The economy officially fell into recession this week, according to government and economic rules defining recession.
When thinking about the recession, it’s a good exercise to analyze the top 10 contributing factors that created the financial crisis and meltdown of 2022.
Despite her insistence on a low unemployment rate of 3.6%, US Treasury Secretary Yellen admitted, in response to a reporter’s question, that the “common definition” of a recession is two consecutive quarters of GDP negative.
Here are 10 key issues that likely caused the 2022 recession. These key challenges below could continue to prevent the United States from returning to prosperity unless new strategies are engaged.
- Border crisis“Border issues have a negative impact on wages and jobs for women and minorities. With 2 million new immigrants looking for work, citizens could lose their jobs to cheaper workers. In addition, benefits for those in need in the United States could be reduced.
- Pandemic of drug-related deaths—With 100,000 American citizens killed each year by toxic drugs from Asia and Mexico, America’s drug crisis is killing productivity and leaving millions of spouses and children on public assistance. Senator/Dr. Cassidy said: “Fentanyl accounted for 64% of the 100,000 overdose deaths last year… [of the] two out of three people who die from opioids are from fentanyl or fentanyl-like drugs.
- Foreign policy debacles—Sending billions to Eurasia for countries to wage war will only keep energy and food prices high for working families.
- Discretionary expenses—The purchasing power of your money is much lower. Typical food and service costs have increased by 10% to 20% over the past year. With spending and purchasing power falling, people will buy fewer goods, eat less, travel less, and be unable to afford to participate in the economy, even if it collapses.
- violent crime—Homicides in major US cities rose significantly in 2021, with a 44% increase from 2019. Rape of women and children may have reached new highs in 2021 with more than 400,000 victims per year.
- Energy dependency and strategic failures“Closing pipelines and stopping drilling in the Gulf of Mexico has doubled the price of gas for the middle-class worker. Loss of energy independence is a national security issue. Rising energy costs due to impulsive organic energy strategies are driving up the costs of fuel, fuel oil, food, utilities – anything related to productivity.
- Supply Chain—Supply chain issues are new to Americans. Most Americans have never seen a shortage of anything before. However, in 2021-2022 individuals and businesses have been unable to get what they need to thrive. Even basic needs like formula milk can continue to run out.
- Housing costs—With the real estate market hot, mortgage rates soaring and inflation continuing to rise, housing costs are skyrocketing whether you own or rent your place of residence. Inflation and interest rates are crushing home buyers.
- Consumer sentiment at new lows —Surveys from the University of Michigan and several reports, including CNBC, show that consumers are increasingly discouraged.
- Productivity Benefits and Tax Exemption from Public Assistance Lending Rates “It is becoming more and more difficult to earn a living in honest work and to pay for the basic necessities of housing, food and energy.
In contrast, a person on public assistance and receiving tax-free benefits may not feel the pain of increases in housing costs, taxes, energy, fuel, utilities, education, and health care. For these reasons, many quit their jobs and enter public assistance and disability programs.
All in all, this is one of the most difficult times American citizens have ever known. Unfortunately, many of the problems we have today could be solved through strategic planning, innovative thinking, diplomacy, tax policy, and productivity policies.
In my other articles, I write clearly about the ability of the Federal Reserve to create additional inflation. Remember that if you increase loan rates, you increase the cost of products, services, credit card loans, car loans, student loans, mortgage rates, adjustable rates and interest on loans and taxes.
There are other obvious problems hurting families and the economy’s discretionary spending.
In January, I called my local utility company to inquire about heating prices. My heating bill has gone up about 100%. The local utility company said this was typical as costs were up, but the biggest issue was that the winter was mild and heating prices could have been three times higher than in 2019- 2020.
Additionally, mortgage rates have increased over 100% in about a year, and rates are now above 6% on a 30-year fixed rate mortgage. Thus, there seem to be countless inflationary variables hitting families from all sides.
With about 100 days until the 2022 election, no one knows how politicians will be able to appease working people with so many things going wrong at once. Moreover, it seems almost impossible for Nany Pelosi to retain her seat in Congress and her position as Speaker of the House in 2022 when Republicans have in fact won seats in 2020.
George Mentz JD MBA CILS is CWM Chartered Wealth Manager ®, Global Speaker – Educator, Tax Economist, International Lawyer and CEO of GAFM Global Academy of Finance & Management ®. GAFM is an ESQ EU accredited graduate body that provides certification training in over 150 countries to ISO 21001 and ISO 9001 standards. Mentz is also an award-winning author and certified law professor in wealth management in the United States. .
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