You should start by answering question #3 with one more question. Am I a billionaire, oligarch or come from old money? If the answer is no, then you are a loser. If the answer is yes, then you are a winner. It’s just that simple. The other 2 questions are a bit more complicated to understand. Without understanding the dynamics surrounding these questions, you would typically drink the Kool-Aid, believe the standard answer and blame it on the business cycle and not look at the underlying historical events caused by “Pinocchio economics.” Normally the Fed and treasury department would implement a recession based upon his Tax Cuts and Jobs Act Law, assault on Obama era financial reforms and his deregulation policies. However, this time so-called-president Trump through ignorance has bailed out the usual suspects with his asinine, idiotic and illegal China trade war.
Trump’s trade war with China is illegal and the Republican-controlled Senate has refused to do its duty and place Trump in check. Article I, Section 8 Clause I of the constitution states:
“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;”
This clause essentially gives Congress and not the president the power to levy tariffs {1}. However, in 1977 Congress passed the “International Emergency Economic Powers Act” or IEEPA. This act gives the president broad powers to deal with foreign economic transactions in the event of a national emergency. Initially, presidents targeted foreign states or their governments. Over the years, however, presidential administrations have increasingly used IEEPA to target individuals, groups, and non-state actors such as terrorists and persons who engage in malicious cyber-enabled activities. However, it has never been used to levy tariffs on a foreign power since that would be taking away Congress’ constitutional powers.
International Emergency Economic Powers Act or IEEPA
To put it bluntly, Trump’s trade war with China is illegal and without the Republican-controlled Senate doing its duty of oversight of the Executive Branch, nothing will be done to stop it and the recession will quickly become a reality. Only this time it could be much worse than anything this country has ever seen and certain sectors of the economy may go the way of the U.S. steel industry, it no longer exists. To start, this trade war is the ‘I must win” fantasy of a madman, a want-to-be dictator. In America, any president that is foolish or stupid enough to order America businesses to stop doing business with China is certifiable, out-of-his-mind. Aside from being an act of lunacy, such a thing exhibits a total ignorance of how our government and our free-market economy work as evidenced by the following tweets.
Both the Great Depression and The Great Recession of 2008 were preceded by huge tax cuts, deregulation of the banks and rising deficits. Like matter, wealth cannot be destroyed only transferred. Each of these events resulted in an enormous transference of wealth from the working class to the wealthy. Like his Republican predecessors who also practiced Pinocchio economics, Trump has put these things into action. Since the passing of the Tax Cuts and Jobs Act of 2017, economists have quietly been warning of an impending recession. So, with or without the illegal China trade war, “the recession had already been scheduled.” As ludicrous as this may sound, in a June 2017 report{2} to its clients, Goldman Sachs, one of the largest investment banks in the country and a member bank of the Federal Reserve (Fed), Goldman stated that every recession (and depression) since World War II has been caused by the Fed.
Now, thanks to Trump, the unpredictable “Joker” in the deck you can add a slowing global economy on-top of everything else. When the global economy slows, American manufacturers and farmers lose market share which they may never re-acquire causing massive job losses and bankruptcies here in America. Without the help of a trade war, the 2008 great Recession devastated the global economy. Ukraine, Argentina and Jamaica, Ireland, Russia, Mexico, Hungary, the Baltic states, The United States and The United Kingdom were most deeply impacted by the recession. China, Japan, Brazil, India, Iran, Peru and Australia were among the least affected. The 2010 Academy Award Winning documentary film {3} narrated by Brad Pitt titled “Inside Job” explains in detail the global impact which includes the near-bankruptcy of some municipalities and nations. It pays close attention to identifying the perpetrators of the recession and the transference of wealth from the middle-class to the wealthy. It also explains the crimes committed by the perpetrators and the fact that none were punished for this global catastrophe.
The new recession is coming. To make things worse, Trump has added a Trade War with the second-largest economic power in the world. Based upon his negotiating tactics, lack of strategic planning and his inability to conceive of an exit strategy, this war is already lost. China has won! Welcome to Trump-land.
Okay! Unlike in 2008, you now have a 6-12 month heads-up on the recession. Regardless of what you do, you can’t stop it. You need to know who is going to be impacted the most, what the impact will be and who are “The Next Great Recession’s Winners, Losers and How to Survive It?”
The people that will be impacted the most by the next recession are the poor, middle-class, retirees, small business, family-owned farms and millennials. The effects of Trump’s illegal China Trade war is already taking a heavy toll on American farmers. With undue financial burdens caused by Trump, many of America’s farmers are in jeopardy of losing their farms and when the recession hits, farms that have been in families for more than one hundred years will go bankrupt only to be bought for pennies on the dollar by corporate conglomerates. Many of America’s farmers have never fully recovered from the 2008 recession when their property values dropped by as much as 30% and they lost market share due to failing economies overseas. They are still trying to recover and thanks to Trump’s China trade war, he may have just put the final nail in their coffins.
