Here's why the next recession could be different than the one the United States has ever seen



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  • Goldman Sachs sees that the five traditional catalysts of a meltdown are collapsing in the face of a possible economic downturn.
  • However, Goldman recently identified an unprecedented scenario that could make the next US recession unprecedented. And he says chances are rising.

As the cries of an impending recession sound louder and louder, investors swept the economic landscape for any sign of the exact date of the next crisis.

Whether it's looking at the yield curve, knowing consumer confidence or other indicators of the economic climate, there's no denying that's what people think. And it scares them.

Fortunately for those who felt uncertain, Goldman Sachs has been looking into the matter. The company began by looking at the five major recessionary factors in its history: (1) industrial shocks, (2) oil shocks, (3) inflationary overheating that leads to aggressive rate hikes, (4) financial imbalances and (5) fiscal tightening.

Goldman says that none of these five red flags is particularly troubling at the moment. So what does this mean for the current situation?

In order to answer this question, Goldman has considered something new: a possible catalyst for a recession that has never been the subject of an economic recession. They envision the possibility that the slowdown in global growth will spread to the United States.

If this seems to you exaggerated, it is because, until recently, it was the case. But as the graph below shows, this has become a very real and valid concern for people.

Related: signs of real life we ​​are in recession

23 PICTURES

Signs of real lifeWe are in a recession

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Are we in a recession? Officially, it is up to a group of economists from the National Bureau of Economic Research, non-profit, to decide. While their statement is based on facts and figures, we have taken a more "average" approach to determining if we are already in the middle of the big "R."

Our bloggers have observed more than 20 new trends in everyday life that seem to say that we are. Click on our gallery to see what they see.
& # 39; Overview of recession signs

First Up: Recession Sign No. 1

The thieves began removing catalytic converters, which help control emissions, from the underside of parked vehicles. The converters contain trace amounts of platinum and rhodium (respectively $ 2,054 and $ 9,278 an ounce) and can be sold on the black market for a few hundred dollars each. Victims, however, pay much more than that for spare parts.
& # 39; Which vehicles are most affected

Next: Recession Panel # 2

Who is better placed to influence consumer behavior than people working in retail stores? For example, a presenter who works in a Maryland target noticed that she received fewer items for the displays she manages and that the traffic in the stores had dropped considerably since the holidays. She says that there does not seem to be as many people doing their shopping and that they carry fewer goods.

Next: Recession Panel # 3

Costco is one of the few retailers to wear well these days. Why? As Americans worry more and more about rising food prices, more and more people end up biting the ball and joining wholesale clubs like Costco. Example: WalletPop.com's blogger, Amey Stone, recently took the train wholesale. "Even though my husband and I feel safe in our own job, we are seeing growing job insecurity all around us." Given this background, I decided that it was worth really worth paying $ 50 to become a Costco club member. "
& # 39; More about Costco effect
Next: Recession Panel # 4

Even with weddings, people are looking more and more at their money. They book business outside rush hours and reduce the number of guests they invite, according to the National Association of Restaurant Executives. Increasingly, people are negotiating with caterers to keep their costs low without sacrificing the pomp of what should be a unique event. For example, do not be surprised if you attend this year's lavish wedding without a Viennese table, a selection of desserts served at the end of a bargain. Next: Recession Panel # 5

Are you planning to party this summer? You may not have to worry so much about meeting other golfers as there are fewer of them. According to the New York Times, people are leaving the sport en masse, partly for economic reasons, such as reducing the number of members to country clubs by companies. This happened despite the popularity of Tiger Woods.

Next: Recession Sign No. 6

The auto industry, which is already suffering a lot, is trying to convince buyers to embark on a new car with many incentives. This is because dealers are desperate because thousands of Americans decide to postpone the purchase of a new car this year.
& # 39; $ 1K per month for Minivan ??

Next: Recession sign n ° 7

Getting a reservation at your favorite restaurant has become a lot easier lately – too easy for restaurant owners. Sales are down in chains ranging from Red Lobster to Ruth's Chris Steakhouse.

Anecdotally, one of the writers of AOL Money & Finance recently was able to immediately install at the Cheesecake Factory in Sterling, Virginia – during prime time on Thursday night. . Previously, the wait was always greater than one hour.

Next: Recession Sign No. 8

Pass over Pampered Chef and Mary Kay, the "Gold Party" services arrive in town. Companies like My day of gold and Gold Party by ADI offered to help you convert your friends' gold into cash either by providing (for a fee) the equipment and training needed to evaluate the DIY, or by sending a representative to your home, who will settle in your kitchen.
& # 39; More about this Gold Party trend

Next: Recession sign n ° 9

The National Federation of Independent Businesses (NFIB) reports for March that its index of small business optimism is at its lowest level since the second quarter of 1980. Businesses complain about rising selling prices that are not following not inflationary pressures. Nearly one-quarter reported increasing their employees' pay with a margin exceeding profitability increases. The headlines abound in popular retailers closing some (or all!) Of its stores: Home Depot, Sharper Image and many others. Losing competitors
Next: Recession Sign No. 10

Repo men have enviable careers right now. Newspapers across the country have published stories about local Repo men earning money, mainly taking cars, cars to campers, motorcycles to motorboats. According to KHOU, a television news channel of Houston, 1.5 million vehicles have been resumed, an increase of 15% over 2006. 2008 is expected to increase by 10% over 2007.
& # 39; More about the Repo Men Awards

