I think that Gail has a very good handle on what we are going to encounter in the next few years. Better to be prepared for these sthings.
Posted on April 24, 2025 by Gail Tverberg
(a) Recession seems likely, starting out as being barely perceptible, but getting worse and worse over time.
(b) World output of physical goods and services will begin to decline almost immediately. In particular, products manufactured in the US using inputs from China will become difficult to obtain, as will goods imported into the US from China.
(c) I expect that commodity prices will fall. Deflation seems more likely than inflation. If inflation does take place, I expect that it will take the form of hyperinflation, with central banks issuing huge amounts of money, but there not being very many goods and services to purchase with this money.
(d) I expect that many banks, insurance companies, and pension plans will fail. I expect that governments will not be able to bail them all out. If governments do try to bail out all these failing institutions, the result is likely to be hyperinflation, with not much to buy.
(e) Many governments have plans for digital currencies to replace the currencies we have today. I am doubtful that these plans will work. For one thing, intermittent electricity is likely to become an increasing problem. For another, government organizations, such as the European Union, the World Trade Organization, the World Bank, and the United Nations are likely to start falling apart. Even the United States is likely to become less “united,” or it may comprise fewer states.
(f) I do not see gold as being very helpful for the long term. It seems like small silver coins will be much more tradable in the future. What we will really need is food, water, and shelter. I expect that these will go mostly to workers producing these essentials, rather than to hangers-on to the system.
(g) A few businesses may do well. Figuring out how to produce food in quantity, locally, may be helpful. Converting unused buildings to shelters for poor people may also be helpful. Private “protection” services may also do well.
(h) The stock market provided great returns for US investors in the 2008 to 2024 period, but this cannot be expected to continue. A likely result is that returns will fall very low or will turn negative.
(i) Borrowing is likely to remain challenging, or get worse. Lenders will increasingly recognize the default risk. Some lenders may go out of business.
(j) Over a period of years, trade will change to be more local. The US will lose its status as the holder of the reserve currency. It will no longer try to be the policeman of the world.