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    How to Survive the Incoming Economic Crisis
    How to Survive the Incoming Economic Crisis
    How to Survive the Incoming Economic Crisis
    Ebook119 pages2 hours

    How to Survive the Incoming Economic Crisis

    By Allen Chan

    ()

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    About this ebook

    The aim of this book is to help you understand the impact of economic crisis and teach you on how to equip with skills to survive and grow your wealth by making wise investments

    As developed countries will start to fall and as their economies will start to go down, the great and probably, the worse financial crisis will affect the whole world.

    The next global financial crisis will come; that’s for sure. What we do not know is when it will explode into our faces. Protect yourself by knowing what’s happening in the world market. Any major news can result to the collapse of the bond, stock, and Forex markets. Take action before you lose your profits and investments. Know when to get out of the market before everybody does.

    As early as possible, accumulate wealth by getting a good paying job and by making money online. Then, invest your money and take advantage of opportunities that are available to you. Consider investing in real estate, bonds, stock market, and foreign exchange. Most importantly, learn how to protect the wealth that you have already accumulated.
    LanguageEnglish
    PublisherBookBaby
    Release dateSep 6, 2013
    ISBN9781483506951
    How to Survive the Incoming Economic Crisis

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      Book preview

      How to Survive the Incoming Economic Crisis - Allen Chan

      9781483506951

      Introduction

      Many have thought that the financial collapse that took place in 2008 was the worst. However, many experts believe that it was just a warm-up. With what’s happening in Europe and with the United States facing the possibility of losing fed stimulus, it doesn’t take an expert financial guru to guess that the whole world might be heading to another economic crisis.

      People from around the globe, especially Americans, were caught by surprised as financial crisis hit their country in 2008. The United States, the world’s largest economy went from being stable to critical. A lot of people lost not just their jobs but also their houses and other properties worth millions of dollars.

      Prior to the financial crisis, stock prices in developed countries were soaring high enabling people to make huge purchases such as houses and cars. As nobody foresaw the rapid downturn of the economies of developed countries, very few people have prepared for this event. Many found themselves without a roof over their heads and without money on their pockets.

      If there’s one thing that history tells us is that; anything can happen. It doesn’t matter how perky is the US job market now or how high stock prices in NASDAQ are, financial crisis is still always a possibility.

      The world is going through series of financial bubble bursts that started when housing industry in the United States collapsed. Unlike down financial cycle which is typically followed by an up cycle, financial crisis affecting both developed and emerging countries, may stay longer than what economists feared.

      Every now and then, newspapers, with the hopes to sell more copies, give people around the world false hopes. News saying that recession is coming to an end and that progress in the economy is seen. But is the recession or financial crisis really over?

      On June 2013, the release of GDP report confirmed what economists already know; US economy is still weak. Gross Domestic Product or GDP that is used to measure economic activity increased by just 1.8% annual pace between January to March leading a sharp downward revision from 2.4% reported on May 2013 by the Commerce Department. Unemployment rate remains at 7.5%, which is considered very high for developed countries such as the United States.

      The Relationship of GDP and Debt Ceiling

      Debt ceiling refers to the maximum amount of money that the United States can borrow at any given time. This is imposed on statutory debt limit. The debt ceiling forces the Congress and the president to become more accountable in fiscal policy. There’s an imposed limit to ensure that annual debt will not exceed annual earning.. Deficit spending in general foster economic growth. However, if the debt to GDP ratio becomes too high, debt owners will obviously become concern that the US will not be able to generate enough revenue to pay the debt back.

      On January, 2013, it was confirmed that the US has reached its legal borrowing limit. Congress was given two months to increase the debt ceiling yet again or the government will run the risk of defaulting on its bills and financial obligations. Since 2002, the Congress has increased itby ten times.

      This year, the story MAYBE different. President Obama has said that he will not negotiate over raising the debt ceiling. The House Speaker has said that there should be real cuts in spending to lower the country’s debts. Obama and the Republicans have been down this path before. The first one was in summer 2001 that resulted to the US facing the brink of default. It also suffered credit downgrade from S&P.

