Global recession coming?

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cassowary
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Joined: Thu Dec 15, 2016 11:30 pm

Re: Global recession coming?

Post by cassowary » Thu Sep 12, 2019 3:46 pm

Sertorio wrote:
Thu Sep 12, 2019 10:46 am
cassowary wrote:
Thu Sep 12, 2019 7:54 am
Sertorio wrote:
Thu Sep 12, 2019 2:43 am

For those who believe Keynes was mostly right, recessions are the result of decreases in aggregate demand - either in cosuming or investing, or both -, and such decreases may be the result of decreases in disposable income or in increases in production costs. As such, you could only prevent recessions if you could avoid any of those things happening. Some you can, others might be difficult to avoid.
Well, I mentioned that demand is one of the factors. But the Fed has the tool to compensate for a fall in total demand by lowering interest rates. This makes it easier to, say buy a car, on hire purchase. Or for businesses to borrow and invest. So this boosts demand.
But lowering interest rates decreases savings, because it becomes less interesting to save... And thus makes investing more difficult... :)
No. It means they stop investing in cash. Instead they invest in the stock market or a new factory.
The Imp :D

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Sertorio
Posts: 2871
Joined: Fri Dec 16, 2016 3:12 am

Re: Global recession coming?

Post by Sertorio » Thu Sep 12, 2019 4:04 pm

cassowary wrote:
Thu Sep 12, 2019 3:46 pm
Sertorio wrote:
Thu Sep 12, 2019 10:46 am
cassowary wrote:
Thu Sep 12, 2019 7:54 am
Sertorio wrote:
Thu Sep 12, 2019 2:43 am

For those who believe Keynes was mostly right, recessions are the result of decreases in aggregate demand - either in cosuming or investing, or both -, and such decreases may be the result of decreases in disposable income or in increases in production costs. As such, you could only prevent recessions if you could avoid any of those things happening. Some you can, others might be difficult to avoid.
Well, I mentioned that demand is one of the factors. But the Fed has the tool to compensate for a fall in total demand by lowering interest rates. This makes it easier to, say buy a car, on hire purchase. Or for businesses to borrow and invest. So this boosts demand.
But lowering interest rates decreases savings, because it becomes less interesting to save... And thus makes investing more difficult... :)
No. It means they stop investing in cash. Instead they invest in the stock market or a new factory.
Most savers do not invest in the stock market or in new factories. If interest rates go down they will spend the money in consumer goods and services.

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cassowary
Posts: 3294
Joined: Thu Dec 15, 2016 11:30 pm

Re: Global recession coming?

Post by cassowary » Thu Sep 12, 2019 5:15 pm

Sertorio wrote:
Thu Sep 12, 2019 4:04 pm
cassowary wrote:
Thu Sep 12, 2019 3:46 pm
Sertorio wrote:
Thu Sep 12, 2019 10:46 am
cassowary wrote:
Thu Sep 12, 2019 7:54 am
Sertorio wrote:
Thu Sep 12, 2019 2:43 am

For those who believe Keynes was mostly right, recessions are the result of decreases in aggregate demand - either in cosuming or investing, or both -, and such decreases may be the result of decreases in disposable income or in increases in production costs. As such, you could only prevent recessions if you could avoid any of those things happening. Some you can, others might be difficult to avoid.
Well, I mentioned that demand is one of the factors. But the Fed has the tool to compensate for a fall in total demand by lowering interest rates. This makes it easier to, say buy a car, on hire purchase. Or for businesses to borrow and invest. So this boosts demand.
But lowering interest rates decreases savings, because it becomes less interesting to save... And thus makes investing more difficult... :)
No. It means they stop investing in cash. Instead they invest in the stock market or a new factory.
Most savers do not invest in the stock market or in new factories. If interest rates go down they will spend the money in consumer goods and services.
Yes. In that case demand for goods and services go up.
The Imp :D

neverfail
Posts: 4104
Joined: Sun Dec 18, 2016 3:47 am
Location: Singapore

Re: Global recession coming?

Post by neverfail » Thu Sep 12, 2019 9:02 pm

cassowary wrote:
Thu Sep 12, 2019 5:15 pm
Sertorio wrote:
Thu Sep 12, 2019 4:04 pm
cassowary wrote:
Thu Sep 12, 2019 3:46 pm
Sertorio wrote:
Thu Sep 12, 2019 10:46 am
cassowary wrote:
Thu Sep 12, 2019 7:54 am
Sertorio wrote:
Thu Sep 12, 2019 2:43 am

For those who believe Keynes was mostly right, recessions are the result of decreases in aggregate demand - either in cosuming or investing, or both -, and such decreases may be the result of decreases in disposable income or in increases in production costs. As such, you could only prevent recessions if you could avoid any of those things happening. Some you can, others might be difficult to avoid.
Well, I mentioned that demand is one of the factors. But the Fed has the tool to compensate for a fall in total demand by lowering interest rates. This makes it easier to, say buy a car, on hire purchase. Or for businesses to borrow and invest. So this boosts demand.
But lowering interest rates decreases savings, because it becomes less interesting to save... And thus makes investing more difficult... :)
No. It means they stop investing in cash. Instead they invest in the stock market or a new factory.
Most savers do not invest in the stock market or in new factories. If interest rates go down they will spend the money in consumer goods and services.
Yes. In that case demand for goods and services go up.
Exactly! Which is how the Labor government headed by Prime Minister Kevin Rudd shored up consumer confidence here in Australia in the aftermath of the GFC in the northern hemisphere back in 2008 - thereby making Australia the only western country to stay out of recession that year.

