The funny thing about recessions, and macroeconomics as a whole; much of the time, we eat the food we cook. If there is an upcoming recession, the most likely root cause is that a bunch of people believed there will be an upcoming recession.
De facto - bear in mind the system that we´re talking about moves rather slowly - recessions always have real financial or economic system causes, and quite often are seen coming in advance by some people.
People who are at the right points in the financial system, who for example can see bad debt starting to build up (takes months, but there's always a clear pattern of people starting to skip payments etc), companies starting to run out of runway with no revenue coming in, again their banks will typically be able to spot this fairly quickly. Changes in fuel costs are very significant, especially in the US, too many people drive too far to work, petrol goes up, this multiplies quickly - this one hasn't even really hit the system yet, wait for winter.
Sure; but 8 times out of 10, these things happen and there's no recession. People were SCREAMING recession recession recession in 2020 Q1-Q2. It never materialized.
You've got the "well we kicked the can down the road" group, who are just as bad as the "predict 10 recessions and you'll get one right" group because there's always going to be a recession; saying "it'll happen in the future" is at least more accurate than saying "it'll happen last month, no this month, no next month, ok JULY" because at least you're not wrong, but the future is indefinite. Its not useful.
If the markets & macroeconomies were rational, then you could draw a line and say: root systemic issue causes recession. Clean, simple. The problem is, economies aren't rational (by any definition of rationality understandable to the human brain, which is the only useful definition). They're extremely complex, billions of signals, and predicting what's going to happen is extremely difficult.
Its honestly surprising to me that, generally, people on HN fully understand: you can't predict when the stock market is going to go up. It is literally no different than predicting when its going to go down. You can't do either; not with any foolproof reasoning. If you spend every month saying "its going to be a down month", eventually you'll be right, but it doesn't mean your process is good and it doesn't mean you'll be right next month.
"companies starting to run out of runway with no revenue coming in" Like Bolt? The company that raised $300M this year, and to compensate for their "declining runway" decides to fire... 250 people.
This is not an example of a company reacting to systemic market conditions. Its a company reacting to systemic market sentiment. Sentiment precedes conditions. Startups operate for years with 12 months of runway and no revenue. What's changed? Availability of capital? Eh, not really. What's changed is the expectation of availability of capital in 12 months. That expectation is based on real or semi-real things: rising interest rates, inflation, supply chain woes, but it is not in-and-of-itself Real; its a prediction of the future.
Of course, maybe availability of capital is drying up, today. Why? VCs being more stingy. Why? Well, maybe you say rising interest rates, maybe inflation, war in ukraine, but go talk with a VC and they'll say: expectation of market downturn in the coming year.
Through that expectation they (hopefully temporarily) destroyed the economic activity of 250 people. A hold has been placed on all those peoples' ability to: buy iPhones, buy clothes, eat at a nice restaurant, buy a house... and that is what causes recessions.
Sentiment precedes conditions. Sentiment is already priced in.
This is bordering on delusional. You think there are no meaningful fundamental factors to the world economy and the only thing likely to cause it to go down is sentiment? Not debt? Not liquidity? Not inflation. Not money supply? It just goes down because people woke up on the wrong side of the bed?
The people believe it's going to go down because they are doing things like looking at balance sheets and tracking the relevant data. It's like saying someone got killed because a bullet happened to be moving around towards them but that it definitely wasn't because they were shot.
Recession happens when all the people who thought they were working on the next big thing realises that they wont be the next big thing, that all the work they put in was just a waste. You can't avoid that by just thinking positive thoughts, reality isn't an optimist and will hit you sooner or later no matter how hard you try to ignore it.
Trying to delay a recession just means all that waste work gets even deeper entangled into your economy, making the recession hit harder and wider.
