Will 2019 Be The Year Of Economic Collapse?



Investors’ Addiction to Low Interest Rates Will Trigger Economic Collapse in 2019

The interest rate alone cannot explain why 2019 could trigger a global economic collapse.

The first hint of trouble came when Janet Yellen left the Federal Reserve in February 2018. The new chair, Jerome Powell, sped up the process of lifting rates from near zero 10 years ago to 2.25% now.

But it’s a good place to start the narrative.

And while I’m still pondering why I’ve become so concerned about the higher chances of economic collapse, I will reveal a fact that few realize.

Nobody Really Knows How It Works

Economists and similarly inclined administrators and academics have no clue. They’re great at explaining things after the fact.

There’s a wealth of great books about the causes of the last recession or the Great Depression.

Sadly, however, economists, despite their mind-boggling equations that would bring tears of joy (or pain) to Albert Einstein’s eyes, don’t have what is known in the vernacular as a clue.

In other words, for all their knowledge and science (and it’s not their fault), economists don’t know what makes an economy grow.

And they don’t know what helps reduce debt. And debt is one of the biggest problems afflicting the U.S. economy.

Sure, tax cuts can work. But applying this solution, as Trump did in December 2017, often works better at encouraging families and individuals to spend more than inducing businesses in investing.

In fact, the tax breaks have contributed to lifting stock valuations to precarious heights.

Now, not even a year after the tax cuts were unveiled, the Dow Jones, the S&P, and the Nasdaq show a net loss in year-to-date terms. Clearly, the tax cuts haven’t resolved the problem of real growth.

And Then There’s the Federal Reserve

The Fed isn’t an elected body, accountable to Americans.

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Gary Anderson 2 years ago Contributor's comment

Making the Fed subject to the will of the people is risky. If the Fed knows business investment, or lack of it causes recessions, it is acting to escape the zero bound before it all hits the fan. The Fed is likely late in doing this. How much damage could result? With Trump's recklessness added on, quite a lot.