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A comment on How to Prepare for a Recession. Parent comment

Re:How to Prepare for a Recession by TekMol on Friday March 18, 2022 @10:27AM (#30722685) 

    The "money" in the economy is actually mostly credit,
    and during a recession it contracts
What arguments are there to support the theory that a recession (decline in overall productivity) causes the amount of credit in the system to shrink?

From a look at the M2 and M3 money supply, there never seems to have been a contraction:

https://fred.stlouisfed.org/series/M2

https://fred.stlouisfed.org/series/MABMM301USM189S

That seems to be a pretty strong argument against the money contraction theory.

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Re:How to Prepare for a Recession by atwebb on Friday March 18, 2022 @10:44AM (#30722925)
Another example (I am no expert) is a margin call.

If I am purchasing using $100k of margin and my collateral drops to the point that I no longer have the margin. That 100k is gone. It wasn't a real 100k in the first place, it was leveraged and backed by a volatile asset.

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Re:How to Prepare for a Recession by analyst74 on Friday March 18, 2022 @10:32AM (#30722748)
Fractional reserve.

Also, recession causes people to spend less and save more. Further reducing demand.

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