The symptoms are always a piece coming out of the big picture, but they are not hard to spot.
What are the signs?
- U.S. vs. China trade war
Politics are the number one cause of economic changes in any country, and the relationship between the U.S. and China proves it.
The president of the United States of America began his "America First" campaign a few years ago. Part of the campaign is about fighting steel dumping, and the president imposed a 25% import tariff on steel against China, India, Canada, Mexico, and the EU.
This means that the focus has been all over China since then, and President Donald Trump has even blamed Beijing for undercutting goods from the U.S. with undervalued currency.
- The U.S. growing slowly
The president of the United States, Donald Trump, has inherited a buoyant economy, and his income tax cuts acted as a sugar rush that boosted the economy further. The U.S. Federal Reserve was able to increase interest rates as a result, while the economy was expanding strongly.
However, 2019 was all but smooth, and it seems the Fed rate hikes contributed to cooling off the economy. Industrial production in the U.S. and the manufacturing sector are in decline for the very first time in a decade.
- German recession
Germany has been on economic turbulence, and the finance minister has raised expectations to boost the economy and head off an upcoming recession. Many analysts are expecting Olaf Scholz's extra cash to be a little late to prevent negative growth, which is the very definition of a recession.
- Chinese debt
Since the 2008 financial crash, China has been extra gear for the global economy, but the country has a full-blown debt crisis going on.
Banks are weighed down by loans, state industries have borrowed a lot, and each time Beijing has to try to rein in excessive consumer and corporate lending, the global economy starts to wobble.
Uncertainty is the first symptom of something going wrong when it comes to politics and the economy. And all the mystery surrounding the future of Britain and whether it reminds one of the world's largest trading blocs or not have already started to damage investment and growth of GPD.
The most significant factor here is whether or not the UK leaves the EU without a deal. If it does, the damage can be brutal.
- Venezuela, Argentina, South Africa, Turkey and Iran
A group of countries are going through a recession currently, and some have already suffered a contraction. Argentina is weighed down by debts, Iran faces a blockade by the U.S. and Venezuela in political and economic crisis, to say the least. International investors don't overthink about these countries since South Africa and Turkey represent a more significant problem since they are more integrated into regional and international markets.
- Jitter in the financial markets
Currently, the stock markets in the U.S. and Germany are at historically high levels, but we have to remember that bond markets are more jittery.
- Bank capital shortening
Nowadays, the financial system can work differently, and if one of the big banks fail, despite the reforms enacted after the 2008 crisis, the system would be still working great.
Some economic analysts do not agree with this. Still, the U.S. Treasury Department has done independent research and has found no problems regarding the future if one of the big banks fail at any given time.
- Private debt
One of the biggest triggers for the next financial crisis can be soaring private debt. Credit cards, loans, and general corporate debt are in the same bag. We need to remember that secured lending being backed by an overvalued asset is a concern.
- Federal deficit growing
The federal deficit growing is a significant concern, mainly because it is the perfect formula for the next economic downturn, whether or not the country has enough arms to fight back.
- Alarming student debt
Another disturbing fact for the next couple of years is the sudden rise in student debts which can slowly become a leading asset to inflation.
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