Deficit spending
The politicians in Washington are continuing to accelerate their deficit spending program. This policy effectively mortgages the future to pay for spending in the present. It also drives inflationary “easy money” policy where the government “expands its balance sheets,” or prints money, thus devaluing the money already in circulation.
Despite this mounting debt, Washington currently remains committed to expanding its spending. When asked by Sky News whether the US could afford another war given that the country is in its weakest fiscal position since World War II with a debt to GDP ratio at 122 percent, US Treasury Secretary Janet Yellen, responded “absolutely.”
Armed conflicts
The current hostilities between Russia and Ukraine most recently erupted in February of 2022 and negotiations to bring about peace currently look unlikely, with Ukrainian President Zelensky stating he will not negotiate as long as Russian President Putin remains in power.
With Washington and its allies in the North Atlantic Treaty Organization (NATO) currently committed to Ukraine, it is not outside the realm of possibility that the conflict will escalate with devastating consequences. Leading Russian academic Sergey Karaganov made headlines in June of last year for his proposal that Russia use nuclear weapons on European NATO states if the conflict cannot be resolved by conventional means.
Conflict is also once again flaring in the Middle East, with a war underway between Israel and Gaza and worsening conflict in Yemen, a country that is located along an important trade route. With 48% of the world’s oil reserves, instability in the Middle East has the potential to further increase energy and fuel prices for consumers around the world.
Slower economic growth
The World Bank released a report at the beginning of this year predicting 2024 to be a year of disappointing economic growth, especially in Western Europe. The World Bank predicts overall economic growth in the world to decline from 2.7 percent in 2023 to 1.7 percent in 2024. Nonetheless, some parts of the world are expected to still experience modest growth, with Asian and African economies projected to lead the way.
Banking system instability
Events over the last year suggest the banking system may not be nearly as stable as many people think. A recent survey by staff at the European Central Bank showed widespread concern that the bank’s chairman Christine Lagarde is not competent to lead this institution, one of the most important central banks in the world. Among the concerns stated were doubts about her competence to address inflation.
Meanwhile, last year’s high profile collapses of Silicon Valley Bank and Signature Bank in the US revealed these banks had received letters from regulators citing “matters requiring immediate attention,” or an MRIA letter, which they ignored. Such letters are confidential and can legally be ignored, which raises the question of how many more banks have received such letters? According to one study, nearly 200 more banks are on the verge of collapse.
Furthermore, leaders of some BRICS nations (Brazil, Russia, India, China and South Africa) have proposed the creation of a new global currency to rival the dollar. While such a currency may not be launched in the near future, former White House economist Joe Sullivan stated even without such a currency, BRICS could still swing an ‘economic wrecking ball’ at the dominance of the dollar over global trade.
What you can do
Although major challenges loom on the horizon, even in a difficult time there still are opportunities. In fact, even during the Great Depression, some businesses thrived, including companies that are still around today like Chrysler and Boeing. Succeeding in spite of difficult circumstances requires forward thinking, planning, and the advice of experienced professionals you can trust to look out for you.
Eric Eisenhammer
Eric is an Asset Protection Specialist. He is co-founder of Legacy Defender Insurance Solutions and holds licenses in Life and Property & Casualty insurance. Eric earned a bachelor's in Finance from California State University, Northridge and a Master's in Public Policy and Administration from Sacramento State.
