Have Easy Money and Cheap Credit Finally Come Home to Roost?
It’s December, and we suddenly find ourselves in the last month of 2019 with the holiday season well underway. Ready or not, the year will come to an end in a matter of weeks. For some it has been a good year, for others it has been a year of hard work and hard lessons. In terms of money and finance, 2019 offers critical clues as to what to expect next.
During the past year, the U.S.-China trade war exposed cracks in the global economy. Suddenly, everyone seemed vulnerable from U.S. farmers, to Chinese manufacturers, to German automakers. The yield curve inverted, business investment began to sag, and wage growth all but stalled. Wall Street turned downright fitful as intraday market volatility reached levels not seen in eight years. And a decade of easy money and cheap credit came home to roost as the world’s debt pile grew to almost three times the size of global output.
We have now come face-to-face with the limitations of monetary policy as interest rates around the world remain fixed at historic lows leaving central banks painfully short on ammo.
Let’s not forget the forces of wealth inequality, waning corporate profits, economic contractions (in the EU, Asia, and Latin America), the looming Brexit fallout, and the repercussions of America’s deep, political divide. The potential impeachment of a U.S. president casts tax policy, corporate regulations, and capex spending into a sea of doubt.
Despite a record-setting stock run and a chart-busting U.S. expansion, uncertainty is undercutting confidence in every nook and cranny of the financial world.
The U.S. manufacturing sector remains in a contraction, national debt has ballooned to unsustainable levels, CEO confidence is slipping, and private sector job growth has slowed. Financial leaders and policymakers around the world are recession-proofing their companies, shoring up their reserves, and safe-guarding their capital in the event the downturn gains steam.
The story of 2019 is one of a ‘world disrupted’ — and the resulting commotion and chaos will carry into 2020.
Like all ‘Auld Lang Synes,’ the prospect of a new year brings familiar regrets, improbable resolutions, and a year of fresh risk. So, we remain on recession watch and brace for more volatility, increasing uncertainty, and steeper market losses.
Billionaires, hedge fund gurus and speculators from across the financial spectrum have expressed growing concerns about everything from negative interest rates and negative bond yields, falling inflation and evaporating liquidity, geopolitical risk and the collapse of the free market system. Others believe that we could talk ourselves into a recession. They’re unanimous, however, in their collective anxiety about how we’ll cope with the next downturn.
So, before you tune into Dick Clark’s New Year’s Rockin’ Eve, watch the Times Square ball wobble and drop, sip some extra dry champagne, and mouth the words to that song that no one really knows — it’s a good time to make a plan to protect your savings.
Along with the new year comes the reality of the unforeseen, the unexpected and any number of pressing issues that could crush consumer confidence and send us headlong into a full-blown financial crisis.
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