The United States is currently experiencing one of the largest periods of economic prosperity in its history. Stock markets are up, unemployment is down, and many people are finding that their financial prospects look more promising than they have in years. However, many prominent economists have warned of turbulent waters ahead because of a host of signs that the booming economy may be ending soon. To advise readers on the potential upcoming collapse, leading gold distributor U.S. Money Reserve has released an informational e-book on the subject. The resource identifies three main factors that may trigger a financial crisis and details their causes in the current economic climate.
Before diving into an assessment of a possible economic crisis, U.S. Money Reserve analyzes past troubles with the economy, notably the recession that began in 2008. While past recessions have been attributed to a wide range of economic factors, such as panic, trade restrictions, and speculation—in its e-book, U.S. Money Reserve identifies four specific factors that are generally recognized as the causes of the most recent recession. These factors are securitization of loans, deregulation, Federal Reserve rate adjustments, and subprime lending. In essence, a lack of oversight for financial institutions, along with reckless lending practices and easy access to credit, helped fuel the calamitous real estate and banking collapses.
In the wake of the downturn, many economists have turned their eyes to the causal relationship between the collapse and the economic practices that preceded it. The central question in their studies is whether or not the downturn was rational, meaning whether it could be seen as a logical extension of economic and fiscal practices at the time. The answer to that question has since been widely accepted as a resounding “yes.” Though economic downturns may not always be predictable, they do seem generally rational—and, as such, we may have ways to forecast such an event before it occurs if armed with the right information. In the e-book, U.S. Money Reserve goes on to identify the three main warning signs that indicate the country may once again be heading for economic difficulties.
Warning Sign #1: Fed Monetary Policy
The first concerning trend that U.S. Money Reserve identifies is the Federal Reserve’s current interest rate policies. Many economists believe that the Federal Reserve has sweeping power to affect and subvert economic downturns in the country. For this reason, many feel that changes to its main policies could be a major determining factor regarding whether the current positive economic conditions continue. Because the organization raised interest rates in the wake of the historic lows that followed the recession, many question whether the extra cost of borrowing money will now affect sectors of the economy that have benefited from cheap lending practices. The housing industry, which is seeing prices in some areas that have even outpaced their pre-recession highs, is a prime example.
At the core, this issue is predicated on a very simple idea. In the wake of the recession, the Federal Reserve created excess liquidity to fuel the recovery. This, on the whole, was very successful and has contributed to the positive economic indicators the country is currently enjoying. But as the Federal Reserve implements monetary policies that restrict access to capital, many wonder if a reduction in liquidity may trigger a return to another recession.
Warning Sign #2: Lending and Regulation
In the wake of the 2008 financial crisis, regulations placed on banks and other lending institutions increased substantially. These regulatory policies were put in place in response to the discovery of predatory, irresponsible, and risky actions that contributed heavily to the downturn in the first place. As evidence of just how harmful some of these practices were, U.S. Money Reserve points to the historical increase in foreclosures following the crash. The 2009 foreclosure rate, which was more than four times higher than the pre-crash rate, illustrated how freely banks had doled out money to borrowers severely lacking in credit requirements.
In response to these actions, the government enacted regulations, such as the Dodd-Frank Act. These regulations were designed to reform irresponsible financial practices on Wall Street and protect consumers in the process. With this type of increased government oversight, the hope was that the financial industry would never again descend into such severe malpractice. However, recent changes in government have largely removed these restrictions, including the Dodd-Frank Act. With the removal of government oversight, many worry that the financial industry is again heading for an unsustainable situation regarding lending practices and other financial policies.
Warning Sign #3: Protectionism
The final topic highlighted in the resource is the slew of recent government policies aimed at “protecting” the U.S. economy from outside forces. These policies have emerged in a variety of ways, such as trade conflicts between the U.S. and a host of other countries, including China. Though the idea of prioritizing domestic goods and services over those that are foreign-made is tempting, many economists fear that such policies may inch us closer to a trade war that will ultimately have a devastating effect on trade and the economy in general.
The prospect of such a full-scale conflict is especially damaging to U.S. businesses that rely on foreign imports to supply needed materials for their operations. As the U.S. enacts tariffs on foreign goods, an increasing number of retaliatory tariffs are enacted by other countries in response. One of the fallouts of this is that prices for a range of consumer goods are increasing, and many Americans are finding that their dollar doesn’t go as far as it once did. If these practices continue, it could signal economic trouble on the horizon.
U.S. Money Reserve Up Close
With a history of providing customers with both quality precious metals and reliable information about purchasing them, U.S. Money Reserve has emerged as a company that is well-placed to advise on the current economy. In fact, it is the only gold company headed by a former director of the U.S. Mint, Philip N. Diehl. Owing to his unique career, during which he has both worked at some of the highest levels of government and advised everyday consumers, he brings a skill set that sits right at the nexus of public policy and personal fiscal strategy. With his economic philosophies leading the company, resources such as the recent e-book have become a wealth of information for buyers seeking guidance in a changing economic landscape.
Preparation for a Downturn
U.S. Money Reserve has suggested that buyers handle the possibility of a downturn by seeking out and investing in assets that have typically performed well during difficult economic times. The company highlights precious metals ability to serve as a store of wealth and source of profit potential over time. The price of gold, for example, has increased by more than 375 percent since the year 2000. This type of preparation before a downturn could help buyers to preserve their purchasing power.
Although the economy is currently performing well and markets are up, it is important to consider the possibility of a downturn in the near future. In fact, many economists are warning that such a downturn is likely to occur sooner rather than later. In the recently released resource, U.S. Money Reserve highlights three of the main indicators that may signal such a collapse. Those worried about the possibility of a new recession should review the above points and consider how a holding in precious metals may help protect individual wealth.
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