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State of the Economy

Recent media reports state, “the economy is good” and “unemployment is at an all time low”; however, the validity of such statements remains to be seen.


According to the United Nations (2018), “at the annual International Monterey Fund meeting in Washington DC; former Bank of England, Governor Mervyn King reported the world is sleepwalking towards a fresh economic and financial crisis that will have devastating consequences for the democratic market system”.


During his lecture Lord King said today’s economic and political climate has never been so fraught; for instance, a recent study shows the ongoing US-China trade war has resulted in sharp declines in bilateral trade with U.S. consumers bearing the heaviest brunt of the tariffs on China. Overall results of the study serve as a global warning that “a lose-lose trade war is not only harming the main contenders; it also compromises the stability of the global economy and future growth”. The figure below shows in the first half of 2019, US tariffs caused a 25% export loss inflicting a $35 billion blow to the Chinese exports in the US market for tariffed goods; however, the competitiveness of Chinese firms which, despite the substantial tariffs, maintained 75% of their exports to the US (United Nations, 2019).



More economic worries surface as China struggles to contain the deadly coronavirus, it’s becoming increasingly evident that the disruption to its economy will be global. Provinces accounting for almost 69% of Chinese GDP will remain closed weeks after the annual Lunar New Year holiday, shutting factories, shops and restaurants, leaving ships trapped at port, and slamming household spending. Travel restrictions limit the movement of more than 48 million people, with the crucial manufacturing and logistics hub of Wuhan (the epicenter of the virus). Hundreds of major manufacturers have had their links to the global supply chain severed; Robert Bosch GmbH, the world’s largest car-part maker, had to shutter two factories employing a total of 800 people in Wuhan. Other auto part manufacturers, including Honda and Nissan have also closed their facilities in Wuhan. Depending on how quickly the virus can be contained, policy makers and CEO’s are preparing for the worse; Nike closed about half of its company-owned stores in China, Starbucks has closed about 2,000 of its cafes and Apple says its supply chain will be greatly affected (Dormido & Leung, 2020).


To worsen matters, the new spending blueprint released by the current administration reveal a lot of broken promises; specifically, President’s promise to eliminate the national debt in eight years. However, outlined the spending blueprint titled “A Budget for a Better America: Promises Kept, Taxpayers First”, the federal government would not start paying down debt for 15 years. Until then, even under budget writers’ rosy projects of the blueprint, Washington would run annual deficits adding to the red-ink total that already stands at more than $22 trillion (Allen, 2020).


Given the overall short and long-term impact of all three economic events, the perception that all is good with the economy is not so true; in fact, as predicted by the developers of cryptography, cryptocurrency and stablecoins emerged from society demands of a better currency not controlled by the government after the last financial crisis of 2008. In fact, a recent survey revealed how people felt about cryptocurrency compared to other investable assets. When asked which they would prefer in terms of stocks, bonds, gold or virtual currency, 21% prefer it over government bonds, 17% prefer it over stocks, 14% prefers it to real estate and 12% prefers virtual currency over gold (Brogart, 2018). Interest in cryptocurrency continues to grow along with the overall want and need for it; in fact, Dick (2018) reports that, “millennial's today are not happy with the existing financial system; in fact, 77% believe the financial system is favorably biased to the rich and powerful at the expense of ordinary people like them”. Three-quarter of respondents fear the global financial system will be hacked, 77% expect another global crisis in the future and the majority report a strong distrust in the existing financial system.


These findings test the validity of a good economy leaving critics and economist to believe the economy is rapidly changing to a not so good status. Likewise, Northeast Capital Fun II and A$$ETcoin has emerged into the spotlight to provide a more stable economic foundation to sustain any future economic storms. This concludes part one of our discussion, in part two, we address unemployment and wealth in minorities communities across America.


Sources:

Allen, J. (2020). Trump broke his promise to fix the debt. He'll blame Congress in 2020. NBC News.

Brogart, S. (2018). Bitcoin is a Demographic Mega-Trend: Data Analysis. Blockchain Capital.

Dormido, H. Leung, A. (2020). Charting the Global Economic Impact of the Coronavirus. Bloomberg.

Dick, R. (2018). Survey: A Quarter of Millennials Hold Crypto, Wary of Current Financial System. NewsBTC.

Elliott, L. (2018). World economy is sleepwalking into a new financial crisis, warns Mervyn King. The Guardian.

United Nations. (2019). Trade War Leaves Both US and China Worse Off. United Nations Conference on Trade and Development.

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