Comment by FollowingTheDao
4 days ago
Is anyone here wondering like me why we did not have a recession in 2021?
Was it the COVID checks they sent out? Might be a good thing to do in the next recession...
But this current state of margin debt, I do not like at all. That with the reduction of new home construction.
> Might be a good thing to do in the next recession...
The magic money we sent out is the cause of a lot of the problem we're facing now though, it's not like you can print magic money every 5-10 years to extinguish systemic problems
> The magic money we sent out is the cause of a lot of the problem we're facing now though
So, inflation.
The banks and corporations have been getting the "magic money" since 1971. The moment we give it directly to the people evryone is concerned about inflation. This mindset is sad.
Do you know that banks in the last 15 years have been getting free money and then lending to people at rates from 5 to 29%? Does that not make you mad?
We're talking about the same magic money... people got almost non of it even during covid, it mostly went to companies
The first thing to understand is that middle-lower and lower class people don't matter much to the economy, but they make up a large contingent of the population, so they matter a lot to media orgs. They love news stories about their struggle and the media is happy to oblige them with ad-ridden news stories. Hence the endless pandemic economic doomerism and "I lost my cashier job" stories.
Who does matter are the white collar upper-middle, upper class people. They generate the most value and spend the most money. These advanced sectors are the american economy. And what happened to them during the pandemic? They just stayed home and kept working, thanks modern tech.
However the government responded like it was still 2005, where there was no tech to keep things moving, and created an incredibly stimulative environment for an economy that was largely still doing fine. By the end of 2020 GDP had recovered.
Despite this we still got:
- 0% interest rates, this is the crack-cocaine of the upper class, especially when the actual economy was doing fine.
- Pause on student loan payments, this was massive, most of these people were employed making more money than ever
- Pause on rent, another massive boon, again people who didn't lose their job now are not paying loans or rent
- PPP loans, pretty much a straight handout to business owners, who again, were still in business anyway.
- Child tax credit, the child tax credit was almost doubled for anyone who had a kid(s).
- Unemployment benefits, this is getting away from upper class territory, but lots of lower class workers were getting 2x pay while not paying rent or working, which they took right to spending.
- Stimulus checks, the most visible but least impactful, everyone got a few thousand dollars.
You are completely incorrect. Middle and lower (economic) class people very much matter to the economy.
I don't know how to explain something that is plainly true but plainly insensitive.
The guys who clean the stadium and sweep the court are needed for the games to happen. They are called the backbone of the stadium because they provide support. But the economic backbone of the stadium, the ones making the whole thing worthwhile, are the players, and unsurprisingly they are paid the most. It's not nice to say that, but I doubt you ever paid $80 to buy overpriced beer and snacks to sit in a seat to watch someone mop a basketball court.
The bedrock of the US economy are high skilled high compensated workers. The US is an advanced economy. Hits to it's cashier, shelf stocker, screw turner, or retail worker are not really meaningful hits. If they were, the economy would have collapsed in 2020. Instead it became clear that the "players" weren't taking a hit, they were just working at home, and the economy ripped as uneeded stimulus for them poured in.
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For some people the pandemic was very traumatic and resulted in a severe loss of income (eg. worst case scenario, a theatrical performer) but for other people, (eg. tech workers) they experienced the opposite, an increased demand for their services alongside a reduction in their costs (nil commute). The latter was the greater amount of people and so you had a lot of people with increased disposable income, alongside ultra low interest rates, and that caused the economy to surge as people spent money, took on debt and acquired assets.
Covid cheques which in some countries only went to persons in the former niche category I think had less remarkable impact than the broader factors.
We have been kicking the can down the road since 2008, and made it worse with all those covid checks.
The irrational/solvent saying has never been more true, and it has been irrational for almost 20 years because we never paid the piper.
>Is anyone here wondering like me why we did not have a recession in 2021?
We didn't? '21-'23 was a bloodbath on the market. How that was spun as not being a recession is mind boggling to me.
There is a pretty concrete recession definition (two consecutive quarters of GDP contraction). Maybe we did?
https://www.dallasfed.org/research/economics/2022/0802
If we did, it was seemingly mild in hindsight.
>If we did, it was seemingly mild in hindsight.
That's pretty much the consensus.
Also, remember that markets are most responsive to rates of change, which is an important angle to consider beyond the hard recession definition. It may have technically been a mild recession, but the rates of change in many areas were extreme and had some fairly catastrophic consequences (for example, fixed income/rate volatility getting so high that systemic risk skyrocketed and Fed intervention was required).
'22-'23 was a return to the norm from the overheating economy of the pandemic years.