Where does purchasing power go during a recession?

[Anonymous No.16502717]

Where does purchasing power go during a recession?

I've spent alot of time researching long and short term debt cycles but I cant seem to answer this question. If all major asset prices tank (stock market crashes, housing crashes, bond yields are pathetic, etc.) where can one hole up their money?
>cash
Runs risk of inflation
>metals
Didnt pump until after asset prices tanked in 2008, and even then not enough to make up the lost purchasing power

Where does the purchasing power go?

[Anonymous No.16502771]

>>16502717
Bumping this, actually curious for a real answer to this. I would have thought Mining Companies, but I guess not. Interesting question indeed. Hmm.

[Anonymous No.16502778]

>>16502717
Perhaps nothing? A brief period of Deflation perhaps?

[Anonymous No.16502781]

Crypto

[Anonymous No.16502782]

>>16502717
Negative interest bonds or whatever they are?

[Anonymous No.16502860]

>>16502717
When deflation occurs, people hang on to their money or use it to service debt.
Oft times when deflation occurs interest rates go up. When this happens people have to pay more interest to service their debt.
When price deflation occurs, people are rewarded with lower prices when they hang on to their money longer. Why buy that new washing machine now, when in a month it will be $200 less?
Often times higher interest rates are necessary to clear out bad investment or unprofitable businesses. Central banks globally have pretty much determined that they will never let this happen and prefer inflation and hyper inflation to any kind of deflation. When inflation you need to hold onto hard assets with a fixed supply. Gold, BTC, real estate because the money supply is increasing at an astronomical rate eroding your purchasing power.

[Anonymous No.16502900]

>>16502781
>>16502860
Crypto will be the best hedge in the upcoming recession and the majority of people will be too scared to buy in until it's too late. Too many dollars will have to be printed to keep the wheels spinning.

[Anonymous No.16502932]

>>16502717
Im thinking the very definition of a recession is when purchasing power diminishes.

It’s the opposite of an expansion when people get additional purchasing power through loans, essentially pulling purchasing power from the future into the now

[Anonymous No.16503386]

>>16502717
Ok think I'm at least a little qualified to answer some of your questions (masters econ fag). If you think there's some impending doomsday recession coming your best bet is in cash holdings.

Cash doesn't really run the risk of inflation during a recession, inflation is a result of rising pressure on prices, say for example when wages put pressure on companies to raise prices. And a lot of developed countries have sound monetary policy to make sure that doesn't happen. In fact we haven't seen runaway inflation in a very long time, even considering how low the unemployment rate is.

In my opinion, commodity holding isn't worth it unless you really know your shit when it comes to resource prices or you think this whole system is going to come down, but in that case you'd have more things to worry about.

You're best bet for a recession-proof investment strategy is in some very secure government fixed assets (I'm from Canada and I think the U.S. is Treasury Bills?), cash holdings, and diversified stocks in companies that have solid balance sheets. Solid balance sheets meaning they have nice cash reserves, lower debt, and good cash flow. These companies tend to handle recessions better than those that have already taken on lots of debt, and may struggle to pay that debt if they lose cash flow.

What's going to be interesting about the next recession (not saying this is anytime soon), is that the U.S. has a very large fiscal deficit relative to other G20 countries, I think 4.5% of GDP, and already very low interest-rates.

The two tools to deal with economic downturns are exactly those two things mentioned. Either the government spends to break the cycle of low output, low consumption, or the central banking authority lowers rates to stimulate spending.

Anyways remember in the long run we're all dead who cares.

[Anonymous No.16503437]

At the peak of a deflationary recession, you want to be buying stocks.

At the peak of an inflationary recession, you'd want to have already bought precious metal stocks.

[Anonymous No.16504063]

>>16502717
>Where does the purchasing power go?
I'll give you an example. Before the recession the 2000 watt Honda generators were very expensive. Even after a large number of clones came to the market the price did not change. People still wanted the high quality Honda generators.

During the recession a sale happened on the 2000 watt Honda generators. It wasn't a ten percent off sale. It was over 40% off. It was ridiculous.

So companies reduce prices or put on sales to bring in customers during a recession. Conclusion: purchasing power goes up!

[Anonymous No.16504699]

bump for a real thread

[Anonymous No.16505469]

>>16502900
>>16502781
I'm very skeptical of an extremely volatile asset like crypto performing well through a recession. I'm excited and interested to see how it does nonetheless though.

>>16502932
In my mind, purchasing power (I should just use the proper word: VALUE) is finite and unchanging. It cannot be created nor destroyed. Exactly like energy in a physical system. Though your point about pulling pp from the future may poke holes in my theory.

>>16503386
Thanks of the comment. I'm a leaf, too. What the Canadian equivalent of Treasury Bills? GICs?

[Anonymous No.16505536]

Cash is your best bet. Ask yourself why Buffet is pilling up more and more cash everyday. Market crashes during recession last 12 to 18 months, at most. Inflation would take faaar longer than that to even start, and even then, what's the risk? You miss out a year when suddenly there's 5% of inflation? Who cares when the stocks are still at -60% and you have a pile of cash to buy loads of them.

[Anonymous No.16505541]

>>16502717
The money did not exist in the first place, eg it was just stock market valuation, so there is no "money" to put anywhere that it already is not.

[Anonymous No.16505581]

>>16505536
> Ask yourself why Buffet is pilling up more and more cash everyday
Yeah I watched vid related and it was insightful.
https://www.youtube.com/watch?v=X2Xyr8weYpQ

>>16505541
I'm not talking about so money so much as value.

[Anonymous No.16505586]

>>16505536
>cuz he’s an old boomer who doesn’t understand the world anymore
>everyone he knows is dead except munger who’s half dead and bill gates who likes to suck his dick

[Anonymous No.16505655]

>>16505536
>>16505586
Buffet's days are numbered like his net worth balance sheets. Day of the pillow will come soon

[Anonymous No.16505775]

dont go into cash if your currency is NOT USD!

during a recession people loose their job and therefore purchasing power.
companies make less profit, again less ppower. cash is king because it will be deflationary at first which kills off exports since wages are rising (gaining ppower).

the measured to fight deflation will flip the whole thing and the trick is that inflation wont get out of control.

our current situation is that all usual methods are already impl. with only a small effect on inflation yet (except stonks, real estate).

and thats where it gets interesting because all kinds of untested things are being discussed to increase inflation, see ray dalios article on mmt.

[Anonymous No.16505798]

>>16502717
>stock market crashes
>where can one hole up their money?
In the stock market while it's nice and cheap.

[Anonymous No.16505923]

>>16502717
Where does it go? It goes “away.” People lose their purchasing power. Do you understand? I’m smarter than you.

[Anonymous No.16506395]

>where do I put put money until the stock market recovers?
No wonder everyone on this board is a broke loser who gambles on shitcoins.

[Anonymous No.16506447]

>>16506395

[Anonymous No.16506798]

>>16503386
>You're best bet for a recession-proof investment strategy is in some very secure government fixed assets (I'm from Canada and I think the U.S. is Treasury Bills?), cash holdings, and diversified stocks in companies that have solid balance sheets
sorry but in an inflationary recession how can it be holding money the best route?

[Anonymous No.16506873]

>>16502717
It doesn't "go" anywhere. Recessions are caused from an overoptimistic buildup of supply-side production.