The financial crash of 2008 crippled the world economy and marked the beginning of a very difficult period for people all over the world. Jobs were lost, companies folded, governments struggled. 9 years on, things are finally on the up again. Unemployment is dropping and the markets are stabilizing, but we aren’t out of the woods yet.
I don’t make a habit of listening to the comments of Donald Trump, but his claim that the world is heading for another financial crisis could have some truth behind it. I wish I could say it was just him that has claimed this, but it isn’t. Analysts and journalists across the world are starting to warn us of an impending crash that could be even worse than the one we experienced in 2008.
According to experts, the downturn started at the end of last year. Some disagree with this analysis and say that it’s nothing more than a normal blip that will soon pass but there are indicators that we’re on the cusp of another crisis. As a business owner, you need to make yourself recession-proof right away so if the predictions do come true, you reduce the negative effects and hopefully survive until the economy recovers again.
Creating more than one income stream is the best way to get out of a financial crisis, especially if your main product is a luxury item that people are unlikely to buy during a recession. You also need to start streamlining the business and cutting costs as much as possible ahead of time. You can do all of those things but the easiest way to protect yourself is to know when the storm is coming, so what are the indicators of an impending financial crisis.
The first major problem is that the banks are running out of government-approved tools for stimulating the economy again. The only options that they have left are unorthodox and very risky. They could implement a policy called helicopter money whereby banks create liquidity through new money and distribute it amongst their customers. There’s also the possibility that they could introduce negative interest rates to smaller banks but this is likely to be followed by restrictions on cash withdrawals. Neither of these options is particularly viable but there might not be another way for them to sustain the economy.
We live in a culture of debt and it’s very dangerous, but nobody is talking about it. We’ve come to accept it as a natural part of life that we shouldn’t worry about too much. That’s a risky attitude to have because of the amount of debt, both public and private, is ridiculously high. There’s a danger that the bubble will burst and people will start defaulting on loans left right and center, which was one contributing factor in the 2008 recession.
This causes issues for two reasons; firstly, lots of private companies that are owed money will have severe cash flow problems if all of those loans aren’t repaid. Secondly, governments will not have the cash they need to stimulate the economy if they’re in huge amounts of debt themselves. These debts are growing and growing and it’s unlikely that the current situation will sustain itself forever. When it all comes to a head, we could see a huge downturn in the global economy.
The political climate always has a big impact on the global economy and at the moment, we’re right in the middle of a very unstable period with a lot of drastic changes happening. Britain has recently voted to leave the European Union and nobody knows quite how that will affect the economy of Britain, Europe, and the world as a whole.
An increasingly unstable military situation in the middle-east could also have far-reaching effects on the economy if nations are increasing the amount of their budget that goes toward their military. With terror attacks on the increase all over the world, there is no telling how that situation will play out in the long term and the effects it could have on the economy.
The political reorganization in the wake of the 2008 financial crash saw the creation of lots of institutions in Europe with the aim of better regulating the economy. That sounds like a good thing but so far, they’re untested so we don’t know whether they’ll actually work or not.
The general consensus in the media is that the economy is recovering and we’re headed for good times. It would be great if that were true but experts are starting to say otherwise.