The United States economy has been on a roller coaster ride in recent years. After the Great Recession of 2008-2009, the economy began to recover, but growth has been slow and uneven. In 2020, the economy was hit hard by the COVID-19 pandemic, but it rebounded in 2021. However, there are growing concerns that the economy is headed for a recession.
In April 2023, Russian Foreign Minister Sergey Lavrov said that over a dozen countries have applied to join BRICS. He said that the bloc is considering these applications and that it will make a decision on membership in the near future. This could signal that many emerging markets are ready for a change, and one with a lot of far-reaching economic consequences for the entire globe.
Economy: Are We in a Recession?
A recession is defined as two consecutive quarters of negative economic growth. The National Bureau of Economic Research (NBER), the official arbiter of recessions in the United States, has not yet declared that a recession is underway. However, there are a number of factors that suggest that a recession may be on the horizon.
Let’s cover the larger, non-BRICs economic risks first.
Top Five Problems That Could Trigger a Global Recession
The global economy is facing a number of challenges, including high inflation, rising interest rates, and the ongoing war in Ukraine. These challenges are raising concerns about a potential recession.
Here are the top five pressing concerns for the global economy:
Inflation is at a 40-year high in the United States, and it is rising in other countries as well. High inflation is eroding the purchasing power of consumers and businesses, and it is making it more difficult for businesses to make investments.
2. Rising interest rates
In an effort to combat inflation, central banks around the world are raising interest rates. Higher interest rates are making it more expensive for businesses to borrow money, and they are also making it more expensive for consumers to borrow money to buy homes and cars.
3. The ongoing war in Ukraine
The war in Ukraine is disrupting global supply chains and driving up energy prices. This is leading to higher inflation and slower economic growth.
4. The COVID-19 pandemic
The effects of the COVID-19 pandemic are still ongoing and disrupting economic activity. The pandemic and stimulus have also caused labor shortages and changed worker attitudes, which are making it more difficult for businesses to operate.
Geopolitical and social tensions are rising around the world, and this is creating uncertainty for businesses and investors. Uncertainty is making it more difficult for businesses to make investment decisions, and it is also making it more difficult for investors to allocate capital.
Additionally, recent well-established brands and retailers such as Budweiser and Target have lost billions from upset customer bases intent upon sending a message to the establishment.
BRICS Nations and Federal Reserve Could Spark a Global Recession
The BRICS nations (Brazil, Russia, India, China, and South Africa) are a group of emerging economies that have been growing rapidly in recent years. Their recent high-profile activity on the world stage have shaken some people’s faith in the invincibility of the US petrodollar.
As of June 1, 2023, there are no countries that have recently joined BRICS. The last country to join BRICS was South Africa in 2010. However, there are a number of countries that have expressed interest in joining BRICS. These countries include Argentina, Egypt, Iran, Indonesia, and Turkey.
The expansion of BRICS would be a significant development. It would signal the growing economic and political power of the emerging markets and would provide these countries with a platform to coordinate their policies and to challenge the dominance of the United States and the European Union.
Will a BRICS Currency Beat Out the Euro and Dollar?
While a unified BRICS currency may be a long way off, or even impossible, something far worse may have just occurred. In a move that could still greatly weaken the US dollar’s dominance in the global oil market, Saudi Arabia has agreed to sell oil in non-USD currencies. The announcement was made by Saudi Arabia’s Minister of Finance, Mohammed Al-Jadaan, at the World Economic Forum in Davos, Switzerland.
Al-Jadaan said that Saudi Arabia is open to pricing oil in other currencies, such as the euro, the Chinese yuan, and the Russian ruble. He said that the decision was made in response to the growing demand for oil from countries that do not use the USD.
The move by Saudi Arabia is a major blow to the US dollar’s dominance in the global oil market. The USD has been the de facto currency for oil sales for decades. However, the growing use of other currencies, such as the euro and the Chinese yuan, has been chipping away at the USD’s dominance.
The move by Saudi Arabia is also a sign of the growing economic and political power of China and Russia. Both countries have been working to reduce their reliance on the USD. China has been developing its own digital currency, the digital yuan, and Russia has been increasing its use of the euro and the ruble.
The move by Saudi Arabia is a significant development that could have a major impact on the global economy. It remains to be seen how the US will respond to the move.
What Saudi Arabia’s De-dollarization Could Mean for the Global Economy
The move by Saudi Arabia to sell oil in non-USD currencies could have a number of implications for the global economy.
