The debate "There is nothing Trump or the Federal Reserve can do to prevent the coming recession." was started by
October 24, 2018, 6:18 pm.
31 people are on the agree side of this discussion, while 31 people are on the disagree side.
That might be enough to see the common perception.
There is a tie in this debate, post your arguments, call some reinforcements and break this tie.
Nemiroff posted 2 arguments, lachlan2 posted 2 arguments, TheExistentialist posted 2 arguments to the agreers part.
lachlan2, TheExistentialist, Nemiroff, Aceabdu2 and 27 visitors agree.
Runtz, crispsandchips, sidhant, bae_jil_dong, Emihle, Matt and 25 visitors disagree.
companies dont issue shares based on stock prices. all shares are already issued and issuing more will only dilute and lower their own stake in their own companies, a rare move.
the borrowing power is the only indirect benefit companies get from their stocks as far as I can tell, and even that can be measured in other ways. it's a pretty speculative measure that can tank or skyrocket over night.
if stocks were not the measuring stick, Companies would find other valuations that would be more stable and less likely to be abused which might create a more stable situation for the "wage growths, job creation, unemployment, GDP, revenue for the government, deficits, consumer confidence"
either way, I wonder if this collapse will affect main street, although it is VERY possible corporations and the wealthy will pass the suffering on to main street, while continuing to hoard the subsequent recovery.... which really should lead to a revolt but probably wont.
I think we are being robbed.
stock prices do affect companies and the economy in general indirectly. While the day-to-day of a company isn't affected by the price of their stock, if a stock drops too much the company will stop issuing shares and thus stop raising revenue to expand, pay off debt, etc... additionally falling stock prices are reflected in a company's credit and thus it will be more expensive for them to borrow money.
This in turn leads to companies either slowing down their expansion/hiring rate/wage increases, and can even lead to downsizing in order to finance things like new equipment if money is too expensive to borrow. All of this of course leads to slower wage growths, slower job creation, higher unemployment, lower, GDP, less revenue for the government, higher deficits, lower consumer confidence (thus less purchasing), all of which is a negative feedback loop that ultimately cause recessions and depressions.
That is why stimulus packages work to get us out of recessions. They essentially provide a stream of cheap money in the form of debt rather than capital that corporations can use to innovate, expand, etc...
There is also the matter of banks investing their capital into stocks. Banks can actually loose their customer's money in the stock market and become insolvent. This in turn means that banks won't be able to issue private loans for things like cars, houses, credit cards, etc... causing even less economic activity and another negative feedback loop.
I'm actually curious as to whether this is will be a real recession, or just some stock nonsense. im aware that the technical definition of recession is linked to stocks, but I dont believe stocks are linked to reality.
the only way a company profits from stocks is the initial sale. after that its just people. bouncing money around with minimal effect on the companies. especially considering mainstreet saw minimal gain during the recovery while stocks were booming, they are completely detached and are simply a game for rich people.
While I think that the Trump administration can't really do anything to prevent a recession, it could enact laws/regulations that help insulate vital sectors and certain consumers from it's impact. Recessions and booms are cyclical and will always be part of our economic cycle. Individual administrations have some impact on these cycles, however, for the most part it's their magnitude that can be influenced not the event itself.
As for the question of the next recession and the Dodd-Frank act; it would have insulated tax-payers from having to bail out banks again, as it required them to be more robust in their ability to withstand an economic down-turn. Since we haven't split up these "too big to fail banks" and then gutted the holdings requirements for big banks and the Volcker rule, we're in the same position we were just before the 2007/2008 recession. Banks being over-leveraged and too important to the economy to let fail. By gutting the Dodd-Frank act, the Trump administration essentially guaranteed that the tax payers would have to bail out the banks again in the recession/market crash that is surely to come.
Right and there was also an inflationary boom before every recession that would cause excess income inequality. Recessions are not independent of the fed, every recession comes after an inflationary boom. Furthermore, even if there is income inequality before every crash, correlation is mot enough for proof, theory is also necessary.
In regards to the Dodd-Frank Act, if all other things were equal-we had a ten year inflationary boom with zero interest rates- and Trump was president, but the Act was not repealed how do you think it would prevent the crash?
or it could be the bank regulations that obama put in to prevent another recession that were coincidentally removed a few months ago. couldn't be any other factors...
also the income inequality / boombust is a historic and repeated correlation independent of the fed
Right I think if Trump gets his wish and P
the Fed holds down rates longer it will just inflate a bigver bubble.
Although I would argue that artificial income inequality is a byproduct of the root cause: inflationary bubbles produced by the Fed manipulating interest rates. I think it is a "correlation equals causation" fallacy to allegate that high income inequality causes a recession.
Although it is true that the same cause of bubbles has caused excess income inequality that would not otherwise exist.
they can certainly affect it. slow the decline, minimize the fallout, or make it all worse. but there is no stopping it altogether.
boom bust cycles have been a regular symptom of high income inequality