The International Monetary Fund has cut the global economic outlook to the lowest levels we’ve seen since the Great Recession crisis of ten years ago. The bleak outlook was downgraded in light of new trade war information but could be the net result of people’s inability to recover completely from the last crisis.
“This is a delicate moment” for the global economy, Gita Gopinath, who recently became the IMF’s chief economist, said at a press briefing in Washington. A projected pickup in growth next year is precarious, she said. The world economy will grow 3.3 percent this year, which is a downgrade from the 3.5 percent the IMF had forecast for 2019 back in January. The IMF said Tuesday in its latest World Economic Outlook that the 2019 growth rate would be the weakest since 2009 when the world economy shrank. It’s the third time the IMF has downgraded its outlook in six months, according to a report by Bloomberg.
The financial crisis that wiped out a significant portion of the middle class back in 2009 was made possible by high-risk mortgages. And it seems like in America especially, the lessons of that financial disaster have not been learned, so we are destined for a historical repetition of that recession. Unfortunately, with 78% of Americans living paycheck to paycheck and roughly 80% having some kind of debt, another crisis could be right around the corner.
Most financial analysts believe that the next recession will be worse than the last, however, they also think we have some time. A series of encouraging developments have boosted optimism about the world economy in recent weeks. The decision of the Federal Reserve to put interest-rate hikes on hold and encouraging data from China’s manufacturing sector and the U.S. job market were a few of those positive aspects. However, making money inexpensive to borrow seems to be the constant that continues to get people in trouble. Debt is a double edged sword, without a doubt.
The IMF is warning that several risks are being blamed for their numbers being skewed lower. With a range of threats menacing the global economy, including the possible collapse of negotiations between the United States and China to end their trade war, and the departure of Britain from the European Union without a transition agreement, known as the “no-deal” Brexit scenario.
All of these things seem to have compounded into an event that caused the IMF to act more warily. “Amid waning global growth momentum and limited policy space to combat downturns, avoiding policy missteps that could harm economic activity needs to be the main priority,” the IMF said.
The IMF also slashed it’s U.S. growth to 2.3 percent this year, down 0.2 percentage point since the IMF’s last global outlook in January, while saying a recession will not happen in the near future. Most predictions still see a recession rear it’s ugly head toward the middle of 2020, while a few think we only have until the end of 2019.
Predictions are difficult, but preparing for the inevitable, whether it’s in 9 months or 18 months, will benefit those who have taken the initiative. Work towards financial freedom by paying off your debts and saving an emergency fund. Also, consider hoarding an alternate commodity such as canned goods, ammunition, Bitcoin, or gold and silver. Choose the one you think will help you the most after pondering the situation. Remember, all of those things are only worth the value OTHERS will subscribe to it.
Preparing for a financial meltdown is not too complicated, but it’s harder when you’re buried by debt and trying to do several things at once. Do thigs in order, and free up some much-needed cash. You’ll have the added benefit of working toward financial freedom as well.