- It could weaken the US dollar. The USD is the world’s reserve currency, and it is used to price oil sales. If Saudi Arabia starts selling oil in other currencies, it could lead to a decline in demand for the USD. This could make it more difficult for the US government to finance its debt and could lead to higher interest rates.
- It could boost the economies of China and Russia. China and Russia are two of the world’s largest oil importers, and they have been working to reduce their reliance on the USD. If Saudi Arabia starts selling oil in other currencies, it could boost the economies of China and Russia.
- It could lead to a more diversified global oil market. The current global oil market is dominated by the USD. If Saudi Arabia starts selling oil in other currencies, it could lead to a more diversified global oil market. This could make the global oil market more stable and could reduce the risk of supply disruptions.
The move by Saudi Arabia is a significant development that could have a major impact on the global economy. It remains to be seen how the move will play out.
Bad Timing for Real Dollar Purchasing Power and US Consumers
This spells doom as the Federal Reserve is already facing a difficult task. On the one hand, it needs to raise interest rates to combat inflation. On the other hand, it needs to be careful not to raise rates so high that it causes a recession.
The economy is already showing signs of slowing down. In the first quarter of 2023, GDP growth slowed to 1.5%. This was the slowest pace of growth since the second quarter of 2020, when the economy was in the midst of the COVID-19 pandemic.
There are a number of factors that are contributing to the slowdown. The housing market is cooling off, and consumer spending is starting to slow. The war in Ukraine is also having a negative impact on the global economy.
The Federal Reserve is aware of the risks of a recession. However, it believes that it is necessary to raise interest rates in order to bring inflation under control. The Fed is hoping that it can raise rates gradually and avoid a recession.
However, there is no guarantee that the Fed will be successful. If the Fed raises rates too quickly, it could trigger a recession. This would be a major setback for the economy and would have a negative impact on millions of Americans.
The Federal Reserve is walking a tightrope. It needs to raise interest rates to combat inflation, but it needs to be careful not to raise rates so high that it causes a recession. The next few months will be critical, and the outcome will have a major impact on the economy.
- Central banks need to raise interest rates gradually to combat inflation. However, they need to be careful not to raise interest rates too quickly, as this could lead to a recession.
- Governments need to provide support to businesses and consumers to help them cope with higher inflation and rising interest rates. This could include tax breaks, subsidies, and other forms of financial assistance.
- Businesses need to find ways to reduce their costs and pass on higher prices to consumers. This could include investing in new technologies, reducing waste, and negotiating better deals with suppliers.
- Investors need to be patient and selective when making investment decisions. They should focus on investments that are likely to be resilient to economic downturns.
By taking these steps, we can help to mitigate the risks of a recession and keep the global economy on track.
Here are some things that you can do to prepare for a recession:
- Make sure you have a financial cushion. This means having enough money saved up to cover your living expenses for at least 6 months.
- Pay down debt. The less debt you have, the less stress you will feel during a recession.
- Update your resume. Keep your resume up-to-date so that you are ready to start looking for a new job if you lose your current one.
- Network. Stay in touch with your professional contacts so that you have a network of people to turn to if you need help finding a new job.
- Stay positive. A recession can be a tough time, but it is important to stay positive and focus on the things that you can control.
Best types of investments that can help you weather a recession
- Cash. Cash is king during a recession. It will allow you to pay your bills and cover unexpected expenses.
- Treasury bills. Treasury bills are safe investments that offer a guaranteed return.
- High-quality bonds. High-quality bonds are also safe investments that offer a higher return than Treasury bills.
- Dividend-paying stocks. Dividend-paying stocks can provide you with a steady stream of income during a recession.
- Real estate. Real estate can be a good investment during a recession, but it is important to do your research and make sure that you are buying a property that is in a good location.
It is important to remember that a recession is not the end of the world. The economy has always recovered from recessions in the past, and it will recover from this recession as well. By taking steps to prepare for a recession, you can minimize the impact it has on your finances and your life.
More Bad Economic News: Germany Enters Recession as Inflation and War in Ukraine Take Toll
Germany’s economy shrank by 0.3% in the first quarter of 2023, marking the second consecutive quarter of contraction and meeting the definition of a recession. The decline was driven by a number of factors, including high inflation, the war in Ukraine, and supply chain disruptions.
Inflation in Germany is at a record high of 7.9%, and it is eating away at consumers’ purchasing power. This is leading to a slowdown in consumer spending, which is a major driver of economic growth.
The war in Ukraine is also having a negative impact on the German economy. The war is disrupting supply chains and driving up energy prices. This is leading to higher inflation and slower economic growth.
