Modern Economic Nonsense — Recession is coming

xuanling11
Coinmonks
Published in
6 min readJun 13, 2022

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The global economy is a house of cards. The 2008 financial crisis was just the first sign that things were not well. Since then, central banks have been artificially stimulating the global economy through quantitative easing and record-low interest rates to prevent another recession. But these measures cannot go on forever. When interest rates reach their lowest possible point, there’s no further that they can go down. With most central banks now ending their QE programs, we are approaching the end of an unprecedented period of monetary stimulus that has kept the world afloat for nearly a decade after the last recession. What comes next will be very different from what we’ve experienced so far. In a recent interview with Dutch newspaper De Volkskrant, billionaire investor Warren Buffett warned that “the next recession will come sooner than people expect” and will be more severe than in 2008 because monetary policy has backed up against its limits. Markets remain overpriced, he said, and artificial stimulus won’t work for much longer. “We are sitting on a keg of dynamite that will explode sooner or later,” he said. This time, the recession is not because we are running into economical trouble, it is we are having too much wealth!

Why is the next recession coming?

The global economy is currently growing at the slowest rate in the last five years. A marked slowdown in the Chinese economy, heightened trade tensions, and uncertainty surrounding Brexit have dented global growth. This can be seen in weaker trade growth, declining corporate earnings, and a slowdown in global investment. The US economy, the world’s largest, is also facing headwinds. The recent stock market turmoil in China and the US-China trade war have only added to the picture. It is important to remember that the Chinese market was already grappling with a slowdown in economic growth and a real estate slowdown, both of which had a negative impact on the stock market. The US market, meanwhile, has been in the grips of a bear market for months, with the S&P 500 hovering at around the same level as it was back in October 2017. Worst, the US printed much money to cover the Pandemic downturn and to carry more debts that cannot be erased easily without possible economical contractions.

Record-high household debt…

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