If There Is a Recession in 2016, This Is How It Will Happen

[Lodestar]

More and more news headlines and stock market analysts’ reports have started predicting, or at least insinuating, that a recession could be near in the United States.

I’ve been skeptical; the economy may not be great, but I’ve had a hard time envisioning how economic turmoil in countries like China and Brazil and supercheap oil could somehow combine to drag down the mighty United States economy. That’s why my October article on the economic outlook ended not with any bold conclusion, but with the “shruggie” emoticon.

But after thinking about it some more and talking with some people on the pessimistic end of the spectrum, I think I have a handle on how the economy could end up in a substantially worse place by the end of the year.

Here’s that narrative.
What we’re dealing with isn’t just a run-of-the-mill economic slowdown in emerging markets, but the reversal of a 15-year cycle in which capital has flowed into emerging markets year after year while debt grew. Now that’s reversing, and we’re seeing a version of Warren Buffett’s maxim that “you only find out who is swimming naked when the tide goes out.”

In other words, now that capital is going out rather than coming in, we’re seeing just how much of the growth in Asia, Africa, Eastern Europe and Latin America since 2000 has been driven by a credit bubble and how much is real, durable economic activity.

MORE
http://www.nytimes.com/2016/02/05/upshot/if-there-is-a-recession-in-2016-this-is-how-it-will-happen.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news

[ErisDiscordia]

1. A credit AND a commodity bubble

With China's manufacturing going offline, and neither the US Congress nor the Eurozone banksters having the wit to increase demand through infrastructure and jobs programs, it's going to get ugly globally very fast, and stay that way until the banksters take their hands off the economy's throat and let workers work for living wages.

The best place right now is Russia, because it's isolated from the larger world economy by the sanctions and by not needing them. It's almost the perfect autarky, like the US used to be before the moguls had the greed to ship manufacturing out of country.

A smart election can get the US back to autarky, too.

[roamer65]

2. Financial systems are too interconnected now.

Any major financial disruption will be felt and experienced worldwide. Watch the velocity of money figure very, very closely. If it continues to slow, we are in for a world of hurt.