Instead of frigging about giving tax cuts to the wealthy the Rudd government got straight down to business by focusing our "stimulus package" on this country's "bottom feeders". Our Federal treasury department mailed out cheques to the tune of around AUS $900 to welfare recipients across Australia.

Yes cassowary! This was a rare instance in an Australian government handing out "free stuff' (as you would term it) but who cares? It worked! It stimulated consumer demand to the extent that it kept our retail sector solvent which in turn prompted the retail stores to order replacement supplies - thereby keeping manufacturing, agriculture and other supplier sectors of business solvent in the "flow-on" multiplier effect.

I hope you can see by now that the successful management of a modern consumer society economy has absolutely nothing to do with abiding by a strict, old-fashioned Calvinist code of morality.

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Sertorio
Posts: 2871
Joined: Fri Dec 16, 2016 3:12 am

Re: Global recession coming?

Post by Sertorio » Fri Sep 13, 2019 2:59 am

cassowary wrote:
Thu Sep 12, 2019 5:15 pm
Sertorio wrote:
Thu Sep 12, 2019 4:04 pm
cassowary wrote:
Thu Sep 12, 2019 3:46 pm
Sertorio wrote:
Thu Sep 12, 2019 10:46 am
cassowary wrote:
Thu Sep 12, 2019 7:54 am
Sertorio wrote:
Thu Sep 12, 2019 2:43 am

For those who believe Keynes was mostly right, recessions are the result of decreases in aggregate demand - either in cosuming or investing, or both -, and such decreases may be the result of decreases in disposable income or in increases in production costs. As such, you could only prevent recessions if you could avoid any of those things happening. Some you can, others might be difficult to avoid.
Well, I mentioned that demand is one of the factors. But the Fed has the tool to compensate for a fall in total demand by lowering interest rates. This makes it easier to, say buy a car, on hire purchase. Or for businesses to borrow and invest. So this boosts demand.
But lowering interest rates decreases savings, because it becomes less interesting to save... And thus makes investing more difficult... :)
No. It means they stop investing in cash. Instead they invest in the stock market or a new factory.
Most savers do not invest in the stock market or in new factories. If interest rates go down they will spend the money in consumer goods and services.
Yes. In that case demand for goods and services go up.
But investment goes down by the same amount. In terms of GDP, nothing changes, there is no growth.

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cassowary
Posts: 3294
Joined: Thu Dec 15, 2016 11:30 pm

Re: Global recession coming?

Post by cassowary » Fri Sep 13, 2019 5:20 am

Sertorio wrote:
Fri Sep 13, 2019 2:59 am
cassowary wrote:
Thu Sep 12, 2019 5:15 pm
Sertorio wrote:
Thu Sep 12, 2019 4:04 pm
cassowary wrote:
Thu Sep 12, 2019 3:46 pm
Sertorio wrote:
Thu Sep 12, 2019 10:46 am
cassowary wrote:
Thu Sep 12, 2019 7:54 am


Well, I mentioned that demand is one of the factors. But the Fed has the tool to compensate for a fall in total demand by lowering interest rates. This makes it easier to, say buy a car, on hire purchase. Or for businesses to borrow and invest. So this boosts demand.
But lowering interest rates decreases savings, because it becomes less interesting to save... And thus makes investing more difficult... :)
No. It means they stop investing in cash. Instead they invest in the stock market or a new factory.
Most savers do not invest in the stock market or in new factories. If interest rates go down they will spend the money in consumer goods and services.
Yes. In that case demand for goods and services go up.
But investment goes down by the same amount. In terms of GDP, nothing changes, there is no growth.
Investments will also go up. The cash deposits of the large corporations and the rich will be used to invest in new businesses or expanding old ones. Or they will borrow more because of the low interest rates.

For the man in the street, he will spend more money as you said since his savings give so low interest rates.
The Imp :D

User avatar
Sertorio
Posts: 2871
Joined: Fri Dec 16, 2016 3:12 am

Re: Global recession coming?

Post by Sertorio » Fri Sep 13, 2019 6:47 am

cassowary wrote:
Fri Sep 13, 2019 5:20 am
Sertorio wrote:
Fri Sep 13, 2019 2:59 am
cassowary wrote:
Thu Sep 12, 2019 5:15 pm
Sertorio wrote:
Thu Sep 12, 2019 4:04 pm
cassowary wrote:
Thu Sep 12, 2019 3:46 pm
Sertorio wrote:
Thu Sep 12, 2019 10:46 am


But lowering interest rates decreases savings, because it becomes less interesting to save... And thus makes investing more difficult... :)
No. It means they stop investing in cash. Instead they invest in the stock market or a new factory.
Most savers do not invest in the stock market or in new factories. If interest rates go down they will spend the money in consumer goods and services.
Yes. In that case demand for goods and services go up.
But investment goes down by the same amount. In terms of GDP, nothing changes, there is no growth.
Investments will also go up. The cash deposits of the large corporations and the rich will be used to invest in new businesses or expanding old ones. Or they will borrow more because of the low interest rates.

For the man in the street, he will spend more money as you said since his savings give so low interest rates.
As you very well know,

I=S

No amount of arguments will change that reality... Any attempt at increasing consuming and investment will lead to inflation and higher rates of interest...

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