system and the drive to safe the environment don't fit together...

    Looking at shopping centre the country over, 50% clothes, 1 big super market, a few coffee shops and smoothie places, a "health"store, 1 or 2 jewelry stores and a pennies...

    Genuinely believe the majority of the cloths are poor quality and the ones that are good quality are "too expensive"... jewelry weather expensive or costume seems to go in phases and waves, like my wife has 11 Alex & Ani but I haven't seen her wear any in nearly 3 years, unlike her Dr Martens which she wears whenever she's able to...

    My BIL is the same, he has shoes made in sweet shops in Asia that his paid over €500 for, but sure after 1 year they are starting to fall apart...I have a leather pair of shoes/booth(€100) that I have over 8 years and typically wear on a Saturday & Sunday every week still good as new, got the sole replaced last year for €30, good quality and great value in fairness

    The whole fashion industry and marketing of that industry is detrimental to the environment as there is a significant level of transport and waste...

    But the economy needs these things to generate jobs and tax/rents/rates...

    If governments want to reduce carbon and pollution, they need to have a proper look at the current model, also the amount of tat in places like Tiger-Tiger, Deals and Lidl, stuff that is literally just rubbish or a novelty...

    Pennies pays well, but most other retail jobs pay very poorly with conditions varying for horrific to good...many people in their mid 20's have had their eyes opened during Covid, and we see Hospitality struggling for staff, I wonder how long before retail starts to suffer...and I hear many people saying, sure they will work if they need the the money...

    Well with house prices climbing, I personally know of 3 people who have stopped saving for a mortgage and decided to go on a few holidays and remain living at home, can see this becoming the norm in many parts of the country...

    When the recession hits, the recovery could be very very slow, maybe we need industry to build things that actually last and offer after purchase care, unlike the current model of build it cheap, sell it high and know that it'll last 2-3 years and then there back for the newer model(Apple)



  • Registered Users Posts: 1,768 ✭✭✭mumo3


    @c.p.w.g.w "Well with house prices climbing, I personally know of 3 people who have stopped saving for a mortgage and decided to go on a few holidays and remain living at home, can see this becoming the norm in many parts of the country"

    My friend just recently did the same thing, has been saving and living like a miser for a couple of years, but this year just gave up and bought herself a fabulous new 4wd, she felt there was no sign of house prices dropping and she is hoping to be a cash buyer!!



  • Registered Users Posts: 8,239 ✭✭✭Pussyhands


    I've been thinking of doing so in the last few years but prices are way above what I'm willing to pay for them. Whether I'll be in a position to capitalise on a potential downturn, I'm not sure. I may well have spent my cash pile before then on something else I want to purchase.

    I've seen many one off houses in the countryside be left up for weeks now because material prices are so high.

    Go over to the property forum here and you'll see many say "ah price doesn't matter if you plan to live in it forever". You'd think people would be the same with material prices then....but that's not the case. Demand is going to fall for sure.



  • Registered Users Posts: 1,768 ✭✭✭mumo3


    My friend is the same, she doesn't even mind moving into a fixer upper and doing it up bit by bit around herself, but even those prices are going sky high.... she's just hoping the arse falls out of the house prices.



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  • Registered Users Posts: 8,239 ✭✭✭Pussyhands




  • Posts: 0 [Deleted User]




  • Registered Users, Registered Users 2 Posts: 7,113 ✭✭✭timmyntc


    beware of the institutionals

    rate rises will lead to some big valuation haircuts



  • Registered Users Posts: 1,768 ✭✭✭mumo3


    I work in the construction supply industry and starting to feel it already, ended up leaving work after lunch everyday this week because its been so quiet. My boss said this is exactly what it was like in 2008, been super busy and then it just stopped. We've had 3 clients tell us they've either directly or heard of a company that's handed back keys to sites.



  • Registered Users Posts: 1,007 ✭✭✭greenfield21


    Are you having supply issues or has demand for goods dropped...

    Everywhere seems busy here in Ireland anyway...



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  • Registered Users Posts: 1,768 ✭✭✭mumo3


    It's a bit of both, the prices we would buy at have more than doubled in some cases, we used to get a small price increase maybe 3 times a year from suppliers, now most of them wont hold a quote for more than 24hrs. On top of that trying to get stock in is a disaster ... it can take up to 12 weeks for some items. Us like most suppliers have locked in long term contracts for companies and can no longer afford to absorb the increases.



  • Registered Users, Registered Users 2 Posts: 4,204 ✭✭✭Roberto_gas


    Its not impossible....know many friends who have saved so much and are not keen on buying house in this mad market...they rather wait for 2-3 years or more and buy in cash when the fairytale is over ! May or may not happen but gives them that flexibility.



  • Registered Users, Registered Users 2 Posts: 3,607 ✭✭✭wassie


    Being reported over the last couple of days that the GDPNow tracker (A 'Nowcasting' economical model produced by the Federal Reserve Bank of Atlanta) is now pointing to an annualised growth rate of 0.9% for the second quarter, down from an estimated 1.3% increase less than a week ago.

