Are We Headed for The Next Global Economic Meltdown?




Economic meltdown is about to be repeated

“Those who cannot remember the past are condemned to repeat it.”- George Santayana, 1905.

The history repeats since most refuse to acknowledge the mistakes from the past. There are mistakes like the melting of the glaciers that we neglect. It is because of the consequences that seem distant.

But why are we prone to jump into the new economic meltdown over and over? The effect on the world economy is immediate and terrifying. But it repeats itself.


Crisis and the world economy


The last crisis happened since banks allowed people to take loans for their new homes. For 100% or more of their value! But when banks realized they must cover the loses, they stopped lending to other banks. Interbank interest rate (LIBOR) rose, and this caused the 2008 financial crisis.

The mortgage crisis that caused the last crisis is not likely to happen. Also, thanks to renewable energy, oil consumption is not changing.
But there are many influences on the world economy.

We have seen stable global growth in 2017. But financial experts project the slower growth for the rest of 2018 and into 2019. What is causing this?

Politics impacts on the economy

Politics and policies are a significant factor in the financial status of the world. The trade war between US and China is having its impact on the whole world.

US

They are using tariffs to reduce the trade deficit. Because of that, Trump imposed higher taxes on products from China. At the same time, US fiscal policy is expansive, and their monetary policy is restrictive. And inflation has the fastest rate in the last six years.

China

The Chinese currency, YUAN, is depreciating. It is because China is trying to offset the impact of the US tariffs. The investment growth in China had a record low in 2018. And China can't use public spending due to its mounting debt of 300% of its GDP.

Eurozone

Politics was a cause for Trump's doubling of aluminum and steel tariffs on Turkey. Now, Turkish lira is at its all-time low to a dollar. The situation close to EU borders could trigger another crisis in the eurozone. Combine this with Brexit, immigration and the Italian debt, and you have a powder barrel.

What will happen in the economic meltdown?

The economic recovery is in its 10th year. But the signs of the new crisis approaching are evident. It seems that the timing and the effects are hard to predict.

Since we are in an information era, the news will travel fast. Frightened investors in the US withdrew $140 billion back in 2008. As a result, money markets didn't have enough cash for everyday operations. This time, it will happen faster.

Banks caused the last crisis, and many of them closed. With a disastrous effect on the economy. And if the crisis hits again, they can close again. J.P. Morgan had a 100% growth since the last crisis.

One is for sure - if the crisis happens, it will happen fast.


Conclusion


What goes up, must go down. Since the history is repeating, the economic meltdown will happen for sure. It seems that the beginning of 2019 is its timing according to experts.

There are many influences on the world economy, and politics is one of the greatest. It influences tariffs, taxes, and the stability of investments. So, the effect is devastating.

If the economic crisis happens, banks will close, and there will be no cash for the business to operate. Global information era will cause global panic, too.

Since cash will hold no value, one would better hold on to the gold. Or crypto, as some say. It will be hard to tell what the best choice would be.

Are we headed to the economic meltdown? The future has the answer!.

Comments