Is The U.S. Really Headed For A Recession?
Your money's becoming worth less and less, but some simple measures can help.
“Are we going to have a recession? It’s pretty likely,” said former SEC Chief Economist Larry Harris, according to CNBC. “It’s very hard to stop inflation without a recession.”
If you've been paying any attention to the news lately, you've probably been a little startled by all this talk of the R word. To sum it up, a lot of experts are worried that the U.S. is headed for a recession. What exactly is a recession? We won't get too deep into the nitty-gritty of economics (you can learn all about recessions here), but a recession is basically a period of significant economic decline in a region due to low GDP.
Sounds bad on its own, but how does this actually affect you? Frankly, every recession is different. There's no one "look" for a recession, but generally, it will get harder to secure jobs, there will be a lower supply of goods (especially luxury ones), and you may find that your budget's a little tighter due to pay cuts and/or higher costs across the board due to inflation. The last time the U.S. experienced this was the Great Recession, which lasted from December 2007 to June 2009. Now, economists surveyed by The Wall Street Journal are putting the probability of a recession in the next year at 28%.
You might be wondering how we got here. While that's a very complex topic, you should know that recessions are generally correlated with inflation (increase in prices, decrease in money value). Today's inflation is being caused by an increase in costs for making products, a high demand for those products from consumers, and supply chain shortages caused by the pandemic lockdowns. I'm sure you've noticed that everything from gas to groceries to entertainment has gotten stupidly expensive—that's inflation. Another way to think about inflation is that there is too much money circulating in the economy chasing after too few goods.
All kinds of things can cause a recession, but the recession experts are worried about in this case is dependent on inflation. They're worried because the Federal Reserve (and other central banks around the world) are responding to inflation by increasing interest rates. The purpose of this is to discourage consumer spending and encourage saving, but many fear the Fed is raising rates too quickly and aggressively. These interest rates impact everything from your home mortgage to your credit cards to your savings accounts.
Of course, nothing is ever 100% certain when it comes to the economy—these experts are simply pointing out that the probability of recession continues to increase. Not everyone thinks there's reason to be concerned yet, however. A MarketWatch opinion piece states, "It’s technically possible the U.S. will tip into a recession within the next year, but a lot more would have to go wrong." According to Insider, data like high employment rates and high retail sales show that a recession isn't coming anytime soon.
There's no way to predict the future. We might go into a recession; we might not. That's why it's important to prepare for the worst so that you'll be way ahead of the curve if the worst happens. Let's walk through some ways you can combat rising prices due to inflation and prepare for a possible economic downturn as an American.
What Can Happen During Severe Recessions Or Extreme Inflationary Periods
While it is not likely that all of the following things will happen here in America, it is more than likely that at least some of them will. The list of information that follows was pulled from first-hand accounts of people who have lived through the recent economic crisis in Venezuela. This is not being included as a scare tactic, but more to educate you about what could happen in a worst-case scenario so that you can take steps to be ready for these things should they occur.
Inflation: Prices rise and the purchasing power of the dollar gets less and less and this causes profits to plummet. Businesses will lay people off and pressure will be put on the government to provide for citizens. People shift into survival mode in their spending habits, which exacerbates the situation because people no longer go out to movies or fast food or other recreational types of activities and save money exclusively for food and bills—which can cause cascading failure in retail and service industries.
Taxes and interest rates will go up and corporate profits will go down and the stock market could drop off quickly.
Riots and civil unrest and protests will become more frequent and grow larger, which will disrupt commerce, block roads, and can cause the economy to worsen in affected areas.
Quite often you will also see a migration to the city centers in order to find jobs.
Bank bail-ins: Banks could potentially take money directly from your accounts without your permission. This would likely spur a massive run on banks to withdraw cash.
The runs on banks will mean that there is no money to secure loans and credit, so credit limits will be reduced or eliminated and it will be difficult to get loans or credit cards.
Banks will put limits on how much cash can be pulled out per day or week.
Utility outages: Periodic brownouts (electrical shortages) and periodic tap water and gas line interruptions. You may see assigned power and water schedules based on address or location. In worst-case scenarios, you might only get 4 to 6 hours a day of utilities.
Unemployment will go through the roof. Schedules will be cut and hours will be reduced.
Foreclosures and evictions will be commonplace and refugee camps very similar to today's homeless camps will get larger and larger.
Fresh food availability will decline drastically. Ration lines at food distribution points will get longer and longer. You will likely have assigned days you can pick up based on name.
Drugs for prescriptions will be available on an intermittent basis.
Pensions and retirement checks as well as government benefits checks could become sporadic or be canceled altogether if the crisis goes long enough.
Incidents of untreated mental illness, deep depression, and PTSD will be very common and highly troublesome to deal with. This will lead to more mass shootings in public places and outbursts of violence throughout large city centers.
A rise in the prevalence of extremist groups (Islamists, White Power, Black Power, Nazis, etc.) will increase and emerge in a more public way.
Corruption will be the rule of the day. Many companies and government officials will be involved in corruption at all levels. The gap between the haves and the have-nots will widen significantly. The middle class disappears.
How To Prepare For An Economic Recession
The following are some of the best ways to put yourself in a good position if the country was to go into a recession.