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Gary Shilling, a renowned American financial analyst and commentator, warned that a second downward spike was coming, and compared it to the Great Depression of the 1930s, when the depth of the recession dragged recovery out for years. In fact, he noticed striking similarities between the performance of the stock market this year–when it rebounded from stunning dips in March–and its performance in 1929, which also saw an initial dip, a bounceback, and then of course, one of the most economically devastating periods of American history.
If we are following that same path, then the worst is still to come.
So some consumers can’t spend, and some simply won’t. For many of those that still have savings to lean on and enough money to drive economic activity, it isn’t worth the health risks of going out. Furthermore, as cases surge across the country, options for dine-in meals of in-person shopping are again dwindling amidst new lockdown measures and reopening rollbacks.
It seems the world was just waiting for the perfect disaster to come along and crumble the weakened infrastructure that was barely hanging on.
Of course, the elite are taking advantage of the accelerated timeline we now see ourselves on. Billionaires and massive corporations have sailed through the economic turmoil thus far without blinking an eye, while smaller businesses and households have been absolutely destroyed. Clearly, the US did not learn enough from the Great Recession of 2007-2009.
And the US government has only exacerbated the inequality. The Fed’s first priority throughout the crisis has been to guarantee that the wealthy continue to enjoy their riches. Billions of dollars have been sent out to the largest corporations and the richest households. On the other hand, public health has almost entirely fallen by the wayside. US health institutions were months behind the rest of the world in procuring and distributing testing kits, and hospitals across the country have experienced shortages of crucial medical equipment. Furthermore, only a single $1200 check was sent to Americans that were, in many cases, on the brink of serious financial difficulty. Some are still awaiting those checks.
And those in power may very well stay in power. After all, the stock market is hitting record highs, keeping ignorant investors optimistic despite the dozens of negative indicators that signal the economic collapse is only getting worse.
The Fed has no businesses pushing stock prices higher as the US moves towards a November election. This is a blatantly political move. After all, the better the economy, the better Trump looks to voters.
Federal institutions have gotten us to this point through their failure to implement effective policies and protect those that were most at risk. If we have learned anything thus far in the pandemic, it’s that the Fed will continue to flood the system with newly printed money with no regard for eventual consequences. This could lead to any number of things–social revolution, the crash of the US dollar, or who knows what else.
Without some serious changes coming soon, a double-dip recession or even an L-shaped recovery is looking all the more likely. There is little the average American can do to affect monetary policy at a national level or to reverse the damaging trends that are playing out now, but there are two points that we can count on.
First, the Fed will continue to print money. It may even accelerate the rate at which it is doing so. Already, its balance sheet has skyrocketed from $4.2 trillion in February to around $7 trillion now. The Fed has overreached so far that the pandemic is now inversely related to US markets. This means that the worse the pandemic gets and the higher the case counts climb, the more stimulus the Federal Reserve pumps into the economy, and the better stocks perform. While this seems like a positive thing in the short term for investors, it will lead to numerous dangerous bubbles that will eventually have to burst. A stock market crash, an IPO (initial public offerings) frenzy, and a binge on debt represent the greatest threats.
Second, the pandemic will continue to be mismanaged on both a state level and a federal level. Without better and more cohesive policy, cases will not be brought under control for months, leaving the economy little room to even begin to recover. What is more likely is that governments will double down on already damaging policies until the entire system buckles.
So the best thing to do, unfortunately, is simply prepare for the worst. The United States is entering a time of extreme upheaval and no one–except maybe the very elite–will make it through unscathed.”