The crash of 2016?

https://www.washingtonpost.com/opinions/the-crash-of-2016/2016/02/10/91870716-d012-11e5-b2bc-988409ee911b_story.html

by molecule • 10 years ago

81 96 10 years ago

frign3• 10 years ago

I'm preparing for a crash in 2016. Unlike back in 2008, when the FED was able to "balance" it out by dropping the interest rate to almost 0%, we now won't have an airbag to save us.

The crash will come, sooner or later, and compared to that, 2008 was only a road bump, with all of us sitting in a big oil truck heading at a steel wall of a nuclear plant.

simonebrunozzi• 10 years ago

Stop with this apocalyptic stance. The only effect you will have is to freak out some people.

Either provide data, or avoid pretending you know what the future will be.

frign3• 10 years ago

The broad scope of this topic won't be justified in a short comment like this, but it's general knowledge that the economy goes in cycles.

My special area are rare earth metal bonds and EU government bonds. The derivative markets are not a good direct indicator for stability (because they are unstable), but they set the bar for what one can expect. If you look at the M1-data by the FED [0] (M3 is _censored_), you'll see how large the bubble really has become. And this is consistent across all global markets.

Call me an apocalyst, I don't even care. Invest, crash and burn, have fun!

[0] https://research.stlouisfed.org/fred2/series/M1

jqm• 10 years ago

Ya, well, we're all gonna die one day too. (Maybe). I can't prove it though and I'm unsure of when. But please indulge my worrying about it's immanence. I am a glass half empty kind of guy.....

As for the apocalypse, I've been waiting since 1980. And its coming to the point I've about given up. I'm still eating long term dried food rations packed in 2006 and they don't taste very good. I'm kind of starting to suspect that things change but somehow life keeps right on going.

Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present.

-Marcus Aurelius

merb• 10 years ago

Why it will crash is because there are certain startups valued at too high value for producing exactly nothing.

It won't be to apocalyptic, but it will hopefully bring the gold rush in the internet erä down. I'm not sure if it will be in 2016, however I'm really sure that once in a while the markets (not just the us) needs to cleanup from everything overvalued. Also even when that happens, it will happen again, once in a while it must happen cause we (the humans) are just too dumb to learn from our mistakes.

the bad part of this, is actually that mostly renewable energy will also suffer from big market drops since investores will be scared a bit from 'new' technologies after a bigger hit into the market.

However what I'm telling is nothing special, it happens as there a people who handle everything based on their greed.

denim_chicken• 10 years ago

There is loads of data that suggests an economic collapse around the corner. Right now there are so many indicators of economic health that are reporting poor results, that it's worth taking seriously the prospect of a looming economic collapse.

eru2• 10 years ago

Or at least put your money where your mouth is, and sell shorts.

n0mad01• 10 years ago

problem is that when enough people think like him the prophecy fulfills itself.

theres a lot of that sentiment around since '08.

sliverstorm• 10 years ago

The only effect you will have is to freak out some people.

... which might be his goal. Short the market, and spread FUD.

WalterBright2• 10 years ago

sooner or later,

It's a meaningless prediction, as it is non-falsifiable. and non-actionable.

peteretep2• 10 years ago

    > The crash will come sooner or later

I wonder if there's ever been a point in human history where that wasn't true?

mark_l_watson• 10 years ago

I don't know why you were down voted. I gave you a +1 to balance things out.

I also am preparing for a continuing slow burn (i.e., slow and steady downward trajectory in our economy and the world's economy). I would bet that there is less than a 10% chance the there will be a huge crash this particular year.

The thing is, and the reason I basically agree with you, is that preparing for a long slow downward economic trajectory is the same as preparing for a possible crash: maintain your health (physical, mental, spiritual); without going crazy, try to reduce your debt as much as is possible while still caring for our families; when possible spend some non-working time on education to learn new skills.

I think it is important to keep a cool head though - I believe that your last sentence was an overstatement.

gozur884• 10 years ago

I'm preparing for a crash in 2016. Unlike back in 2008, when the FED was able to "balance" it out by dropping the interest rate to almost 0%, we now won't have an airbag to save us.

They may not be able to drop interest rates (much), but they can always print up money and use it to buy things as a way to inject cash into the economy. That's what QE was, after all.

You may be right about The Crash, and if your only time frame is "sooner or later", you are certainly correct. We will eventually have some sort of large economic downturn. But that's like predicting rain will fall, eventually. It may not happen until everyone reading this is long gone.

DrScump• 10 years ago

As prescient as this was, perhaps.

https://www.goodreads.com/book/show/2857587-how-to-prosper-d...

The author certainly prospered; it was on the bestseller lists for months.

carc• 10 years ago

I find all the economic prodigies here entertaining. People who's day job is to predict this stuff can't even make good predictions. I guess I never knew that techies were better economists than the economists

adventured• 10 years ago

When the dollar soared, a crash in emerging markets was extremely obvious. It has happened several times before under similar circumstances. It doesn't take a prodigy to understand how it works, it requires not putting your head into the sand and pretending fake good times (paid for via massive piles of debt and endless rounds of currency debasement) last forever.

Who's to say most economists are any good at their jobs? Did you see what many of them were saying during the obnoxiously obvious real-estate bubble of 2004-2007? The dotcom bubble? And so on.

dpc59• 10 years ago

The thing is that a lot of economists have a vested interest in markets going up and bubbles inflating, because their jobs at financial institutions depend on that, so when things start going bad they just block their ears, pretend everything is alright and hope that the markets don't suffer from too much panic.

etherael4• 10 years ago

Plenty of people were better alchemists than alchemists back in the day, too.

clock_tower• 10 years ago

And plenty of people were better doctors than doctors were.

