Where's the Recession? A Closer Personal Look at Economic Realities

Is the shadow of a recession truly looming over us? From where I stand, it's nowhere to be found. Nestled in a picturesque tourist hub, I can attest that this year has witnessed a thriving surge in local activities. Even as rain momentarily drizzles down this afternoon, spring's arrival has breathed life into our region, much like any other year.

Visitors from all corners of the country, along with curious foreigners, have flocked to our charming town. They've willingly paid a premium for accommodations and dining, embarked on scenic boat cruises that embody the pinnacle of vacationing here, and then seamlessly moved on with their lives. Some were merely transients, stopping briefly as they journeyed through for a slice of their own adventure.

Unlike 2020, when Romanian vacationers turned their focus inwards, opting for domestic destinations, this year they spread their wings to places like Greece, Albania, and Croatia. Money has flowed, and the ominous signs of a recession remain conspicuously absent.

Autumn approaches, and the beaches in Romania still teem with tourists relishing in the pleasures of life—feasting, imbibing, and embracing leisure. These guests, undeterred by soaring prices, illustrate the undeniable reality: costs have escalated considerably compared to a year or two ago.

So, where's the recession hiding? My eyes catch no glimpse of it. But let's pause and consider the standard definition of a recession before dissecting why it won't be knocking on our doors anytime soon.

A recession denotes a significant economic downturn within a nation or globally. This downturn features a contraction in gross domestic product (GDP), diminished consumer spending, reduced business investments, escalating unemployment rates, and other markers of economic decline. While a normal part of economic cycles, its repercussions ripple through various societal facets.

News may have swirled about Germany and The Netherlands recently stepping into a recession, yet my friends living in Germany haven't mentioned their jobs being imperiled. In fact, I stumbled upon a report today stating that Germany just voted to elevate basic income for asylum seekers and the unemployed by 12%. Such initiatives hardly align with a recession narrative.

Curious about the sectors hit earliest by a recession, I consulted ChatGPT, and here's the outcome:

Here in our neck of the woods, these two indicators remain unscathed by any recession. A more detailed perusal of real-world data corroborates that real estate and construction in my country are far from crippled. So, the question persists—where is the elusive recession hiding?

Ironically, the very expectation of a recession could be its undoing. Investors, including those in the crypto realm, often sideline themselves, anticipating a recession as an opportunity to augment their portfolios. Unfortunately, they might stay parked on the sidelines until the market's zenith.

When the S&P500 and Bitcoin eventually peak—successively or in tandem—only then might a recession rear its head. Or perhaps not. Regardless, if you've strategically locked in some profits during the current bull run, navigating a recession's challenges should prove more manageable. It's a truism: when the masses anticipate something, it often fails to materialize.

Did we foresee the black swan of 2020's pandemic? Hardly, yet it consumed two full years of our lives. Could anyone have predicted Bitcoin's resurgence to $20,000 post-pandemic? Not many, but the crypto sphere was treated to an impressive bull market, capped by a resounding $69,000 all-time high for the golden cryptocurrency. Will history repeat itself this time? Place your bets...

And before I conclude, permit me to highlight that those assessing recession status via traditional methods are overlooking significant "side data." A forthcoming post will delve into the emergence of parallel economies, which, in my opinion, these assessments often miss.

Oh, and one final note: to my modest understanding of economics, simultaneous unregulated inflation (which we're undoubtedly witnessing) and a recession are incompatible bedfellows... What's your perspective?

Thanks for your attention,
Adrian