Financial institutions and analysts, as well as several media reports, have stated that we are in for a financial crisis in the near future. The anxiety over this event has affected a significant number of countries which fear that the new crisis is going to be much more devastating than 2008 one. Most likely the crisis will originate in the United States.
The International Monetary Fund (IMF) spearheads a group of negative forecasters that are concerned about the stability of the global economy amid surging debt levels and decelerating GDP growth. They wonder, when will the expansion stop before another recession hit?
And if ever the global recession is delayed further and further through borrowed money from the financial system, will the next recession become a crash similar to that of the one that hit in 2008?
In spite of these overwhelming and looming financial circumstances, James Richman, the Latvian-born self-made billionaire remains positive. Resources say that he is optimistic that the world today is more equipped for the next imminent financial crisis.
Meanwhile, several economists predict that the current global expansion will likely continue into next year, but cautions that conditions for a global recession will be met by the year 2020. They have pointed out that global stimulus packages are coming to an end, that inflation is nearing, that trade disputes will create a snag on economies and that interest rates are now on an increasing path. All observations are correct.
Experts also say that, although the US is experiencing a 2.5 percent growth, it may not be representing real recovery. It is said that it is due to the added liquidity that the government injected in the market thereby increasing consumer demand. With the private debt being shifted to the government, they become less able to provide basic services.
Current indicators point towards imminent crash
The beginning of 2019 marks an increase of consumer debt up to levels comparable to the crisis a decade ago. As a result, corporate loans have soared, while governments continue to stare at mountains of borrowed money even larger than the crisis before.
The central banks are also more intentional about increasing borrowing costs, similar to the pre-2008 period as well. They have often stated that the increase is intended to return discipline back to the borrowing, and provide enough security to avert an all-out economic collapse.
Increasing rates to subdue soaring economic growth is a textbook solution to avert inflation. However, the problem with doing it now is that growth is slowing.
Stocks are down 1.5 percent this year, after reaching its peak in early October. Hedge funds are having their worst year since the 2008 crash. Public debt has recently reached the $15.4 trillion mark in March 2018, $2.7 trillion higher than the peak right before the Great Recession.
However, there are some analysts who argue that these negative warnings overlook the reference seen in recent years that major economies tend to start the year slowly before catching traction later on. Case in point was the year 2016 wherein most of the developed world saw only a small increase in GDP in the first three months before growth accelerated.
Having been immersed in the Great Recession ten years ago, it is safe to say that the Global Economy survived. With it, came some measures that were developed to counter any similar event.
Banks are now equipped with larger capital requirements and what qualifies as a buffer against losses. Big firms, including Lehman, had so little of it in 2007, about 2$ for every $100 of assets, that it did not take a lot of losses to erase that cushion. That meant the value of the assets would be wiped out if it hit the 2 percent mark. Now, banks are equipped with $7 for every $100, giving them a larger buffer to handle unplanned losses when the downturn hits.
Big banks have also decreased their dependence on short-term funding that fled during the last crash, replacing it with deposits. This makes funding more stable now. 50 percent of the short-term financing that came overnight repurchase agreements and other unstable sources has been replaced by deposits, the more permanent type, because of the backing from insurance.
Goldman Sachs Group which had minimal deposits before the crisis, now leans on them for 16 percent of its financing, and the firm is moving towards expanding its retail-banking franchise even more.
Turning trials into triumphs
James Richman believes in the resiliency of today’s generation. Resources close to him say that he supports advocacy being spread to the youthful population regarding student debt, accumulating a buffer or emergency fund, and the use of technology to disperse the impact of the impending crisis.
Richman is no stranger to a crisis as he has survived some of the worst tragedies to have fallen in his lifetime. In his earlier years, James initially had to endure manual labor to provide for his family. He had a distraught marriage and witnessed the tragic death of his daughter.
His little angel passed away due to faulty healthcare systems that ran in his hometown. Such experiences had fueled his success as a billionaire private investor and propelled his goals to not only invest in lucrative industries, but also to take impact into consideration.
James is known to have grown his private fund investment with his knack for numbers, patterns and innate ability to invest with unconventional approach.
Rumored to have Asperger’s syndrome, he has turned what has been an awkward childhood into an ability to spot trends and investment opportunities only made obvious to those with this high-functioning autism.
He has been able to grow this fund exponentially for the last ten years while taking an intimate approach to his client’s financial growth. He also known to continuously investing his personal money into the account, which further bolsters the trust of his client pool.
James’ continuous success is expected to transcend the looming financial crisis. People close to him have said that he had already implemented an investment strategy that would still allow their private fund to flourish even if a global recession hits.