Theodore Dalrymple had a column proving that Shakespeare did _not_ have a formal medical education, because he described symptoms correctly. (He contrasted this with a book by a practicing doctor from the time, who described patients purely in terms of the four humors -- creating fanciful descriptions unrecognizable to a modern practitioner.)

Come to think of it, there was also a book published a few years ago about US president James Garfield's death in the late 19th century. He didn't die of being shot in the back; he died of receiving the best medical care in the world.

crdoconnor• 10 years ago

People who's day job is to predict this stuff can't even make good predictions.

When you get paid for lending academic legitimacy to politically 'useful' recommendations, accuracy isn't necessarily priority #1.

spangry7• 10 years ago

Do you have anything to back that statement up, other than 20/20 hindsight? I'll admit that few economists get timing right on big macro events, but please don't tar us all with the same brush: https://news.ycombinator.com/item?id=10166958

If you want to see some decent economic commentary, look here: http://www.macrobusiness.com.au/ . These guys have been screaming bloody murder for at least the past year.

dandelany2• 10 years ago

How about the fact that index funds consistently outperform actively managed funds?

Throwaway234122• 10 years ago

The whole concept of "being good at prediction" is extraordinarily difficult to back up. If you were even a few percentage points better at prediction (especially economic predictions) than the average person, your life is pretty much made. You would literally be better than the average person at seeing into the future. There is a 1% of people (Warren Buffett and James Harris Simons for example) who are significantly better than the average person at predictions, but chances are some random Australian on a tech forum is not part of that 1%.

nostrademons• 10 years ago

"People who's day job is to predict this stuff can't even make good predictions."

That's probably a good part of why everyone has an opinion - when the "experts" are so clearly clueless, everybody's an expert.

"If we've got data, let's look at data. If all we have are opinions, let's go with mine." -- Jim Barksdale

zzalpha• 10 years ago

Or it's just good ol' Dunning-Kruger...

perseusprime11• 10 years ago

Here's another quote: "Opinions are like assholes, everyone has one and they stink"

gozur884• 10 years ago

I don't see how random people off the street can be worse economists than economists. Was there ever a profession that was wrong so often and still generally heeded? Nutritionists, maybe.

jpmattia• 10 years ago

A Morgan Stanley analysis finds that most U.S. banks have ample reserves against likely defaults.

A US investment bank finds that most US banks are OK? Boy that's reassuring.

Edit: My all-time favorite pronouncement http://www.cnbc.com/id/26332773

guelo• 10 years ago

This is contentless snark. Here's the data https://research.stlouisfed.org/fred2/series/EXCSRESNS

iofj• 10 years ago

The Fed is an association of banks, it's directors directly picked, by bank directors, from bank directors. So you're not exactly denying the GP's point : the source of your data isn't a neutral party, but is controlled by banks. For all intents and purposes, it is a bank.

But even if there was no conflict of interest in the data you presented. (Fractional reserve) banks are built on trust. Not on money, not on reserves, not on loans, insurance or credit default swaps, not on any of that. If the trust goes, reserves won't last long, and can't cover the losses. This is by design, not because something weird happened.

The banks in the US in theory should have 0, 3 or 10% of the money needed to cover depositors, depending on size, bigger banks having more. However the laws state that if a bank goes bankrupt that money won't actually be used to reimburse depositors, but rather lenders (ie. mostly other banks). So from your perspective as a depositor, money you have a legal claim against that's likely to be fulfilled (the original meaning of reserve ratio, decades ago), reserve ratio is 0%. In Europe due to bail-in legislation introduced during and after the 2008 crisis and the Greek debt crisis, the reserve ratio, while nominally 1%, is effectively 0 from the perspective of depositors. If a European bank goes belly-up, depositors will see what the government gives them, if anything.

You might think, but there's FDIC insurance, so why worry ? But in history there has never been a big payout resulting from FDIC insurance, either in the US, or anywhere. The big examples are the Greek and Cypriot debt crisis. People lost access to their money, and their banks were bankrupt. The result : they couldn't transfer money anywhere, nor get money from ATMs. Then they were "bailed in" (the depositor's money was used to pay off other debtors) and they took haircuts on the money in their accounts. You might think the ECB's equivalent of the FDIC insurance would have made up the difference, but this was of course explicitly excluded in the legislation.

In the Cyprus examples, depositors < 100k euro found their funds blocked for years and halfway through them being blocked, the amounts on the accounts were reduced by 6.75%. > 100k euro accounts, same, but 9.9%.

Therefore, banks will default when (enough) people believe they will default. Why ? Exactly because enough people believe they will default. That's the nature of the beast. When a large bank fails, the government will refuse to honor FDIC insurance. Granted the US government hasn't yet proven that it would do this, it has never been forced to make that choice. But it came damn close in 2005 and again in 2008, and we all know what choice they made.

spangry7• 10 years ago

Fine. You want to know why it always seems to be the same 'clueless economists' churning out the same crap policy, resulting in crisis after crisis? Because politicians don't know jack about economics. They're a bunch of lawyers.

And you know why we have a bunch of economic dullards in power? Because the public (i.e. you), that keeps electing these idiots, can't even tell the difference between 'politics' and 'economics'. Nor can they tell the difference between 'share traders' and 'economists'. Go ahead and look at the top thread on this page.

And you know what? It's pretty clear you people (yes, you) are quite happy wallowing in your own ignorance, so that you can hold on to some smug sense of illusory superiority, while whining about 'how you could do so much better than these so called professionals'. Meanwhile, the few non-political and sensible economists left in government have been tearing their hair out for years because the public keeps electing a bunch of economically illiterate jackass politicians who refuse to see reason (truly a representative democracy).

So I hope you all enjoy the economic disaster that is now upon us, once again. You've earned it.

The crash of 2016?

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