For some time now, the global economy has been expanding at a very healthy rate. 2019, however, has seen the economy slow dramatically. In fact, some of the markers that measure the health of the global economy are now down to levels not seen since the 2008 financial crisis. To better inform readers about what to consider in light of this slowdown, U.S. Money Reserve, America’s Gold Authority®, has released a new resource entitled “The Big Easing.” Read on for a look at the information in that resource and how it may benefit you.
Evidence for Slowdown
To explain the magnitude of recent economic changes, the resource from U.S. Money Reserve first takes a look at the organizations tasked with monitoring such events. The International Monetary Fund is one such establishment that has recently come out with warnings on the state of the economy. In a report from July 2019, the organization calls growth “subdued” and points to a range of reasons for why the change has occurred.
The Organization for Economic Co-operation and Development (OECD) is another group that has lowered its expectations for future economic performance. This intergovernmental organization was founded in 1961 to stimulate economic progress and trade across the globe. Its most recent forecast for growth, a mere 2.9 percent, reflects a general pessimism that is evident across the world at large. That again is the lowest rate since the 2008 financial crisis and represents a marked decline from its estimate of even a few months prior. Clearly, both organizations, as well as many more, are predicting dire times ahead for the global economy.
Effect of Interest Rates
Naturally, in light of the above forecasts, one might be inclined to ask what has caused this economic slowdown. That, of course, is a complicated question, but one school of thought points to the deleterious effects of low-interest rates. Typically, low-interest rates are perceived to have a stimulating effect on the economy. After all, when rates are low, borrowing and spending go up, which can raise economic fortunes for many. This scenario, however, can also have a number of downsides if not kept in check.
Many have warned that low-interest rates can also lead to increased risk-taking and the accumulation of large amounts of debt. It may also negatively affect the stock market by contributing to speculation bubbles. In fact, there is some concern that a potential bubble may not be limited to the stock market but could extend to broad portions of the economy itself. Such an effect might end up contributing to a drop in economic growth through shell companies propped up by nothing more than large amounts of debt. Some fear that, as the unstable nature of these companies becomes increasingly apparent, this may trigger further downturns in economic stability.
In addition, current interest rates are causing many to doubt the policymakers behind the world’s reserve banks. Low-interest rates are usually put in place to help stimulate growth and create jobs, but critics point out that unemployment and economic growth rates have been historically favorable of late. Since banks are keeping interest rates low despite these developments, some have wondered if the policies are now serving only to prop up weak economies. If so, a widespread concern is that these policies could leave the world overly vulnerable when it comes time for the next downturn.
Trade Policies
Another area of focus in the resource from U.S. Money Reserve is the policies centered around trade between the United States and China, the world’s two largest economies. Until recently, the U.S. had applied tariffs on roughly $550 billion worth of goods coming out of China. This list included electronics such as smartphones, toys, steel, and aluminum. These tariffs had negative effects on Chinese companies and business professionals seeking to export their products to the U.S. In retaliation, China had applied tariffs to around $185 billion worth of goods coming out of the U.S., which included wine, airplanes, soybeans, and other major exports. Those tariffs had similarly negative effects on many U.S. industries.
While these policies have had clear effects on the two leading economies, the ramifications do not merely stop with these countries. The economies of many other countries rely on exports from the U.S. and China, and when these countries experience economic setbacks, so do the economies of countries to which they are connected. This can take direct forms, such as interruptions of supply chains or disruptions in import and export operations. It can also take more nuanced forms, such as downturns in business confidence or capital expenditure.
Regardless of the form they take, trade tensions between the two countries have many economists feeling that the tariffs are beginning to have alarming effects on the global economy at large. In response, major players in governments across the world are calling for an end to the trade confrontation. If these calls are not heeded, many fear that current policies could lend momentum to an eventual global economic downturn.
Learning From Past Downturns
Economic downturns are nothing new, and valuable insights can be gained by looking to the past and seeing how rocky times have been weathered previously. Of course, the most recent downturn was the 2008 financial crisis, which had far-reaching negative effects. One of these effects was a change in GDP, which suffered its biggest drop in 26 years during the time of the crisis. This was partly because of a fourth-quarter drop in economic activity of more than six percent. For reference, that financial crisis represented the first recorded time that global GDP experienced negative growth.
These insights are important because they can begin to paint a picture of what can happen in the future if the economy continues to slow. With falling GDP and other relevant factors, one can easily imagine how confidence in various aspects of the economy may also diminish. This type of uprooting in confidence could lead to a sense of fear or malaise that could impact consumers, businesses, and households across the world.
Precious Metals
In light of this impending turmoil, many may be left searching for methods to protect their wealth and safeguard against difficult economic times that may be on the horizon. One asset to consider in this regard is gold. The price of the precious metal rose more than $800 an ounce during the 2008 financial crisis, hitting an all-time high of $1,923 per ounce. This was at a time when many other assets, such as real estate, were struggling and had lost much of their profit potential.
Consumer confidence in gold is also strongly in the metal’s favor. According to Gallup, from 2011 to 2014, Americans said that they had more confidence in gold than they did in real estate, savings accounts, and even stocks and mutual funds. The asset also holds its upside internationally since it is not linked to any one country or economy. It is also widely known as a store of wealth that can provide long-term benefits and help diversify an individual’s holdings. These are just some of the reasons why many are purchasing gold in advance of possible economic difficulties.
While the economy has been performing well in recent history, the past tells us that we should expect future economic downturns. Many economists are already warning that some of the factors they see now may be contributing to such a downturn. Information contained in the new resource from U.S. Money Reserve shines a light on these possibilities. With this information, along with an overview of the potential positive outcomes of owning gold, consumers are better able to take their economic fates into their own hands.
About the Company
U.S. Money Reserve is a leading gold company based in Austin, Texas. The company has a long history of tailoring its work to the specific needs of its clients’ diverse portfolios through the influence of the company’s president, Philip N. Diehl, who previously served as the director of the U.S. Mint. Under his leadership, Account Executives provide information that takes into account the nuances of both public policy and personal financial freedom. Because of this dedication, the company has earned an AAA rating from the Business Consumer Alliance.
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