10 Reasons the Next Financial Crisis Will Be Worse than the Last
The elephant in the room? The U.S. national debt exceeded $22 trillion on February 11, 2019. This is more than America's annual economic output as measured by its gross domestic product. The last time the debt-to-GDP ratio was more than 100 percent was in 1946 when the nation had to pay for World War II.
The U.S. Government has its Eye on Retirement Accounts. In 2010 Portugal seized
account assets to help plug holes with government deficits and debt. Ireland and France did the same
as did Poland in 2013. The U.S. government has been watching. Since 2011, Treasury has taken money
government workers’ pension funds on four separate occasions to cover deficits in federal spending.
billionaire legend Jim Rogers believes that private accounts will be the next ones the government
Top 5 US Banks Now Larger Than Before the Crisis. You learned about the five
largest banks in
the U.S. and their systemic importance as the unfolding financial crisis threatened to collapse
Legislators and regulators promised they would address this issue once the crisis was contained.
years after the crisis ended, the five biggest banks are even bigger and more critical to
than before the crisis began. The government made the problem worse when it forced some
so called “too big to fail” banks to absorb the failing ones. Any of these banking behemoths failing
be absolutely catastrophic.
Danger from Derivatives Threatens the Banks More Now than in 2007/2008. The
crashed the banks back in 2008 did not disappear as regulators promised. Today the derivatives
exposure of the
five biggest American banks is a whopping 45% greater than before the economic collapse of 2008. The
derivative bubble is over $273 trillion now versus the $187 trillion of 2008.
U.S. Interest Rates are Already at Abnormal Lows so the Fed has Little Room to Cut
Even after raising interest rates once last year, the Federal funds rate is still in the range of ¼
percent. Consider that before the crisis erupted in August of 2007, the Federal funds interest rates
5.25%! In the next crisis, the Fed will have less than half a percentage point total it can reduce
stimulate the economy.
American Banks Are Not the Safest Place for Your Money. Global Finance magazine
puts out a
yearly list of the top 50 safest global banks. Only 5 of those are U.S. based. The top spot an
commands is only #39.
The Fed Balance Sheet is Still Expanded from the Financial Crisis of 2008. The Fed
nearly $1.8 trillion in mortgage backed securities on its balance sheet from the 2008 financial
is more than double the less than $1 trillion it held before the crisis began. When mortgage backed
go bad again, the Federal Reserve has a lot less maneuverability to absorb bad assets than before.
The FDIC Admits it Lacks Reserves to Cover Another Banking Crisis. The latest
report shows that they will not have sufficient reserves to adequately insure the nation’s banking
for minimally another five years. This stunning revelation admits that they can only cover 1.01% of
held deposits, or $1 out of every $100 of your bank account deposits.
Long Term Unemployment Is Still Higher than Before the Great Recession.
Unemployment was 4.4%
in early 2007 before the last crisis began. While the unemployment rate has finally reached the 4.7%
seen as the financial crisis began to ravage the U.S. economy, the long term unemployment remains
high and the
employment participation rate significantly lower more than five years after the previous crisis
Joblessness could be much higher in the wake of the coming crisis.
American Businesses Failing at a Record Pace. In the beginning of 2016, the Gallup
Clifton announced that American business failures are now greater than new business startups for the
time in over three decades. The dearth of medium and small businesses has huge implications for an
long driven by free enterprise. Bigger businesses are not immune to the problems either. Even
economic heavy weights like Microsoft (reducing 18,000 jobs) and McDonald’s (shutting down 700
stores for the
year) are suffering from this dismal trend.
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Store of value.
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