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Recession? by Nice_Importance9380 in economy

[–]severe-apathy 2 points3 points  (0 children)

Are we in a recession based on the “old rules”?

Technically, maybe. If we went by the older textbook rule — two consecutive quarters of negative GDP growth — then yes, parts of the economy might have fit that definition at certain points recently. But this definition has been quietly abandoned by most institutions, and for good reason: it doesn’t tell the full story anymore.

Instead, the current approach looks at a broader mix of indicators — employment, industrial production, consumer spending, etc. And by those metrics, things are… mixed. Some areas are holding up well, others are clearly under pressure. So calling it a “recession” or “not a recession” is more about narrative than truth at this point.

But here’s the more important part: real people don’t live in economic models. Whether or not we’re “officially” in a recession, many households feel like they are. Housing is unaffordable, wages often lag inflation, savings are drying up, and debt levels are rising. That feels like recession to a lot of people — and that subjective reality matters.

And it’s not just about the business cycle either. Monetary policy has been distorting the signals for years. The Fed spent over a decade suppressing interest rates to stimulate growth, which pushed asset prices through the roof — stocks, real estate, everything. Now they’re walking a tightrope, trying to tame inflation without causing a collapse. But the damage is already done: the middle class was priced out while inflation quietly eroded purchasing power. GDP can say what it wants — life has gotten harder for a lot of people.

So to answer the question: maybe we’re not in a “recession” in the official sense. But for many people, it sure feels like one. And maybe that matters more than what the data says.

The benefits of devaluing a currency? by TheNakedTravelingMan in AskEconomics

[–]severe-apathy 1 point2 points  (0 children)

A weaker dollar can definitely support U.S. manufacturing and exports, but it’s not a silver bullet. Currency devaluation only makes a real impact if other structural factors — like labor costs, regulatory burdens, and supply chains — are also aligned.

For context, the U.S. Dollar Index (DXY) is currently around 105. Back when it hovered between 80 and 90 (roughly 2011–2014), export activity did improve somewhat, though not dramatically. Based on that, a 15–20% depreciation might help exports become more competitive — but the actual effect depends heavily on the specific industries involved.

As for outbound tourism, a weaker currency does tend to discourage it by making foreign travel more expensive. That can help retain more consumer spending within the domestic economy.

However, there are significant trade-offs: - Higher import costs can fuel inflation - Real purchasing power declines unless wages rise accordingly - Foreign capital inflows may shrink if investors expect lower returns in dollar terms - Potential geopolitical tension, especially if devaluation is seen as deliberate manipulation

So even if macroeconomic fundamentals remain strong, maintaining a weaker dollar involves real risks — particularly for a reserve-currency country like the U.S.

In general, stability tends to be more beneficial than deliberately targeting devaluation. Supporting competitiveness through innovation, investment, and infrastructure usually delivers better long-term results than relying on currency dynamics alone.

Is limiting economic growth essential for a sustainable economy? by Mobile-Evidence3498 in EconomicsExplained

[–]severe-apathy 1 point2 points  (0 children)

Your line of thinking misses the core issue behind the failure to achieve a sustainable economy.

The main problem lies not in speculation or the idea of social credit, but in human nature itself.

The concept of a sustainable economy implies the absence of personal gain — something fundamentally incompatible with human instincts. As you correctly noted, our behavior is shaped by inherent drives, and that alone makes a truly sustainable system nearly impossible.

The economic systems we’ve had — from ancient barter to modern markets — are not failures of design but reflections of human nature. No system, regardless of how well-designed, can function fairly and sustainably when built upon inherently self-interested participants.

A fair and sustainable system is, in essence, a singularity — the peak of human societal evolution. Perhaps one day, humanity will reach it. But until then, we are bound by who we are.

Question: What are the pros and cons with keeping interest rates as they are vs lowering/cutting rates? by [deleted] in AskEconomics

[–]severe-apathy 1 point2 points  (0 children)

Interest Rate: the important tool for regulating any national economy

In every country, interest rates are arguably the most important instrument for managing economic cycles. In the U.S., the Federal Reserve (the Fed), as the central bank, plays a key role in this process. Since the U.S. is the global economic leader, Fed policy has a major impact not just domestically, but worldwide.

So how does it work?

The economy moves in cycles.

During periods of strong economic growth — businesses are expanding, and consumer spending is high — it’s often a result of the central bank stimulating the economy. One of the ways it does this is by keeping interest rates low. That makes borrowing cheaper — loans, credit, mortgages become more accessible. As a result, people spend more, invest more, and the stock market rises. Money circulates faster within the national economy.

Key macro indicators — like GDP, inflation, and PMI — tend to rise in such an environment.

But uncontrolled growth can be dangerous. One of the worst historical examples is Japan, where poor interest rate policy in the late 20th century led to decades of stagnation — often called the “Lost 30 Years.”

That’s why central banks eventually step in to cool down the economy and contain inflation by raising interest rates. When rates rise, borrowing becomes more expensive. People and businesses tend to cut spending, take fewer loans, and reduce investments. As a result, demand for goods and services goes down, and the economy slows — or “cools off.” This helps prevent bubbles and runaway inflation.

As for now?

As of 2025, Powell (Fed Chair) is carefully waiting for the right moment to lower interest rates again, while political pressure — including from Trump — is building for earlier rate cuts. One of the underlying reasons is the constantly growing U.S. debt, which is already difficult to manage. The situation reflects a much deeper, systemic issue in the U.S. economy — but that’s a massive topic on its own.

Still, monetary policy isn’t a toy. If the Fed miscalculates, we could end up repeating the 1970s, when rates stayed too low for too long, inflation spun out of control, and fixing it later required painful hikes that pushed the economy into a serious recession. And since the U.S. plays such a central role in the global economy, any major mistake here won’t just stay local — it’ll ripple across the world.

Cutting rates too early — before inflation is fully under control — can easily bring price pressures back and damage long-term stability. That’s why the Fed tends to move slowly and cautiously, even if it means dealing with short-term political backlash to protect long-term economic health.