A twitter-roll on recessions
I was recently asked about the warnings of an impending recession. Here are some thoughts. First of all, an inverted yield curve is an effect, not a cause. Like all other indicators, it shows a lack of positive sentiment in investors in the bond market.
A combination of events both in the near term (US-China trade wars) and long term (decline in consumption) have deterred money from flowing. It is a mood thing, difficult to predict exactly why….Don’t like Facebook’s intrusion? Distressed by Nationalist leaders? They all count.
Like all else, there are free-market elements that want to maximize their position in the situation. For example, in India, the automobile sector blames all its shortcomings on this “mood”. Can’t help it, they say. Bail us out.
While the automobile sector is deeply interlocked with the Indian economy, there isn’t an acknowledgement from them of the lack of innovation, and lack of quality products in this sector for a while. Some “hits” and some “value for money” but meh on quality, innovation, and research.
Banks are another lazy and subsidized sector that again has “mood” to blame for the lack of improvement in quality of service and innovation. Do you know 95% of credit cards they give out are to men? Not one thought to innovate on credit scoring to be more inclusive?
So is there a recession looming? The answer is ofcourse yes. It’s a question of when. Our capitalist economics allows us to generate cash in anticipation of profits. Profits that come from (expectations of) consumption, advrts that tagged it nicely to aspirations, the #goodlife
We all sense this negative mood now, don’t we? I have never bought an iPhone, but was always fascinated to hear about the newest one. How much do I now care about the iPhone 11? Or the newest Lamborghini, had a poster of Gallardo in my dorm for years and watched car shows.
Consumer markets are saturating. PM’s economic advisory council member Rathin Roy points out that the Indian economy caters mostly to the top 120mil affluents. For ex, in textiles, high-end shirts get produced locally, while entry-level are from our neighbours Nepal and Bangladesh
It has been evident for some time that there is too much money in the economy. Consider the crazy valuations and investments in tech startups. Investors pour in money cause they are desperate for their money to keep its value. Tech seems to generate crazy value. #newgoldrush
Why do they generate so much money if there is no value? The government needs to, we need to buy oil, military equipment, and essential goods. We are a young economy, others are printing too, and value will come, at some point. #pleasegod
I just finished Yuval Noah Harari’s brilliant book Sapiens. He points out that there is no turning back from capitalism, it’s the only way we know to run our lives. Hopefully, he says, we will soon create enough value for every sapient on Earth.
And then stop? It is my opinion that the last major event in the economy of sapiens will be a recession. A time when every one of us will collectively say “I have everything I need”.
Perhaps it’s important to point out that every economic slowdown causes 3 things (1) guilty parties who cry “doom end of the world” (2) govt says “stimulus package” causes jobs (votes) and (3) experts say structural problems, need for reform.
I finally suggested to my friend “ye sab chod”. If you have money to spare, it’s a great time to invest it. Remember It’s all a big fugazi. As his 3yr old sang “wheels of the bus go round and round”
First published here: https://threadreaderapp.com/thread/1171123720213028864.html?fbclid=IwAR1ODSjX5CP5Xh3S8nSagQcNeJoKtdHDNbT8s2IS1hai8YsIysym8DNxf4g
