Why Recessions May Be Inevitable

America has experienced at least 30 recessions throughout history, dating back as early as 1857. Some experts believe that they have become an inevitable part of the economic cycle that fluctuates between periods of expansion and contraction. Nonetheless, certain measures can still be taken to make recessions less likely. As the nation’s authority on monetary policies, the Federal Reserve plays a critical role in managing recessions. So why do recessions happen and what can the Fed do about it? Watch the video to find out.

The U.S. has experienced at least 30 recessions throughout history, dating back as early as 1857.

Some economists argue that they may have become an inevitable part of the financial cycle that fluctuates between periods of expansion and contraction.

“History teaches us that recessions are inevitable,” said David Wessel, a senior fellow in economic studies at The Brookings Institution. “I think there are things we can do with a policy that makes recessions less likely or when they occur, less severe. We’ve learned a lot, but we haven’t learned enough to say that we’re never going to have another recession.”

As the nation’s authority on monetary policies, the Federal Reserve plays a critical role in managing recessions.

The Fed is currently attempting to avoid a recession by engineering what’s known as a “soft landing,” in which incremental interest rate hikes are used to curb inflation without pushing the economy into recession.

“What they’re trying to do is raise rates enough so demand slows,” said Jason Snipe, chief investment officer at Odyssey Capital Advisors.

But a successful soft landing is extremely rare as the monetary policy needed to slow down the economy is often enforced too late to make any meaningful impact.

It was arguably achieved just once, in 1994, thanks to the Fed’s more proactive response to inflation and good timing.

″[It’s] really, really difficult to get into that really, really narrow zone,” said Stephen Miran, former senior advisor at the U.S. Department of Treasury. “It’s the difference between trying to land an airplane in a really wide and spacious open field versus trying to land an airplane on a very, very narrow piece of land with rocks and water on either side.”

Some experts also argue that policies have a limitation on what they can achieve against an impending downturn.

“Policy tends to operate with long lags, which means the ability to effect immediate change in the economy is quite slow. I also think that increasingly we live in a global economy where the cross-currents that are impacting the economic dynamics are very complex,” said Lisa Shalett, chief investment officer, wealth management at Morgan Stanley.

“These are dynamics that the Fed doesn’t have the tools to address and so to a certain extent, we do think that policymakers have certainly developed more tools to fight recessions,” she said. “But we don’t think that you can rely on policymakers to prevent recessions”

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Why Recessions May Be Inevitable

[lawerencemiller]

First of all, this whole economic chaos was powered by optimism that the FED is done with hiking interest rates. Now that interest rate crash is the situation, where do we go from here? How would you advise I safely allocate $250k funds at this point?

[shellylofgren]

Recessions are part of the economic cycle, all you can do is make sure you're prepared and plan accordingly. I graduated into a recession (2009). My 1st job after college was aerial acrobat on cruise ships. Today I'm a VP at a global company, own 3 rental properties, invest in stocks and biz, built my own business, and have my net worth increase by $500k in the last 4 years.

[veronica.baker]

Recession is often the result of external factors, and it appears that the United States is losing its grip as a federal reserve currency. With a decreasing ability to control inflation and a reduction in stocks and oil trading, it seems that a new multilateral world order is on the horizon.

[raynoldgrey]

The only thing you can do is make sure you're ready and plan accordingly because recessions are a natural part of the economic cycle. I began my career during a recession (2009). Aerial acrobatics on cruise ships was my first job out of college. I've developed my own business, am a vice president at a large corporation, own three rental homes, invest in stocks and businesses, and have seen a growth in my net worth of two million dollars over the past four years.

[williamyejun]

I would say TAKE ADVANTAGE OF THE RECISSION! Recessions are an unavoidable part of the economic cycle; all you can do is prepare for them and plan accordingly. I graduated into a slump (2009). My first job after graduating from college was as an aerial acrobat on cruise ships. Today, I work as a VP for a global corporation, own three rental properties, invest in stocks and businesses, run my own company, and have increased my net worth by $500k in the last four years.

