The Booming Global economy over the last decade is slowing down. Why you should be very concerned and prepared as the 2020 recession arrives.
Inverted Yield Curve: An inverted yield-curve occurs when long-term debts have a lower yield as compared with short-term debt. In other words, an inverted yield curve marks a point on a chart where short-term investments in U.S. Treasury bonds pay more than long-term ones. When it costs more to borrow long term versus short term debt….this means we are officially in a recession. The Washington Post has a great article published about current efforts to artificially prop up the economy is futile due to the historically consistent pattern of the Inverted Yield Curve through every recession the US has known.
Trouble in Europe: The German economy is stalling after decades of an unprecedented boom. “The bottom line is that the German economy is teetering on the edge of recession,” said Andrew Kenningham, chief Europe economist at Capital Economics. The immigration issue, coupled with environmental concerns, the German auto industry's decline in demand, China, among other socio-economic and cultural issues, BREXIT, and a changing of the guard has been the perfect storm. But will it be enough? As the United States economy appears to slow, China loses momentum and Brexit looms, can Europe dodge a downturn?
A slowdown in Europe would be another drag on America’s economy at a time when bond markets are already flashing warning signs. “The slowdown in growth is everywhere in the eurozone, more or less,” said Jörg Krämer, the chief economist at Commerzbank. “There is no decoupling.”
Brexit: UK GDP contracted by 0.2% between April and June — the biggest fall since the fourth quarter of 2012. Per the graph below….BAD SIGN!
Car plant shutdowns and the running down of stock built up before the original end of March deadline for Britain’s EU exit resulted in gross domestic product shrinking by 0.2% in the three months ending in June.
News from the Office for National Statistics of the first fall in quarterly GDP in six and a half years sparked immediate speculation that a further bout of Brexit jitters leading up to the new 31 October departure date could lead to a second successive quarter of negative growth — the technical definition of a recession.
China: First currency devaluation in years (decades). The Chinese, known to tightly control their economy rarely make such structural changes. Trade wars with the US and possibly its allies point to only one thing….a tightening global market. China announced this week that industrial production had hit a 17-year low in July. “China’s economy needs more stimulus because the headwinds are pretty strong and today’s data is much weaker than consensus,” said Larry Hu, head of Greater China economics at Macquarie Group in Hong Kong.
“The economy is going to continue to slow down. At a certain point, policymakers will have to step up stimulus to support infrastructure and property. I think it could happen by the end of this year.”
What next? Well, this will not be the first recession, though it may be one of the worst. The gig economy will be fine because when times are slow, people find side gigs.
“I am not an expert in Economics and I am not an expert in Law, but I am an expert in working on an empty stomach while wondering when and where the next meal will come from, I know what it feels like going to bed with a headache, for want of food in the stomach” — Lt. J.J. Rawlings
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