If you watch the news, often you’ll find talking heads arguing about the health of the global economy. Some say it’s strong, while others see impending doom.
On one hand, you have record levels of wealth being created at the top. Expanding global markets means more customers, which means more profit for companies and shareholders. On the other hand, working families continue to struggle with low wages and a high cost of living. Many folks depend on their ability to get a quick personal loan in the event of a financial emergency rather than rely on savings, which is what those closer to the top are able to do.
It’s important to understand the fundamentals for yourself. Don’t let the paid talking heads sway your judgment; they’re there to make money off their opinions. You can form your own opinion when you understand the basics.
For instance, a good economy will show signs of growth with a middle class who has more purchasing power. In addition, one of the biggest benefits of a strong economy is that the country will have more money for scientific research, which can lead to scientific breakthroughs.
Furthermore, innovation is stronger in the private sector as well. If you consider that the United States is still the determining factor of the signs of a strong global economy, then this forecast by the International Monetary Fund shows a 3.7 percent growth forecast for the global economy.
According to Bloomberg, if the U.S. makes it past June 2019, without a recession then that will be the longest economic expansion since 1857 when these types of events were first recorded. But, let’s look beyond the U.S. for other signs of a strong global economy.
How about the U.K.? Well, last month, according to Reuters, Britain’s public finances had a record surplus of 14.895 billion pounds in January. This is the highest surplus since 1993 and higher than all the estimated forecasts.
Add Thailand to the mix. According to Pattaya Today, the Thai baht has already appreciated 4 percent against the dollar this year. And, Thailand has experienced four straight years of growth over 3 percent.
Then, there is Israel. Out of the 36 economies in the Organization for Economic Development and Cooperation, Israel is expected to be the second-fastest growing in 2020. Israel is also expected to have a 3.6 percent growth this year. As a result, signs of an impending recession just don’t seem to fit the reality of the global economy’s upward trend.
A recession only starts when there is a period of negative growth for two quarters, consecutively. So, with just a few examples above, it doesn’t look as though the global economy will have a recession in the near future. Factors that can cause a recession include a financial crisis, such as something similar to what happened in 2008. A decrease in asset prices can also trigger a recession. The government may cut spending, which can lead to a recession. And, exports may fall, which can also determine if a recession is on the horizon.
Not to mention, a dramatic increase in oil prices can mean less money in the pockets of consumers, and a potential recession. None of these events are happening right now, but that doesn’t mean they can’t happen in the future. One sure-fire way to prevent a recession is for a country’s leader to be on the side of economically-stimulating policies; to make the health of the economy a priority in policy-making.
Higher interest rates, and falling real wages can also cause a recession. Still, according to a Labor Department report, U.S. workers have seen the largest nominal wage increase in a decade. And, the U.S. is like the large tide that ripples its effects on the global economy.
So, as you can see, the global economy shows no signs of an impending recession in the near future. While this can change, for now, things are still going well throughout the world.