There have been about 10 recessions after 1950. While observing the recent two, each one started after a trigger. 2008 - Mortgage Crisis and 1997 - dot com.

I understand that a recession is not a result of an isolated event. But does every recession necessarily start with some big shock followed by snowball effect? If so, are there educated guesses on what could potentially lead to the next one? (like cryptocurrencies or Carl Icahn's recent warning on index funds?)

closed as off-topic by ChrisInEdmonton, Hart CO, Brythan, MD-Tech, Nathan L Feb 9 '18 at 16:06

This question appears to be off-topic. The users who voted to close gave this specific reason:

  • "Questions on economics are off-topic unless they relate directly to personal finance." – ChrisInEdmonton, Hart CO, Brythan, MD-Tech, Nathan L
If this question can be reworded to fit the rules in the help center, please edit the question.

  • As RonJohn said, "markets fall as a reaction to something". Something always triggers a recession. Most of the time, it's due to the Fed tightening fiscal policy. Some like 1981 were due to oil prices rising. some were just due to a natural event such as demobilization after WW II and reduced government spending. – Bob Baerker Feb 9 '18 at 15:52
  • This is an economics question so belongs on the economics stack, sorry – MD-Tech Feb 9 '18 at 16:05

According to your numbers, twenty percent of recessions started with a shock/trigger. That's nowhere close to even "majority", much less "every recession".

Remember that the 2008 recession was caused by the mortgage crisis, and the lack of liquidity for loans.

The interest rate hikes will slow the economy down a bit, and bored "journalists" hunting for web site page hits will splash headlines like "Is a Recession coming?". The rate hikes will also take some of the air out of the stock market.

Just remember: markets fall as a reaction to something.

  • 1
    I stated the triggers for the recent 2 because I knew them. I am yet to research the reasons for the previous ones. And yes, some journalists warn all the time to increase readership. My question was not about their hollow warnings :) but I am trying to understand the mechanics of a recession. – Kannan Feb 9 '18 at 15:13
  • That's a topic for a class or three in Economics. Rising interest rates, external factors (weather disaster, OPEC oil embargo, etc.), overbuilding of capacity, etc, etc. You'll see the market heading down before the recession starts because market analysts monitor jillions of economic statistics, and try to predict recessions -- and therefore sell -- before they happen macrotrends.net/2324/sp-500-historical-chart-data – RonJohn Feb 9 '18 at 15:29

Not the answer you're looking for? Browse other questions tagged or ask your own question.