Hey everyone, I know this isn't a topic that anyone seems to want to touch on. I get that it's scary, but this has been weighing on my mind for a couple of months now; and I need a little input for personal preparation. Anyway, it seems to me that financial experts are avoiding talks about the impeding financial recession we're soon to face. There are signs of it everywhere, and they may talk about the signs, but no one seems to be putting two and two together. I understand that it's a scary topic, but fear leads to ignorance, and an eventual repetition of the same things that built that fear in the first place. So, today, I'm finally going to bring up the topic, let you know my views, and hopefully get some feedback from you guys that lets me know if I'm looking at all the different factors I should be. So, let's get started shall we?
Over-inflated Financial Markets
One of the first things I looked at when I came to the conclusion that we're heading down a path to the next financial recession within the next year is financial market data. Throughout the past several years, we've been living, eating, breathing, and sleeping the bull market. In the last couple of months, we've watched the Dow Jones Industrial Average and the S&P 500 both break records. The only problem is that growth in the value of underlying assets isn't moving as quickly as growth in stock prices! Is it just me or does anyone else notice that one of the biggest stories in investing news right now is the possibility of a market correction soon to come?
OK, I know you remember this one. Anyway, remember when the housing market bubble started to burst in 2007-2008? As a matter of fact, this was one of the single most blamed factors for the financial recession. Does it seem like the same thing is happening again? To many central banks around the world it does! As a matter of fact, one of the biggest warnings we've been getting from central banks lately has been warnings about the danger asset bubbles pose to the economy.
This one's interesting as well. We all know that the Federal Reserve has enacted a economic stimulus plan that includes lower rates and bond buying. The process is called quantitative easing; and it's one of the core reasons our economy has been able to recover (at least for the most part) from the last economic recession. However, it's important to remember that these stimulus plans come with expiration dates. Although the Federal Reserve can make the decision to taper the easing over time, at some point, it's got to stop entirely.
Every month or so, we start to see investors getting the jitters as Janet Yellen positions herself for her next press release. The investors are concerned that we'll start to see stimulus plans tapering off early. So, what exactly is going to happen when the quantitative easing plans expire before the end of this year?
When we think back to the last economic recession, there are a few things that we point to...the stock market, the housing market, the war. Right? Doesn't geopolitical turmoil eventually lead to financial turmoil?
If you're a news junkie like me, you can't help but shake your head every time you turn it on. We've got the conflict between Russia and Ukraine reaching a boiling point. As a matter of fact, just last week, the US and EU expanded sanctions against Russia causing economic problems in Germany and the rest of the Eurozone.
As if the Russia/Ukraine issue wasn't enough, all you need to do is look to the Middle East to find more. ISIS is rampaging through oil rich lands as terrorist groups rampage Israel with rockets! Is it just me or are we watching the beginning of worldwide Geopolitical tensions?
Am I Crazy Or Are The Experts Blind?
I would imagine that signs of an upcoming economic recession would be big news. You know, the kind of news that could lead to action, and a possible avoidance of the issue entirely. Unfortunately, that doesn't seem to be the case.
In my eyes, the signs are all right in front of our faces. It's almost an exact repetition of issues we saw 7 years ago; just under different circumstances and with different victims (On the geopolitical end of things).
So, here's my question to you...Does anyone else out there think that we're on the verge of the next economic recession? Are you aware of any of the issues above...if so, do I have them right or is there something I'm missing?
Great Posts From Around The Blogosphere
I'm Striving To Be Just Like You - Even Steven rocks, and in this post, he describes who he's striving to be like. He also wants a shot at the MVP...should I give him a nomination? You be the judge, let me know in the comments below!
Fatherhood: Still My Favorite Job - The new FI baby has finally made her appearance, and she is absolutely adorable. In this post, the FI Pilgrim talks about why fatherhood is still his favorite job and writes an incredibly touching letter to his new baby girl! Congrats...I wish the FI family all the best!