    According to their website, GDPNow works as follows:

    "The growth rate of real gross domestic product (GDP) is a key indicator of economic activity, but the official estimate is released with a delay. Our GDPNow forecasting model provides a "nowcast" of the official estimate prior to its release by estimating GDP growth using a methodology similar to the one used by the U.S. Bureau of Economic Analysis."

    "GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model."

    Essentially what this indicator is showing is that the US economy is now on the verge of a recession. Whilst this is no surprise to anyone here, we are now seeing the economic data feeding into these models to back it up.

    Business confidence in the US is dropping and this is translating into a serious drop in business investment. Retail in particular is being hit hard with many of the majors reporting serious over-stocking levels, leading to a cancelling of orders and profit margins taking a dive.

    The interesting point here is that consumer consumption, whilst lowering, still remains strong. But people have effectively stopped buying stuff after covid and are redirecting their spending on recreation like travel and dining. Inflation will also be starting to have an effect.

    Jobs growth is still also still positive.

    Remains to be seen if both these metrics will remain this way for much longer. IMHO, I suspect that when (not if!) they both drop, then the recession in the US will be in full swing.



  • Registered Users, Registered Users 2 Posts: 3,567 ✭✭✭Timing belt


    Let’s not forget it’s REAL GDP so even if the economy made as much as it did a month ago the REAL GDP would drop if inflation increased.

    likewise if inflation falls away the real gdp would rise (assuming the economy still produces the same)



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  • Posts: 0 [Deleted User]


    I recall reading about the Wall Street crash in the 20s, and how retail investors were taking personal loans to buy stock, since the interest rate on the loan was lower than the expected return, but when it turned south it was a major contributor to the depression.

    I can't help but look at the recent increased access to retail investing paired with a bull market for years, and the crypto bubble (both now declining significantly) and with Fed rates so low has the same thing been happening over the last several years, and if so, will increasing Fed rates bring this crumbling down? (Combined with the slump in the markets and high inflation, it will stress the ability of people to pay their debts back, assuming my theory is correct.)

    It's just a hunch. Thought I'd share.



  • Registered Users, Registered Users 2 Posts: 3,567 ✭✭✭Timing belt


    It wasn’t just the leverage that created the crisis it was the belief that stocks could only go in one direction that sucked everyone in along with the most important ingredient ‘greed’

    it could be argued that similar has happened this time around with people not having a clue what they are actually investing in. For example Why would anyone buy a Meme stock just because some guys start a pump and dump scheme on Reddit.



  • Posts: 0 [Deleted User]


    Yeah that's exactly what I mean. Greed and stupidity, along with a bull market, ease of access, cheap credit...

    I have a feeling this is a repeat, but potentially far worse.



  • Posts: 0 [Deleted User]




  • Registered Users Posts: 8,239 ✭✭✭Pussyhands


    Us fed are gonna increase rates higher. I can see it happening with the way inflation is still very high.


    I'm coming nearer to the opinion that a recession is the only way out.

    Wage inflation spiral has started. Seeing unions today saying they're looking for significant pay rises..



  • Registered Users Posts: 8,239 ✭✭✭Pussyhands


    Redfin, US estate agent is laying off 8% of staff. 17% drop in demand in May.




  • Registered Users Posts: 8,239 ✭✭✭Pussyhands




  • Posts: 0 [Deleted User]




  • Registered Users, Registered Users 2 Posts: 3,567 ✭✭✭Timing belt


    Central banks won’t let this risk crystallise and would just open new swap lines to provide liquidity like they did in ‘08



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  • Registered Users, Registered Users 2 Posts: 4,520 ✭✭✭An Ri rua


    Swap lines with who though? The majority of Western central banks are technically insolvent but no one wants to admit it.



  • Posts: 0 [Deleted User]


    Where will this liquidity come from in today's economic conditions? I mean, what capacity do they have for monetary expansion?



  • Registered Users, Registered Users 2 Posts: 29,901 ✭✭✭✭Wanderer78


    this was inevitable, we cannot keep playing this game of using our financial resources to simply (re)inflate the value of pre-existing assets, we re clearly in desperate need of using it in creating new assets, property, infrastructure, health care needs etc etc, if we do, we ll keep ending up back in potentially serious financial sector crisis all the time......

    enough is enough, we re seriously endangering ourselves by maintaining this status quo....

    Ghana's situation also doesnt look good!

    central banks can never truly run out of money, our problem still is with private sector financial institutions, as has always been the case, theres clearly something fundamentally wrong with their operations!



  • Registered Users, Registered Users 2 Posts: 3,567 ✭✭✭Timing belt


    it it would be no different to them than providing liquidity via overnight night repo as they are doing at the moment. It’s that or you end up with a liquidity problem and the markets freeze



  • Posts: 0 [Deleted User]


    Sorry, could you explain how that could be done, covering this amount of exposure without expanding money supply?

