soviet_dissident
Pigeon
Some arguments for poor economic conditions to come, off the top of my head:
- Tech companies are largely unprofitable and overvalued. Too much venture capital has flowed into these companies seeking high returns in “unicorns”. Even unicorns like Uber don’t make any money and are using more and more VC money to fuel massive expansion. Additionally, a few fat-nosed tech oligarchs getting wealthy does little for Main Street.
- Shale oil producers are hanging on for dear life with OPEC pressure and a supply glut.
- U.S. stocks are generally overvalued.
- The current economic expansion is already one of the longest in history.
- Too many subprime loans have been made in the auto industry. Not enough cars are moving off the lots. Loan terms have been extended to ridiculous levels (e.g., 60 mo+). Sales have been slowing, even with huge incentives. This is a ticking time bomb. (https://www.forbes.com/sites/panosm...oming-collapse-in-us-auto-sales/#3557c2a41660) (https://www.bloomberg.com/news/arti...-morgan-stanley-sees-impending-buyer-s-strike)
- Too many subprime loans ($1.4 trillion) have been made to college students. Another ticking time bomb. Delinquency rates have steadily climbed. Yes, the gov’t (i.e., us) is on the hook for this, but debt overhang (or, worst case scenario, institutional collapse) affects the private sector.
- Home prices have outpaced incomes. Mean prices countrywide have surpassed 2006 levels, though some areas are still depressed.
- Businesses have too much inventory thanks to weak sales figures. Some big-box retail is currently teetering on the edge of solvency.
- Capital expenditures have not been made by companies for long-term productivity growth. Salaries have concomitantly gone nowhere, though corporations and the few at the top have made huge profits. Mohammad El-Erian: "Since the [2008] crisis, the top 1 percent of the nations earners have received 95 percent of the income growth." Arguably, money headed to the rich adversely affects aggregate demand, which in turn affects growth.
- ECB is at the negative bound. The Fed has missed its monetary policy normalization window and additionally has no more tools at its disposal when the next recession comes. Mohammad El-Erian argues that central banks have done God’s work, and that the rest is up to fiscal/regulatory policy. And it doesn’t look like any of the big Western countries are doing anything to get their fiscal house in order. Trump is too busy wasting his time engaging in a pointless media war concerning baseless Russia allegations while Rome burns.
- Small business creation is at at a 40-yr low. (http://money.cnn.com/2016/09/08/news/economy/us-startups-near-40-year-low/index.html). Sorry for the CNN link.
- Debt and unfunded liabilities will eventually crush us. They are likely already having a big effect on the private economy in terms of debt overhang. As an aside, the interesting thing is that we’re probably in a deflationary environment; and that central banks have very little to do with setting interest rates. (https://www.alt-m.org/2016/12/01/fed-holding-interest-rates/). In other words, inflation probably won’t be a big issue in the short-medium term.
- Tech companies are largely unprofitable and overvalued. Too much venture capital has flowed into these companies seeking high returns in “unicorns”. Even unicorns like Uber don’t make any money and are using more and more VC money to fuel massive expansion. Additionally, a few fat-nosed tech oligarchs getting wealthy does little for Main Street.
- Shale oil producers are hanging on for dear life with OPEC pressure and a supply glut.
- U.S. stocks are generally overvalued.
- The current economic expansion is already one of the longest in history.
- Too many subprime loans have been made in the auto industry. Not enough cars are moving off the lots. Loan terms have been extended to ridiculous levels (e.g., 60 mo+). Sales have been slowing, even with huge incentives. This is a ticking time bomb. (https://www.forbes.com/sites/panosm...oming-collapse-in-us-auto-sales/#3557c2a41660) (https://www.bloomberg.com/news/arti...-morgan-stanley-sees-impending-buyer-s-strike)
- Too many subprime loans ($1.4 trillion) have been made to college students. Another ticking time bomb. Delinquency rates have steadily climbed. Yes, the gov’t (i.e., us) is on the hook for this, but debt overhang (or, worst case scenario, institutional collapse) affects the private sector.
- Home prices have outpaced incomes. Mean prices countrywide have surpassed 2006 levels, though some areas are still depressed.
- Businesses have too much inventory thanks to weak sales figures. Some big-box retail is currently teetering on the edge of solvency.
- Capital expenditures have not been made by companies for long-term productivity growth. Salaries have concomitantly gone nowhere, though corporations and the few at the top have made huge profits. Mohammad El-Erian: "Since the [2008] crisis, the top 1 percent of the nations earners have received 95 percent of the income growth." Arguably, money headed to the rich adversely affects aggregate demand, which in turn affects growth.
- ECB is at the negative bound. The Fed has missed its monetary policy normalization window and additionally has no more tools at its disposal when the next recession comes. Mohammad El-Erian argues that central banks have done God’s work, and that the rest is up to fiscal/regulatory policy. And it doesn’t look like any of the big Western countries are doing anything to get their fiscal house in order. Trump is too busy wasting his time engaging in a pointless media war concerning baseless Russia allegations while Rome burns.
- Small business creation is at at a 40-yr low. (http://money.cnn.com/2016/09/08/news/economy/us-startups-near-40-year-low/index.html). Sorry for the CNN link.
- Debt and unfunded liabilities will eventually crush us. They are likely already having a big effect on the private economy in terms of debt overhang. As an aside, the interesting thing is that we’re probably in a deflationary environment; and that central banks have very little to do with setting interest rates. (https://www.alt-m.org/2016/12/01/fed-holding-interest-rates/). In other words, inflation probably won’t be a big issue in the short-medium term.
