That’s the grim warning from Charles Hugh Smith. He identifies five factors that cause and/or contribute to economic troubles:
1. The business cycle … In [a] confluence of greed and euphoria, people over-borrow and put the money into marginal investments and speculations that unravel. Defaults rise, credit tightens, the mood sours and profits tank. Speculations crash, layoffs boost unemployment, consumers trim debt and enterprises work off excess inventory.
2. High energy prices … As consumers pay more for energy, they have less to spend on other goods and services. Discretionary spending falls, triggering a slowdown that dampens borrowing, speculation and the general mood. The virtuous cycle reverses and the slowdown become self-reinforcing.
3. Inflationary pressures other than energy. Central bank stimulus (opening the floodgates of low-cost credit) and federal stimulus (free money) both tend to generate inflationary pressure as a flood of new money chases the existing supply of goods and services.
4. Excessive debt-funded speculation. Loose credit tends to invite excessive speculation which fuels a wealth effect as speculative gains make us feel we can afford to spend more now that we’re richer. But speculative excesses inevitably reverse and losses generate a reverse wealth effect, dampening both speculation and spending.
5. Secular shifts in the economy. There are many potential sources for secular shifts that play out over years or even decades. Examples include: new global competition (1970s); currency devaluations; costs of cleaning up decades of pollution (1970s); financialization (1980s to the present), geopolitical shifts in alliances, social disorder, demographics (aging of the workforce, mass retirement) and sea changes in the distribution of income and power to labor and capital.
. . .
If there was only one causal factor nudging the economy into recession, it might be a mild, brief recession. But with all five conditions in confluence, this recession will be unlike any other.
There’s more at the link. It’s well worth reading.
Mr. Smith is far from the only economist predicting an imminent recession. Yesterday I mentioned “Mish” Shedlock’s warning that we should “Expect a Deep Recession to Start This Quarter or Early Third Quarter“. The warning signs are flashing all around us, and those who have not yet started to prepare for economic hard times are about to get a rude awakening. This is going to hurt all of us, and hurt very badly.
Yet another reminder: get together with like-minded friends and associates you can trust. Work together, make what joint and several preparations you can for hard times, and be prepared to help each other through them in any and every way possible. It’s going to be very difficult, if not impossible, to make it through this one alone. In unity there is strength.