[BateserJoanne]

It's hard to predict the future until we see this month’s inflation results. However, historical data consistently show that stocks tend to outperform bonds in the long term. Therefore, I'm staying in the market and focusing on selecting high-quality stocks. The challenge lies in identifying these stocks.

[Natalieneptune]

It surprises me why everybody gets really worked up about inflation and recession data. Inflation has always existed, and people have been using investments to beat the inflation. The stock market return, for example, always beats inflation. I heard of someone who invested $121k last October, and has grown the portfolio by more than $400k. I need recommendations that can give me similar return.

[gregorywhem]

A recession is currently the "most likely consequence for the economy, " and I cannot fathom becoming a victim of circumstances, with inflation at a four-decade high. In two years, I plan to retire, and my target retirement fund is $967, 000. How can I assure this? What steps can I take?

[lisaollie]

Since watching this video I have really put the pedal to the floor on retirement savings this past my automatic withdrawals for 2023 to max my 401k and ROTH IRA accounts. I make under $150k a off our vehicle and my wife is babysitting 1 child from church which has helped me pull the trigger to max everything out.

[Riggsnic_co]

I see 2-3yrs recession. Fed will raise interests in Sept 2022 if inflation doesn't peak. Inflation is producing a slew of problems throughout the world, including food shortages, diesel and heating fuel shortages, and housing prices and financial market crash. This global collapse might end up being a part of us for a very long time. With inflation currently at about 9%, my primary concern is how to maximize my savings/retirement fund of about $300k which has been sitting duck since forever with zero to no gains.

[hueymorello]

As a major exporting country, we entered a recession as a result of the global economic downturn. You need to be able to examine everything you've done in the past when there is a recession. Yet I'm glad I secured profits.

[oneiljerry]

What bothers me about this situation is the fact that the news and media are all going about a recession which is understandable due to the war and pandemic but still the same media still publish articles about folks in the same economy pulling off hefty 6figure profit(Averg. 200k in barely 8weeks) in this downtrend how is that possible?

[gilbertedward]

I believe I should watch a video on "How to survive the current recession" given the state of things. Actually, it's a complete failure. The fact that some people could still earn more than $400k in a short period of time astounded me. If that's still the case, please explain how.

[johnlennon]

The way I see it this recession most likely has an external cause. The United States is losing influence as a federal currency for the first time in decades. They don't have any more economies to utilize to control their inflation, and less money is being spent on stock and oil trading than previously. They all lend credence to the hypothesis that a new multilateral world order may be in the works.

[thomasgreen]

<I've been considering the best ways to protect myself from inflation after hearing that a weak currency can be a precursor of an economic slump. As inflation is said to be a money-eater, I'm concerned about my $200k in savings.>

[scottarmstrong]

You cannot cut your way out of recession you've got to invest your way out of recession, the Conservative party are in the dark ages on policy they've got to think again. My primary concern is how to maximize my savings/retirement fund of about £170k which has been sitting duck since forever with zero to no gains.

[corneliajennins]

Investing in alternative income streams that are independent of the government should be the top priority for everyone right now. especially given the global economic crisis we are currently experiencing. Stocks, gold, silver, and virtual currencies are still attractive investments at the moment.

[chickmagnetwampaone]

It kills me that they plant the idea that people are overpaid. Are we living on the same planet? People are owed much more. That stagnant wage growth from the last few decades anyone?

[barttfisher]

Major indexes booked their worst yearly performance since 2008 thanks to drivers like the recession, war, hiked interest rate and inflation which so far doesn’t seem to be easing off, so I’m left wondering what 2024 has in store for us investors, I’ve been sitting on over $745K equity from a home sale and I’m not sure where to go from here, is it a good time to buy or do I wait?

[dylanmoris]

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