In part due to Trump's trade war, many sources believe that 2020 could mark the beginning of another recession. However, another factor that may be contributing is the simple fact that there hasn't been a recession in a while. The idea is that if the stock market is good for too long than investors remove their money, predicting a recession and thus cause one. Either way, a recession prior the the presidential election would almost guarantee that Trump is not reelected as such a negative mark would leave him extremely open to criticism. Notably, this is another example of non-governmental systems wielding power over government. The stock market is not described or mandated by the Constitution or its amendments, and yet, its fluctuations exercise extreme power over who is in office as a dip can be attributed to the current president or members of Congress.
3 comments:
Though I maintain a relatively positive image of the current administration, there’s no doubt in my mind that the President’s current trade conflicts have had a substantial effect in the overall health of the global economy, especially considering the tariffs of Chinese imports raising domestic good prices. I fully understand, and agree with, the notion that market bubbles, as you mentioned, come and go on at whims and are contributive to the damaging of national economies. However, it is the unpredictability of the stock market, alongside its associated market trends, as a whole that negates any solid guarantee or prediction of an upcoming bubble, let alone an outright recession. In describing the Chinese Stock Market Crash of 2015, an editorial in the Library of Economics and Liberty stated that “sharp price run-ups [are] caused by irrational exuberance” yet it’s “very difficult to spot market irrationality at the time and even in hindsight”. Though China suffered, the author later noted that “there was no recession in America after the 1987 Crash” in contrast.[1]
From the Tulip Mania of 1637 to the Dot-Com Craze of the 90s, the downfall of public confidence, moreso overconfidence, in the intrinsic value of the markets have led to financial calamities, affecting both national and international governments. However, they are still fundamentally based off erratic and shifting variables that fluctuate in such a manner to form a concrete prediction on when another recession would come is a difficult task. While the recent protectionist stances the President has taken will have contributed to a decline in the overall health of global stocks, and the President will certainly get flak for its outcome from the general public in the runup to the elections, I don’t believe that a mere drop in the stock market is a pure indicative warning that another recession is coming around, let alone next year.
SOURCE:
https://www.econlib.org/archives/2015/08/why_bubbles_are.html
Taking into consideration of the Trump Administration's past actions, most notably the United States-China trade war, an upcoming recession seems very likely. Even though the administration's actions strengthen the American economy by cutting off external competition, there's also the backlash of the ones who oppose these changes. Congress, for one, exemplifies the polarized nature of the administration, making essential laws and policies difficult to pass, thus leading to a lack of recession safeguards that the government is responsible of. In an article from The Balance, a main reason for the 2008 Great Recession was the Bush Administration's ignorance toward the American financial state. Specifically the low interest and mortgage rates placed by the banks, essentially a high risk, low turnout scheme. Both the administration and bank system felt safe with the current condition it was in, but didn't take into account the amount of loans that they were giving out instead of foreclosing property, raising general debt for homeowners nationally. They did eventually lower rates, but not fast enough to successfully prevent the recession. This situation applies well to today; there hasn't been any major changes to the economy, as Congress is in gridlock, Trump has been saying that there will be a major turnout for months now, and he seems content in the economy's strength. Right now, he's just trying to strengthen it, not necessarily to provide any safeguards or precautions.
https://www.thebalance.com/the-great-recession-of-2008-explanation-with-dates-4056832
Although I don't believe that just because it's been a while will cause a recession as we've been hearing that the past couple years based on trends, With the escalating tariffs and conflicts in this trade war, it seems a serious recession with heavy economic implications is near impossible. Neither Trump nor China seems to be willing to end this war even though signs of heavy economic consequences are beginning to turn their heads. On the opposite it actually seems the trade war has been escalating, with China recently investing $280 billion to the Iranian economy, especially to their oil sectors. These contrast the sanctions put up last year which put heavy pressure on Iran. This seems to be building up to near Cold War levels, with 2 superpowers starting to duke it out through intervening in the affairs of other countries. These types of interactions between the US and China don't seem to be stopping any time soon, and despite Trump wanting to strengthen the economy for his reelection, it's possible that the background conflicts will result in a recession in the near future.
https://www.middleeastmonitor.com/20190907-a-blow-to-washington-china-to-invest-280-billion-in-iranian-sectors-targeted-by-sanctions/
https://www.scmp.com/news/china/diplomacy-defence/article/2122435/china-pumps-billions-iranian-economy-western-firms-hold
Post a Comment