Recessions are never isolated. The entire point of a bubble is that investment capital chases gains. In the 90s it was tech. In the 2000s it was housing. Now we're back to tech again.
When the bubble pops, all those invested in the space are hurt. That means hedge funds, pension funds, etc, and the effects will absolutely ripple through the economy. I doubt it'll be anything like 2008 (which was greatly exacerbated by derivatives trading and so forth), but it will be felt well beyond the valley.
are there really a lot of pension funds investing in 0-revenue startups in SV? That seems like a place I really don't want my pension.
EDIT: [1] I lost a lot of money on my house that I bought in 2008 and sold in 2014. It sucked. I can't imagine my next house losing money because snapchat goes out of business....
But that's not what we're talking about. We're talking about a bubble bursting. That's a lot of value going out of the economy, and a lot of people losing money. That makes investors in general pull their money back. It creates an economy wide recession.
I feel like I made reasonable assumptions as to why those things wouldn't happen. If you think that's not the case, at least provide an argument as to why they would, as opposed to stating it as fact.