The U.S. will have another recession soonBy Paul Bousquet | 09/04/2017 10:14pm
In the 2016 Elections, both parties put forward their worst candidate. The establishment wings of both major political parties has eroded and shred the ideological integrity of partisan politics. So when I say this, it’s not because I am trying to hate on Donald Trump. This is reality. We are going to have another recession soon.
The United States economy goes through recessions relatively regularly. President Reagan, credited with pushing the US on a positive long-term trend of GDP growth by spurring Globalization, went through 2 recessions in his eight-year term. According to the Washington Center for Equitable Growth, the recovery to the ’08 recession was so weak there is a relative statistical likelihood there will be a recession in the near future, structurally because of the US’ continuous boom and bust cycling. And that is a purely quantitative (numbers based) analysis. When you factor in the current Trump-fueled bull market, the likelihood of a bust resulting from overheating empirically increases. Trump himself warned of a “bubble” in the stock market as a Presidential candidate, and with the Standard & Poor trading at a rate about twice the actual value of assets the table has been set for a major correction.
How did we miss the signs of another crash? It’s pretty simple actually: we patted ourselves on the back for a recovery that never happened. 6 years after the recession, only 7% of US counties had reached their pre-recession employment, growth, and housing levels/prices. Central Bankers are now beginning to worry there is no good time to ease the massive stimulus that has been serving as a long-term Band-Aid for the international economy. Now, the entire globe is reliant on it. And even more reliant on each other. The underlying reason why a crash is more likely than just a couple bad months is because our economy is structured to build off itself, for better or worse. If a few key countries are doing well economically, everyone around the world benefits. This is because foreign countries and heavily privately and publicly invested in each other. However, the inverse is also true. When a few key countries perform poorly, everyone suffers. In 2016, China had to literally shut down its stock market because it dropped so severely after the US stock market plummeted.
Yet, all of what I said could be wrong, IF nothing catastrophic happens in the next 4 or so years. And I doubt that severely. Trump is at best unpredictable. China’s debt to income levels are setting continuous records. There is political turmoil in literally every continent on Earth (except maybe Antarctica). Something as simple as Republican failure on tax reform could set off a spiraling selloff, in which a few people start becoming uncertain in the economy and then others follow. From there, it’s just one giant snowball, rolling all the way down the hill.
I recently took out $1,000 of my life savings and put it into Etrade. When I think the stock market has reached its maximum value, I will place a bet against the US Economy. Basically, I will buy stock in a hedge fund that grows 3 times the rate negative of the S&P 500 (If it shrinks 2 percent, my stock grows 6 percent). I don’t want the economy to fail; I just want to make some money. But we should not have a system that not only incentivizes behavior that leads to economic collapse but also allows people to benefit when everything fails. The status quo has remained intact for over 200 years. And unless something changes, this will keep happening.
Paul Bosquet is a sophomore majoring in economics. His column runs biweekly.