      What will happen if the debt ceiling isn’t raised this year? If the debt ceiling is reached, treasury notes cannot be auctioned anymore. The government must rely on the incoming revenue to cover Federal government expenses. This was the scenario in 1996 when the Treasury announced that it could not send out Social Security checks.

      If and when the Treasury defaults, the world can expect three things: (1) the Federal government will run out of money for its employees’ salary and benefits. Federal services and buildings will be closed due to lack of funds. (2) Yields on treasury notes will increase that will lead to higher interest rates. This will lead to the increasing costs of buying a home or doing business in the United States. This will surely drive away potential investors. (3) This will drive investors to pull out their money from the United States. This will easily cause the dollar to plummet. If push comes to shove, the dollar will be removed as the world’s reserve currency. When all these things happen, it is more unlikely that the United States of America will be able to pay its debts.

      Talks about Bond Bubble Burst

      Before 2012 ended, there had been so much talk about bond market bubble and this year, nothing much has changed. For 32 consecutive years, corporate, emerging market, and other types of bonds have been in the roll. This led number of economic gurus to proclaim that the possibility of a bond bubble burst has increased exponentially.

      Given the mismanagement of governments not just in the United States but also around the world together with their central bank partners, many are convinced that that this massive debt bubble will burst. The only question here is when. The funny thing about bubbles is that nobody, even economists, know precisely when they will happen. But these people are urging investors to be prepared for the fiscal fallout.

      If you have enormous amount of money tied up on bonds or if you still think that treasury bonds will remain to be safe bets for some time, you need to pay close attention. Listen to what experts are telling you. Know the history, as this will more likely to repeat itself a year or two from now.

      This is just the beginning of the end

      With disappointing economic news here and there, and with the debt ceiling being increased every year, many believe that the 2008 economic crisis isn’t over. Unless leaders of great countries do something radical and take extremely effective measures, this financial crisis will undoubtedly lead to deflation, great depression, and great transfer for wealth.

      But until then, individuals need to do something to protect themselves. With all the depressing economic reports released in the first 6 months of this year, I wouldn’t be surprised if the US dollar fall to historic level and if bonds will take a sharp downturn together with the global stock market. Also, credit bubble burst is another possibility.

      The aim of this book is to help you understand the origin of economic crisis and ultimately, teach you how to make necessary preparations so it will have little or no effect on you and your lifestyle.

      This book will empower you to accumulate and subsequently, grow your wealth by making wise investments.

      Chapter 1

      2008 Real Estate Bubble Burst and Credit Crisis

      The real estate bubble burst experienced in the United States in 2008 is closely related with its healthy stock market in mid-1990s and stable economy. During that time, people who have invested in the stock market were raking unbelievable amount of profits due to soaring stock prices. Of course, when people make a lot of money quickly, they are more likely to buy new properties. This led to the house consumption boom in the late 1990s. The growing demand led to the constructions of several real estate properties and to the rapid increase in house prices.

      Due to very strong demand, prices in both rental markets and ownership reached almost 25% above the average rate over the three years immediately preceding the start of the bubble. People, after seeing figures suggesting that investing in the housing sector is very attractive as the prices kept going up, bought more and more houses. This led to the increased of houses’ asking price.

      However, the housing market boom was heading to a sharp downturn. In 2001, government figures reveal that the United States is slowly making a recovery from recession. Unemployment rose. With hundreds of houses in the market and with the increasing number of people who do not have jobs, the government was forced to step in. The Federal Reserve Board decided to cut interest rates to 50-year low. Bringing down the average interest of 30-year fixed rate mortgage to about 1%.

      As expected, the extraordinary low interest rates helped accelerate the run-up in house prices. From late 2002 to late 2006, house prices increased by 31.6%. This led to the construction of more houses peaking in 2005.

      The over-supply of houses paved the way for the real estate bubble burst in 2007 when the prices could no longer be supported. In late 2006, the rate of ownership unit sank by 50%

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