In addition, supply chain disruptions are also taking a toll on the German economy. The war in Ukraine has disrupted global trade, and this is making it difficult for businesses to get the goods and services they need. This is leading to higher production costs and slower economic growth.
The German government is taking steps to try to mitigate the impact of the recession. The government has announced a number of measures, including tax cuts and subsidies for businesses. However, it is too early to say whether these measures will be enough to prevent the recession from deepening.
The recession in Germany is a sign of the broader economic challenges that are facing the world. The war in Ukraine, high inflation, and supply chain disruptions are all taking a toll on the global economy. It is likely that the recession in Germany will be followed by recessions in other countries.
US Debt Ceiling: How Could It Affect the Global Economy?
The US debt ceiling is the maximum amount of money that the US government is allowed to borrow. The debt ceiling was created in 1917 as a way to prevent the government from overspending. However, the debt ceiling has become a political football in recent years, with Republicans and Democrats often using it as leverage in budget negotiations.
The US debt ceiling was last raised in December 2021. The debt ceiling is currently set at $31.4 trillion. The US government is expected to reach the debt ceiling in October 2023. If the debt ceiling is not raised, the US government will be unable to pay its bills and will default on its debt.
A default on US debt would have a number of negative consequences. It would likely lead to a financial crisis, as investors would lose confidence in the US government’s ability to repay its debts. A default would also likely lead to higher interest rates, as investors would demand a higher risk premium to lend money to the US government.
The US government is currently in talks with Congress to raise the debt ceiling. However, it is unclear whether Congress will be able to reach an agreement. If Congress is unable to reach an agreement, the US government will be forced to take drastic measures to avoid a default. These measures could include cutting spending or raising taxes.
A default on US debt would be a major blow to the US economy. It would likely lead to a recession, higher unemployment, and a decline in the value of the US dollar. A default would also damage the US’s reputation as a safe haven for investors.
The US government needs to raise the debt ceiling to avoid a default. A default would have a number of negative consequences for the US economy. Congress needs to act quickly to raise the debt ceiling and avoid a default.
Things to know about the US debt ceiling:
- The debt ceiling is not a limit on how much money the government can spend. It is a limit on how much money the government can borrow.
- The debt ceiling has been raised 88 times since it was created in 1917.
- The last time the debt ceiling was raised was in December 2021.
- The US government is expected to reach the debt ceiling in October 2023.
- If the debt ceiling is not raised, the US government will be unable to pay its bills and will default on its debt.
- A default on US debt would have a number of negative consequences, including a financial crisis, higher interest rates, and a recession.
- The US government needs to raise the debt ceiling to avoid a default.
And as always, times of conflict and uncertainty present ideal conditions for justifying making sweeping changes to the currency system itself.
Central Bank Digital Currencies and the Token Economy (Social Credit Score System)
Central Bank Digital Currencies (CBDCs) are digital currencies that are issued by central banks. CBDCs are still in the early stages of development, but they have the potential to revolutionize the way we think about money.
One of the key features of CBDCs is that they can be programmed to reward or punish certain behaviors. This is similar to the way that tokens are used in token economies in psychology. In a token economy, tokens are given to people for good behavior and taken away for bad behavior. The tokens can then be exchanged for rewards, such as food or privileges.
CBDCs could be used to create a similar system of rewards and punishments. For example, CBDCs could be programmed to give people more money for saving money and less money for spending money. This could help to encourage people to save more and spend less, which could help to improve the economy.
There is no shortage of potential risks associated with CBDCs. One risk is that they could be used to track people’s spending habits. This could be a problem for people who want to keep their financial information private.
Another risk is that CBDCs could be used to control people’s behavior. For example, a government could use CBDs to reward people for voting for certain candidates or for buying certain products. This could lead to a totalitarian society where the government has complete control over people’s lives.
Potential impact of CBDCs on the token economy from the field of psychology:
- CBDCs could make it easier to create and manage token economies. For example, CBDCs could be used to track token earnings and redemptions. This could make it easier for businesses and organizations to use token economies to reward good behavior and punish bad behavior.
- CBDCs could also make it easier to scale token economies. For example, CBDCs could be used to create a global token economy. This could make it possible to reward good behavior and punish bad behavior regardless of where people live.
- However, CBDCs also pose some risks to the token economy. For example, CBDCs could be used to create a surveillance state. If governments have access to CBDC data, they could use it to track people’s spending habits and control their behavior.
Overall, CBDCs have the potential to both improve and harm the token economy. It is important to carefully consider the potential risks and benefits of CBDCs before they are implemented.
So, what do you think?
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