Next: Recession sign n ° 11

In the United States, Americans pay about $ 5 billion a year to borrow more than $ 40 billion from payday lenders. Even those who know how bad these types of high interest loans are, are not immune to these today. WalletPop's blogger, Geoff Williams, has never intended to enter a payday loan business until this year.
& # 39; My first payday loan

Next: Recession sign n ° 12

Walletpop blogger Josh Smith shares this story: A friend of mine is responsible for marketing at a nearby mall and works closely with their children's program. The program offers children fun activities in which parents can either wear a tiara or go shopping without a junior. Even though the event is free, attendance has been drastically reduced due to a lack of incentive to use the free daycare provided by the events. In short, parents do not need to monitor their children because they do not have the money to do their shopping. Few children need care
Next: Recession Panel # 13

According to Josh Smith, who frequently attends sporting events and concerts, spending $ 100 plus a dinner at a show or at a baseball game while food and gas prices are rising seems frivolous. This year, he and his wife missed the entire season of their favorite minor hockey team and let one of their favorite comedians pass.
& # 39; What will he do instead?

Next: Recession sign n ° 14

More and more small businesses are looking to offset the drop in sales by adding new products. For example, blogger Tobias Bucknell explains that the dojo of his hometown has added a new activity to his martial arts: balloons. In the neighborhood of Tom Barlow, the local model store also produces banners.
& # 39; Strange ideas combined

Next: Recession sign n ° 15

Imagine this, thrifty brothers: A Mercedes woman's latest model parks next to you and walks around in your favorite thrift shop. You wonder what's going on, do not worry a bit, at the sight of a seemingly easy-going member of the company who uses "your" affordable consumer products. What is happening here is a general tightening of the belt. While the economy is running out of steam, people are worried about jobs and the home cash machine is drying up, they are looking for ways to save money. Frugality suddenly became "in". More on this trend Thrift Store
Next: Recession sign n ° 16

Today, many people cancel or dramatically change discretionary travel. With the steady decline of the dollar, travel for fun and amusement has dropped dramatically in the list of craziness for many middle class families. The price of gasoline, grocery shopping, utilities, rents and daily living expenses are reducing our budget spending more and more.
& # 39; More about travel trends

Next: Recession sign n ° 17

If several children are registered for four to six weeks, the summer camp can cost you more than $ 10,000. WalletPop blogger Michelle Turk spent $ 3,000 last year, but not this year. It plans either to completely skip the camp, or to find camps run by the city that cost a few hundred dollars against a few thousand.
& # 39; Summer Camp Sticker

Next: Recession Sign No. 18

Another place that parents like WalletPop's blogger, Sarah Gilbert, avoids in these difficult times, is the local zoo. And no, it is not because of the price of entry. It's the treat at every turn that pushes kids to shout "give me" and the mother at $ 20 for non-nutritious waste.
& # 39; Why did the zoo come out?

Next: Recession sign n ° 19

Blogger Tom Barlow has a favorite coffee. However, it has undergone a change in recent months. More and more frequently, the once vacant tables are occupied by middle-aged rulers with their all-new laptops, mobile phones and ready-made slats that will never happen. Barlow suspects that they are in the same boat as one of his companions that he has known, recently released as part of a downsizing related to the recession.
& # 39; Give me my coffee

Next: Recession Sign No. 20

On the market for a vacation in Vegas? Now could be a good time. The Wall Street Journal recently reported that "Reacting to a national economic recession that has reduced gaming revenue and room prices … casino and hotel operators are offering a buffet of normally booked spring offers. in the slow and hot summer months ". Room rates have dropped by more than 20%, vacationers have not stayed that long, gaming revenue has dropped slightly and it's easier to get into A-List clubs than in the past.
& # 39; More on Vegas Slowdown
Next: Trend Sign # 21

Is the idea of ​​moving to a new city after graduation, while the economy is heading for a recession, scares you? If that's the case, you might want to do what some whippersnappers do; move in with Grandma and Grandpa to save money on rent. Many families succeed. Living with your grandparents can also provide benefits to the whole family, who can rest easily by having someone around to help around the house and be a point of contact in case of emergency .
& # 39; More on Surprising Roomies
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"The tightening of economic and financial ties has probably increased the risk of foreign spillovers," wrote Goldman economists, led by Jan Hatzius, in a recent note to a client.

To determine what an overflow might look like, Goldman performed a handful of scenarios. The firm looked at how global, 1, 2, 3, and 4 percentage point declines in US growth would occur on the US front. And their conclusions were discordant.

If a 4 percentage-point slowdown occurred – which is arguably the worst-case scenario – the 2% US growth expected this year would be reduced to zero, which would only trigger a recession.

"The bar is quite high, although it is below the historical average, both because the share of exports in US production has increased and the potential growth rate of the US economy has increased. decreased, thus facilitating the release of at least one technical recession.according to the standard if the arbitrary definition of the recession as negative growth, "said Hatzius.

Goldman also examined the significance of these downturn scenarios in terms of the probabilities of recession. The firm found that if the feared result of 4 percentage points materializes, the odds would be 64%. This is not a situation that any American investor wants.

In the end, Goldman's findings suggest that the United States is at greater risk that the recession will be triggered by a foreign slowdown than in the past. As such, if the specific developments described above occur, the United States could experience an unprecedented crisis.

For these reasons, it would be prudent for investors focused on the United States to keep an eye on events abroad, lest they encroach on the national economy.

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