Oil prices could slump by as early as the early morning hours of Wednesday, July 3rd. The reason? The global economic condition is worsening. That’s the word from leading financial institutions and stock analysts. If you’ve been keeping track of recent market developments, you know that the global economy has been in a tailspin for some time now. The recent drop in oil prices has been a direct result of this growing global economic uncertainty. Now, don’t get us wrong. Economic pessimism is nothing new. However, the context in which oil prices are being discussed is. Oil prices have collapsed in the past, largely as a result of factors outside an individual company’s control. When the global economy deteriorates, it’s not just oil prices that suffer. The cost of living in general goes down. That being said, the current economic condition is unprecedented. What’s more, it’s not going to go away until we resolve our debt crisis and make fundamental changes to our outdated monetary system.
What does economic pessimism mean?
Economic pessimism can be characterized by the belief that the global economy is in a state of collapse. While economists disagree on the cause of this – some blame over-heated oil futures, others mention sluggish demand from the BRIC countries – they all share the same concern about its effects.
One expert summed up the state of the economy by saying that “The whole world is sitting on a Waterloo cauldron and it is ready to pop.”
The reason why economic pessimism is occurring right now is linked to a debt crisis. The amount of money outstanding in the world’s financial system increased by about 50% between 1960 and 2010. In that period, the amount of debt rose by about 100%. In the absence of strong growth, the increasing amount of debt is a recipe for economic disaster.
The reason why economic pessimism is occurring right now
Economic pessimism can be traced back to the global financial crisis of 2008-2009. At the time, a large portion of the world’s economies were emerging markets. As growth in these countries slowed, so too did world trade. The result was a drop in global and regional stock markets. What’s more, oil prices also plummeted as a result of the global economic downturn.
The implications of economic pessimism
If the global economy turns south again, the knock-on effect would be felt throughout the economy. With countries such as Brazil, Indonesia and the Philippines experiencing real GDP growth of just 0.2% over the next year, the effects would be felt quickly. That means job losses, rising inflation and an increase in the cost of living for all citizens.
How the global economy is worsening
The reasons for the global economic slowdown are many, but one of the major factors is the rise in obesity in the West. The rate of obesity has been increasing in the West for some time now. In fact, it’s now the norm in many Western countries. What’s more, people in the West are becoming increasingly reliant on food items that have been high in sugar for many years.
Will the global economy worsen in the coming months?
The situation in the global economy is unlikely to improve in the near future. In fact, it’s likely to get even worse before it gets better. The following points reflect the view of leading financial institutions and stock analysts:
Eurozone inflation is predicted to remain low throughout the year
In the Eurozone, inflation is expected to remain low throughout the year at around 1.1%.
That’s still well below the European Central Bank’s inflation target of 2%
Given the low inflation rate, it’s likely that interest rates will remain low. As a result, the cost of funds for small and medium-sized businesses will remain low.
3 things you can do to prepare for a potential slump
The following three things will help prepare you for a potential downturn in the global economy:
budgeting for an emergency fund
staying informed with your financial planning
keeping a cash reserve at all times
3 things you can do to help prevent a slump
The following three things will help prevent a slump in the global economy:
Improve your financial literacy
Find a financial advisor
Keep a cash reserve at all times
While you should never go into debt without a plan, there are ways to make sure you have enough money in the event of a recession. One way is to find a financial advisor. Your advisor can help you create a budget and see if you can cut back on your spending. This will help you to save money in the long run.
The global economy is currently in a tailspin. This can be traced back to a debt crisis. The situation is likely to remain the same for the next 12 months. Eventually, the global economic situation will improve. This will allow the markets to correct themselves and follow a generally upward trend. However, in the short term, global economic uncertainty could lead to a slump in the oil market.