by Tony Gray
posted: 18 March 2023

The U.S. economy is in serious trouble right now.

High inflation and scarce goods and labor have caused higher prices for basics like housing, energy and food.

President Joe Biden continues to spend money like a drunken sailor. The money supply is limited, so the more that government borrows, there is less available for us to borrow. Competition for the shrinking money supply takes the forms of higher interest rates and fewer retail loans.

Federal Reserve President Jerome Powell got a bee in his bonnet last year and joined the Biden administration fight against inflation. He declared the Fed would keep raising interest rates until inflation returned to two percent.

Rapidly rising interest rates have melted down the stock market since the Fed began tightening credit. Most Americans have retirement plans that invest in securities like stocks and bonds.

Stock market crashes, like the recent, months-long decline of Wall Street, reduce the value of stocks held in our 401-K or IRA. Individuals ready to retire or nearing retirement age may never recover the huge losses experienced in the market over the last year. Some may have to keep working until they die because they can no longer afford to retire.

Banks are failing left and right and the banking industry is on the ropes. Anyone who follows the news knows Silicon Valley Bank went from a high-flying investment bank to being shut down by regulators in a matter of days.

Signature Bank was shuttered by New York regulators the same week.

Other regional midcap banks saw their stocks drop like rocks. Short sellers have pushed banks like First Republic to the brink of bankruptcy in one week.

Even giants like Bank of America and J.P. Morgan are reeling. JP Morgan is one of the biggest, best-run banks in the world. Its stock is being dragged down by contagion afflicting almost all bank stocks.

The government can make depositors of one or two banks whole but there is not enough money available for the feds to shore up every bank.

Financial analysts have been debating whether the rate hikes pushed by Mr. Powell will create a soft landing to a brief recession, or a hard landing that ends with a lengthy recession.

I worry that his dogged determination to return to two percent inflation will drag the economy down even further than a recession.

There is a very real danger the U.S. (and, thus, the world) may enter another depression. The last depression lasted decades and ended with World War II.

I am not trying to scare readers as much as I am trying to warn.

If President Biden and Fed President Powell continue on their current path, this year may be the last good year we have, financially speaking, for many years. Prudent people prepare for forseeable events.

This is not the time to make major purchases like homes or cars, or leave a job you've had for years.

Put aside some canned or frozen food each pay period. Also, set aside some cash money each pay period. If the banking system breaks, the money in your accounts may get frozen, even if its just for a few days. What do you use to buy milk, bread, eggs or gas in the meantime, though?