    Where does the additional liquidity to cover this come from?



  • Registered Users, Registered Users 2 Posts: 4,520 ✭✭✭An Ri rua


    I didnt say bankrupt though, I said insolvent. And they are as things currently stand.


    Also, worth noting they can run out of credibility when they run out of self-control on creating more money.



  • Registered Users, Registered Users 2 Posts: 3,567 ✭✭✭Timing belt


    it will expand the money supply if used…but it’s for a short period to provide liquidity in times of stress and 9 times out of 10 just having the swap lines in place and not used calms the market.



  • Posts: 0 [Deleted User]


    How is the BIS article I posted related to liquidity if non bank firms can't meet their debt obligations?

    The issue is with provisioning and capital, on the part of banks. And insolvency on the part of the "non bank" entities referred to in the article.

    I don't see how this could be solved by overnight repos in an environment of rising interest rates and high inflation.

    If these OBS debt obligations are due to be rolled over next year then it's a risk to capital, not liquidity.



  • Registered Users, Registered Users 2 Posts: 3,567 ✭✭✭Timing belt


    The risk is that the liquidity is not in the market to settle the fx trades as was the case in march 2020 when central banks had to step in and introduce swap lines to ensure that liquidity existed and to settle…your Bis article even made reference to it!!!



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  • Posts: 0 [Deleted User]


    But there is one critical difference between March 2020 and now, isn't there?

    Inflation is 10%. In fact, the monetary response to the pandemic put us in this position.

    It's nowhere near comparable now.



  • Registered Users, Registered Users 2 Posts: 3,567 ✭✭✭Timing belt


    Central banks will still provide liquidity they’re not going to stand back and let the markets freeze because of a lack of currency in circulation…especially when the shortage of currency is not in the domestic market. It’s not 20/30 year bonds they are buying to inject liquidity it’s currency they are buying via swap lines in the offshore market



  • Posts: 0 [Deleted User]


    The issue isn't a lack of currency. This isn't an issue of liquidity. It companies holding debt obligations that are heading into default as they roll over in 2023. Debt obligations that have apparently being classified as OBS when they are not derivatives but straight lending.

    This is an issue of capital. Not liquidity.

    We're going around in circles here. I'm stopping here.



  • Registered Users, Registered Users 2 Posts: 3,567 ✭✭✭Timing belt


    What part don’t you get the risk highlighted by the bis report is that the fx swap market has grown to such an extent that in the event of a shortage of a currency such as USD the exchange rate would rocket and institutions/banks would be forced to buy at an inflated price to settle the trades on their books which would drive prices higher again. it’s the exact same scenario as the pension funds in the U.K. that had to buy bonds a few months back but instead of a shortage of bonds their would be a shortage of a currency such as USD in the offshore market. The bis report is very clear on this…



  • Registered Users, Registered Users 2 Posts: 3,567 ✭✭✭Timing belt


    There is a reason that the BIS report is titled fx settlement risk. You should read it and understand what your talking about before posting an article about a report that you know nothing about.




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  • Posts: 0 [Deleted User]


    You're not seeing the big picture. Plus, I have access to information that you don't. That isn't public information and I shan't be sharing it.

    Feel free to also get angry at that statement. 😂



  • Registered Users, Registered Users 2 Posts: 3,567 ✭✭✭Timing belt


    The fact is you shared an article you clearly didn’t understand and followed up saying it has nothing to do with liquidity. And now all of sudden you’re commenting on non public info…. To be honest you come across as someone that’s getting there info off YouTube and don’t have a clue what you’re talking about because even if you bother to read a small bit of the report you would know it’s a liquidity issue and if it did arise and central banks didn’t intervene only then would be an issue with capital.



  • Registered Users, Registered Users 2 Posts: 29,901 ✭✭✭✭Wanderer78


    i think theyve already lost that, we have to accept the reality, central banks actually dont have as much abilities and control as they think they do, we have to accept realities such as, central banks dont have full control of critical economic elements such as inflation, and that inflation can be caused from a multitude of reasons, from excess credit created by the global financial system, and our current primary causes, i.e. significant global supply chain disruptions and global energy markets, central banks have little or no control over these causations....

    we also have accept, another major failing from central banks has been their qe programs, it was well known before their implementation that this would more than likely only inflate the value of asset markets, which would only truly benefit certain sections of society, i.e. asset owners, when this became apparent, they continued, this has now failed, yielding a more significant problem, post 08, i.e. over valued, and over inflated asset markets. this all now has the potential to deflate very quickly, potentially bringing us back to a 08 type situation again, or worse.... it hasnt worked!



  • Posts: 0 [Deleted User]



    Yeah some people think that the ECB has magical powers that can solve any problem. The reality is the control that CBs have is situational. It really depends on the CBs remit and current economic conditions.

    That last sentence is completely absent in some people's critical thinking.



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