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Over the past period, there are essential details that show that indeed, a recession is approaching. This one is different from the great 2008 financial crisis, which was brought by the sharp decline in the aggregate demand. This coming recession is brought by the long Sino-America trade wars which have been there for a long time and the technology wars. Below are the factors trends that indeed show that recession is coming.
The first one is the Chinese Debt Crisis. After the 2008 financial crisis, China has been at extra gear more than the USA, but even though, the country is now in the throes of a full-blown debt crisis. The state industries in China have borrowed heavily, and the consumers too have not been left behind. The banks in the country are being weighed down by the several loans which have not been repaid. For the number of times that the government has tried to reign in excessive consumer and corporate lending, the global economy has wobbled thus forcing China to loosen the credit again. There is also a 4.8% 30 year low in the growing production in industrialisation with China.
The other evidence of recession is the Brexit. There is considerable uncertainty that surrounds the future of Britain as it will exit or remain in the world’s largest trading bloc. These have already damaged the GDP of the country. Most economists have sounded a warning to Britain that leaving the trade bloc without a deal would be significant damage which will be very severe. These have been reverberated by the World Bank, IMF, and OECD which believe that without an agreement, there will be a knock at the global growth.
The third evidence is the Sino-America trade wars. This trade war between the United States and China is hurting the global growth as both countries are imposing massive tariffs on the goods being introduced into their countries. USA has accused the Chinese government of undercutting US goods with an undervalued currency which made the US impose more tariffs on the China goods as a form of punishment. These have included video games, computers and machines. Very challenging to measure the impact, but globally, countries have reported a downturn in trade as the tariffs bite in.
Lastly is the financial market jitters. There are mixed signs from the international money markets. The bond market is jitterier while the stock market remains at high levels. Many of the investors who loaned the US government via the bond market have now sold their short-term loans in the expectation of recession as it was in 2008. Many financial analysts do believe that the bond market never lies and that the USA economy is heading to dire trouble as early as next year. The saviour is the FED, which can cut the interest rates to Zero, thus giving a sigh of relief to the indebted households and companies.
