🩻 As 2024 is Coming to an End, Let's Talk About The Worst Case Scenario–Another Depression of The US Economy
What if something bigger than a mere recession is on the horizon?
The United States economy has faced boom-and-bust cycles throughout its history.
What if we face a worst-case scenario where economic contractions affect global markets, resulting in a new Great Depression?
Below, we’ll explore possible signs and reasons why we might be in more trouble than we think.
1. Shuttering Bus Stations and the ‘Invisible’ Economy
A bus station might not sound like the engine of economic vitality, but:
60 million Americans rely on inter-city buses each year.
The average annual income of these riders is under $40,000.
When bus stations close, whole segments of the population lose access to affordable travel.
Why does it matter?
It indicates local governments or private investors see more profit in serving the wealthy (condos, malls) than providing services to average or lower-income people.
Long-term result: More people on the economic margins lose basic infrastructure.
One could argue this is a symptom of a declining economy—our society is restructuring to cater almost exclusively to top earners, leaving the rest behind.
2. Geopolitical Tensions: A Recipe for Economic Turmoil
Ukraine Conflict
U.S. and European sanctions aimed at Russia.
Russia is pivoting to China and India for energy deals.
Western predictions of the Russian economy's “quick collapse” did not happen.
Middle East Instabilities
Ongoing conflicts in Yemen and the Red Sea region disrupt shipping.
Shipping routes are rerouted, raising transport costs and fueling inflation.
Speculative Take:
Rising geopolitical conflicts strain the global economy.
U.S. war spending ramps up, adding more debt and possibly aggravating inflation.
Investors worldwide could lose confidence in U.S. leadership, further pressuring the dollar.
3. Inflation Rollercoaster
We’ve been trying to tame inflation for years.
Fed rate hikes temporarily cool some sectors.
Energy and commodity prices remain volatile due to global conflicts.
Recent stats show inflation ticking back up in several categories.
Worst-Case Thought:
If inflation accelerates too fast, consumers pull back.
Businesses see lower sales, causing layoffs.
All it takes is one major shock to tip an uneasy equilibrium into a sharp downturn.
4. Tech Turbulence and Boeing’s Woes
Once, Boeing symbolized American ingenuity and reliability.
737 MAX controversies
Ongoing safety questions
Production setbacks
Meanwhile, Airbus soars as Boeing struggles.
Airlines seek diversified fleets, so fewer Boeing sales.
Chinese manufacturers are waiting to fill any vacuum left by Boeing.
If big players in tech and manufacturing continue to falter, the U.S. could find its export clout diminished, leading to job losses and wider economic ripples.
5. The Rise of BRICS and the Global Power Shift
The BRICS economies (Brazil, Russia, India, China, and South Africa) continue to expand.
They add new members like Saudi Arabia—a critical oil powerhouse.
What’s at stake?
Access to cheap energy and critical commodities could shift firmly to the BRICS sphere.
Developing nations can shop for the best deals between the G7 and BRICS.
The U.S. might lose its hegemonic trade, finance, and influence advantage.
Speculative Worst Case:
The dollar could lose its status as the default reserve currency.
Countries pivot to alternative alliances for major deals.
Foreign investment in the U.S. slows, and capital outflows accelerate.
6. Potential Triggers for a Depression
A. Financial Crisis 2.0
A credit crunch ensues if big American banks overextend on risky loans or underperforming assets.
Housing bubbles or commercial real estate crashes could be a catalyst.
B. Federal Debt Spiral
Massive government spending (military, social programs, debt service) leads to unstoppable interest costs.
Stalemates in Congress could cause government shutdowns or defaults, sparking market chaos.
C. Social Unrest and Political Dysfunction
The growing wealth gap aggravates tensions.
Political gridlock or extreme partisan shifts spook markets and hamper policy responses.
7. The Domino Effect
Imagine a domino effect:
Rising inflation clobbers consumer spending.
Businesses see falling revenues and lay off employees.
Unemployment rises, fueling more mortgage defaults and credit card delinquencies.
Banks become unstable—again.
Foreign investors pull out or pivot to competing markets (think China).
Suddenly, a deep recession turns into a global depression as panic spreads.
8. Is There Any Silver Lining?
Yes—there always is.
Innovation could spur new industries.
The U.S. consumer market is still massive and resilient.
A swift policy response (lessons learned from 2008) might soften the blow.
Yet, waiting for last-minute solutions is risky.
9. Preparing for the Unthinkable
Diversify investments: Don’t rely solely on U.S. assets.
Stay informed: Geopolitical shifts can impact markets overnight.
Support local economies: Strong local networks often fare better in downturns.
Advocate: Press your representatives for infrastructure and social safety nets that keep societies afloat in hard times.
Conclusion
We’re not saying a new Great Depression is certain. But the warning signs—from:
Shuttered bus stations,
Global power shifts,
War-driven inflation,
Tech and industrial downturns,
Mounting debt,
…suggest the U.S. might be less stable than we’d like to believe.
In times like these, it’s best to be clear-eyed and prepared because if the worst does occur, those least able to handle the shock will feel it first—and feel it hardest.
Happy New Year!
God bless you and your Family,
Jack Roshi, MIT PhD