Experts at the Strategic Investment Conference 2018 have been discussing the possibility of another recession bigger than the fiasco in 2008. With consumer spending slowing down and debts at an all-time high, savings and investments have taken a big hit. How is this possible when statistical analysis show that unemployment is at the lowest it has been in the past 50 years?
Back in 2008, Peter Schiff, current Euro Pacific Capital CEO, predicted the American economic meltdown. He stated in an interview with the National Public Radio (NPR) that American consumers will eventually stop exercising their purchasing power in efforts to rebuild their savings.
When the economy depends on the consumers spending, the sudden halt will cause an imbalance that the recession would need to iron out. True enough, he was right. By that time both the government and private sectors started to restrict credit standards which crashed the real estate market, people could no longer afford to take out loans to pay for the houses they needed. In turn, the real estate market had to adjust to the consumer’s standards.
In a recent interview with Fox News, Dr. Doom (Schiff), stated that the crash in 2019 will be bigger and more difficult to recover from since it doesn’t only affect just one sector of the market but the entire economy itself. “This is a bigger bubble than the one that blew up in 2008”, he said.
According to statistical data, the unemployment rate has dropped by 3.8% – however, this does not guarantee that the economy would be in a good standing. The numbers tell a different story from what is actually happening in reality. Labor participation has been declining since the early 2000s and it has dropped to 66% in 2007 – this was right before the recession began. At the end of this year’s quarter, the US shows a 63% drop which may be caused by the large number of people going back to school, retiring baby boomers and women who choose to leave the workplace. The trend is all too familiar.
At this point, business leaders and investors are hoping for a resolution in the US and China trade war which would possibly infuse more money into the economy by the third quarter of 2019. However, Current US president: Donald Trump has been defensive about the criticism regarding the issue and seems to have no solid plan in providing a resolution for this particular problem.
Although he is scheduled to meet with Chinese President Xi Jinping soon. Stephen Moore, economic advisor to the White House stated that should President Trump be able to pull off a trade agreement with President Xi Jinping, market numbers will soar higher than anyone would expect. However, the deal in question seems to remain uncertain.
President Trump blames Democrats for the looming disaster about to happen by stating “The prospect of presidential harassment by the Democrats is causing the stock market big headaches!” We would just have to wait and see if the President will take action to boost the growth of the economy to soften the blow on his citizens or play the blame game while the economy crumbles under his watch.
Some experts like Greg Valliere, Horizon Investments Chief Global Strategist says that the talk of another recession may be too soon. With elections just around the corner, he believes that this would be the stimulus the president needs to finally cut a deal with China to boost US markets.