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28Jan2018

Although Consumer Confidence Soars, Economists Skeptical

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January, 2018

By Selina Stoller, Summit Consumer Receivables Acquisitions, LLC

The U.S. economy has been on the rise for the past year with many people focused on their personal wealth, not the state of the economy.

USA Today reports the economy expanded at a 3.1 percent annual pace in the second quarter of 2017 and 3.2 percent in the third quarter – mostly due to robust consumer and business spending.

Consumers have also opened their wallets in response to solid jobs and income gains, record-high stock prices, and cheap gasoline. Meanwhile, business leaders and policymakers tend to let the good times roll until they come to an abrupt halt.

According to the Chicago Tribune, even during a robust economy with a soaring stock market, there is a possibility of something going very wrong. The key is to proactively recognize problems and solve them before they become a global financial crisis as we experienced in 2008.

Even though the U.S. economy does not show indications of a recession or financial meltdown this year, experts advise keeping an eye out for some of these warning signs:

China’s Challenges: There are growing concerns of a trade war with China and its government retaliating by either slowing down or not buying U.S. Treasurys – which would hinder U.S. business and economic growth. Experts note that China could become the world’s largest economy in the near future.

Shadow Financiers: The financial crisis of 2008 resulted in regulation of traditional banking systems by raising capital requirements – the money banks have on hand – and tightened lending and credit rules. Now, nonbank lenders and financial institutions (investments banks, some mortgage lenders, insurance companies, etc.) are the financial powerhouses in bigger cities and are behind corporate acquisitions, high-tech plays and brand name startups. These players could be investing/lending too much money to pet projects, and if the economy dips and credit tightens, lenders may have trouble repaying.

Bitcoin’s Fate: The cryptocurrency confuses many financial experts and investors. People are having trouble assessing bitcoin’s actual value to the economy.  However, bitcoin’s value has decreased from $19,000 in mid-December to a recent $10,000. A tanking bitcoin could undercut emerging digital payment methods and choke off a new way of doing business.

Political Warfare: Dysfunction in Washington recently caused a brief government shutdown. Financial experts note these type of events and constant bickering by major political parties can be a cause for concern.

 

  • 28 Jan, 2018
  • Josh Smith

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