Retirees who depend on income from their 401K or independent retirement accounts (IRA) will suffer greatly due to lost income when stock dividends are cut due to falling corporate profits. As corporate profits drop, stock prices drop and the value of 401K and individual retirement accounts. In the final two quarters of 2008, the nation’s 401K and IRAs lost a total of $2.4 trillion. Compounding the problems for these retirement accounts, during a recession, corporations often times are either unable to continue their corporate contributions or they are drastically curtailed due to falling profits and increased losses. To this day, the nation’s retirement accounts have not recouped all of the losses incurred in the 2008 recession. The next great recession will be no different.
Like in the last recession, millions of middle-class and poor families will lose jobs, savings and their homes. Their health will be adversely impacted due to the loss of health insurance when layoffs are implemented in attempts by businesses to avoid closing their doors or filing for bankruptcy. The hard-earned, accumulated wealth of these poor and middle-class families will be transferred to the wealthy just as it was with the Great recession.
Because of the 2008 recession, between 2007 and 2010, households in the bottom four-fifths of the wealth distribution experienced a 39.1% decline in net worth. The top 20% lost just 14% of their net worth.
According to a Pew Research Center analysis {5}, every dollar and of gains in household wealth between 2009 and 2011 went to the richest 7% of American households. Net worth among this group rose 28% during the first two years of the recovery, from $19.8 trillion to $25.4 trillion. The bottom 93% of American households experienced a net worth fall 4%. As a result, wealth inequality increased with the wealthiest 7% of U.S. households increasing their overall share of the nation’s wealth from 56% to 63%.
This new recession will destroy millennials who are already overburdened with student loan debt and a lack of savings. An August 26th article {4} published in The Atlantic explains in great detail the perils facing millennials. Due to the 2008 Great Recession and the fact that wages have never recovered, they are failing to make it to the middle class. Most likely, they will be the first generation in American history to end up worse off than their parents. Caused by the Great Recession, Americans now between the ages of 22 and 38 graduated into the worst job market in 80 years and it has not gotten any better. As of 2014, millennial men were earning 10% less than their Baby Boomer counterparts and Gen X men. Millennial women are earning less than Gen X women.
Education costs have gone up more than 100% since 2001 and the Great Recession has left millennials with more than $1 trillion in student loan debt and no jobs to pay for it. Millennials not living at home with their parents have been forced to shell out hundreds of billions of dollars in rent because they cannot get a job that pays enough to provide them with the economic ability to buy their own houses. Americans under the age of 35 who own stocks has dropped from 55% in 2001 to 37% in 2018 because employers are less likely to offer retirement-savings plans and the fact that Millennials have nothing left over at the end of the month to save. Two-thirds of all Millennials have zero dollars in retirement savings.
The economic picture for the foreseeable future is very bleak. Now is not the time to become delusional. Unless you are on the inside, from old-money, a billionaire or oligarch, this next recession will make you a loser. It’s an undisputed fact. You cannot win during the recession. But you can survive and come out on the other side better off than you were before it all started. While Xplicit News is not a financial journal or staffed by economic professionals or certified financial planners, we can tell you what others in your situation have done to survive recessions of the past. Keep in mind we are not licensed professionals and are not offering financial advice. Here is what other people have done:
- Eliminate high interest and credit card debt if possible
- Consolidate debt with low-interest loans
- Consolidate credit card debt by transferring balances to new cards with promotional 0% interest rates
- Minimize unnecessary spending and save, save, save
- Remember, whether you make money or not, financial consultants get paid by you and most of them, including stockbrokers, told their clients to ride out the 2008 recession by leaving their money in stocks and bonds. That strategy was disastrous for the common folk. Unlike them, the wealthy went to cash. They liquidated their stocks, bonds and risky real estate but they left the money safely in their accounts unexposed to risk. This minimized loses and when the market and real estate values bottomed out, they bought back in. They bought a greater number of shares of stock for less money and as the stock values rose; their wealth grew to be greater than it was before the recession started. Financially savvy people with retirement accounts also used this strategy to protect their retirement savings.
The next great recession is only 6-12 months away. Republican Pinocchio economics anchored by the Tax Cuts and Jobs Act of 2017 have laid its foundation. Thanks to Trump and his illegal China trade war, it has been accelerated, can’t be avoided and you can’t beat it. The best that you can hope for is to survive it. Good luck and don’t forget to thank Trump and the Republican Party by voting them out of office in 2020.
https://www.gofundme.com/xplicit-news
Linked Sources and Documentation
- Article I Section 8: https://www.u-s-history.com/pages/h184.html
- Goldman Sachs Report on Fed and Recessions: https://www.zerohedge.com/news/2017-06-24/goldman-finds-most-modern-recessions-were-caused-fed
- Inside Job: https://www.amazon.com/Inside-Job-Matt-Damon/dp/B004R15SIW
- The Next Recession will Destroy Millennials: https://www.theatlantic.com/ideas/archive/2019/08/millennials-are-screwed-recession/596728/
- Pew Research Center analysis: https://www.pewresearch.org/wp-content/uploads/sites/3/2010/11/759-recession.pdf
Copyright © 2019, Glen Reaux, all rights reserved
