In the last decades, economical crisis’s has become part of our reality. Somehow, we are always surprise when it hit us. It is quite a remarkable fact, as we are allocating millions of dollars yearly to prevent and predict those events. In our current system, we have central bank, state institutions, economics and governments that are all supposedly in charge of making sure it will not happened. Nevertheless, it start to look like the next economical crisis is inevitable.
In the way I see it, those economical crisis should be categories as natural disasters. They happened fast, affecting the majority of the low and middle class drastically, destroying the life of endless citizen and normally takes years of recover (if ever possible). My theory in the subject is that the big institutions, our governments and the rich are well aware of it way before it comes. Moreover, this layer of our society have the confidence that whatever come, they will be safe or saved. After all, bank and cooperation’s are saved by the government. In the worst case scenario, a specific company will bankrupt leaving the rich with their riches, ready to move to their next investment. (just look at our recent history for countless real life proves).
It is unnecessary to mention, that the cost of saving this cooperation’s, banks and riches is payed years ahead by the low and middle class, in form of taxes under the justification of national debts or recession. It is a paradox, the people that get hit the harder by mistakes that are not theirs, are the one to pay for its consequences. The middles class lose their jobs, their saving disappear, their money devaluate itself together with their security, confidence and comfort. In this cases, the low class just becomes poorer which promise they will stay that way.
Now lets be smarter than we’ve been previously. We can learn from the past and prepare ourselves for the future. Does the next economical crisis is around the corner? The answer is yes and it is closer that you may think. In wonderful book called “Manias, Panics and Crashes” by Robert Z. Aliber and Charles P Kindleberger (Click for book review), a theory in the subject is presented. The book is showing that economical crisis’s never stop, they just move around the globe. We are unaware of it, as it will create panic. Which is exactly the same reason we are not aware of the crisis that is coming to hit us now. In the book, a few clear criteria are presented which appear before any economical crisis. I will lay them down and show the current European condition.
- An unreasonable increase in house prices is created – Based on publications, Eurozone house prices rise at the fastest rate in 11 years. House prices in the first quarter of 2018 were 4.5% higher than in the same quarter a year earlier. (Slovenia led the way with a 13.4% rise). Click her for the full article
- An euphoria is created in the market between investors that shift to investments to the local market– recent publications had been showing that investors around the world are optimistic about the European market, ignoring the fact that the ECB just slashed the European growth forecast. Click here for article – Optimism article 1, 2, 3.
- A catalyst need to appear to create the burst of the crisis – There is many things that can evolve to be the catalyst that will launch the crisis. The Italian new government, the Bretix, trump new import/export reform (the “Trade war”) or just one the local big banks that can just collapse are all part of a long list. Just google the next European economical crisis and find endless article in the subject.
The bottom line is clear, the next economical crisis is around the corner. This time, Europe is even less prepare to handle with it than the last time, as it did not manage to recover yet. Moreover, the political fragility at the moment is not a good and comforting sign for the future in case I’m right. What can we do about? Well, at the moment not a lot. From the other side, when it comes we can demand that the solutions that will be implemented will demand the rich, bank and cooperation’s to take responsibility, for the sake of creating a better future for the middle and low class. After all, it is their doing and it should be their responsibility.
Share you thought with me in the comment section and express your opinion. Awareness and open conversation are the key for the creation of a better future.
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