More than a few economic experts have increasingly warned that a second Great Depression is distinctly possible in the near future despite the positive economic growth and optimistic attitudes ahead of the Trump administration. But how would that transpire?
Most national and global financial crises have historically been the result of economic bubbles that ballooned over a relatively short period of time before bursting under intense financial pressure or when an underlying industry or market begins to weaken.
That was certainly the case in the 2008 crash of the housing market when the real estate bubble burst after the overheated stock market, driven largely by corrupt financial institutions and speculative derivative investments, began to fail. That story was told well by the blockbuster movie The Big Short.
The problem with the global economy, explains investment guru Mike Galiga, is that the fundamentals of the failed economy during the Great Recession were not fully addressed. Attempts by the federal government, like Dodd-Frank, didn’t help much and in some cases actually made the problem worse.
Galiga further details, “Fast-forward nearly a decade later and those problems are still with us. But now we have a situation much, much worse than we saw in 2007.”
Referring to the unstable financial status of many Asian and European central banks, Galiga continues, “The media isn’t reporting some of the most critical economic stories around the globe like the fact that the Chinese stock market lost 40% of its value in a single year; that with Brexit and the indebtedness of Greece, Italy and Spain, the European Union cannot sustain itself much longer under German economic strength; that central banks around the globe are leveraged to the hilt.”
Galiga points to the recent spikes in the American stock market and the probable rapid growth as the surest sign a perfect storm is on the horizon. “The money that is behind the resurgence in the American economy is coming from all the foreign investment fleeing Asian and European markets. Essentially what we’re seeing is all bets being placed on the U.S. economy. But what if the U.S. economy fails? Complete global meltdown, that’s what.”
The question isn’t so much whether this will happen, but if Galiga and other economic experts are correct, it’s only a matter of when.
The good news according to Galiga, however, is that lots of wealth can be protected and even increased if investors are smart about how they look for the fundamental signals in the market, prepare for quick action and make moves decisively. Many of the biggest names, for instance, in American economic history were made as a result of massive economic downturns.
Those financial powerhouses were made by riding the wave of key markets as they rose during the bubble period, then by shorting those same markets just before the bubble popped. It created fortunes in 2008, and it will happen again.