Don’t fear the recession, understand it!

Recessions are scary. People lose jobs, retirements lose value, and the whole  country seems to suffer. But guess what? Not everyone has to suffer in a  recession. In fact, some people become wealthier during recessions! Why?  Because wealth is never destroyed, it just changes hands. Will the wealth come  to you or will you give it away? Here are 3 things you need to know to prepare for  the recession… 

What’s a Recession?

Recessions occur when the people of an economy stop spending money. They  usually do this for fear of not having enough during times of trouble. If enough  people stop spending money, the economy begins to suffer. Ever wonder why  President George W. Bush asked America to “Go Shopping” after the 9/11  terrorist attacks? He knew that fears of more attacks could cause people to hoard  their money and the economy would suffer. So what happens when people stop  spending money?

Why do Recessions Seem Bad?

If people don’t spend money, businesses make less money. When businesses  have less money, they can’t afford to hire new workers and many companies find  themselves laying off current employees to cut costs and survive these times of  reduced profits. Young people enter the work force looking for a job only to find  that companies aren’t hiring. These new workers can’t make money, so they  begin to save what little money they have. Wait, they do what?! THEY STOP  SPENDING MONEY and the problem worsens. If this happens long enough, the  economy is said to be in a recession. But there’s a good side to this… 

Why are Recessions Good?

When companies have to lay off employees and cut costs, they become more  efficient and improve their business practices. When they survive the recession,  they find themselves in a better position to succeed and grow. Companies that  don’t make the proper adjustments during this time are said to have poor  business practices and they tend to fail during the recession and go out of  business. While it’s sad to see businesses go under and people lose their jobs,  this is an important part of our free-market system. Why? Because a recession  forces businesses to improve. If they don’t improve, they fail, and competing  businesses, that do improve, often get their customers. This means good  business does better. When good business does better, they grow and they need  to hire new employees. So eventually the lost jobs are recovered and the better  companies thrive. As a result, the entire business industry improves. If this  happens enough, fears about the economy will begin to vanish, people start to  spend their money again, and the economy can recover. So are recessions truly  bad? No! Our economy NEEDS recessions to remain healthy. Recessions help  to improve our businesses!

What Can Help Stop a Recession?

To help stop a recession, businesses need to improve and people must spend  their money again. There are ways to encourage this. One of the best ways, is  for banks to change their interest rates. Why do interest rates matter? When  interest rates are high, it costs more to borrow money and pays more to save it.  So high interest rates make starting new businesses very costly. But saving  money in a bank sometimes becomes a great investment because you earn  higher interest on those savings. So high interest rates basically lead to less  start-up business and more money savings. Did you catch that? Higher interest  rates = more saving money and less business success; sounds like the start of a  recession doesn’t it?

But when interest rates are lowered, people are not rewarded for saving their  money as much, so they tend to spend it more. Also, entrepreneurs can start  businesses for less money and they begin to borrow money more often. This  spending and borrowing jump-starts the economy and helps to bring it out of  recession.

You might think, “Shouldn’t we just keep interest rates low and avoid a recession  all together?” Many people believe that’s the best move, but there are 2 MAJOR  PROBLEMS with it. 1) People won’t store up for their families and 2) businesses  won’t be forced to improve their practices. In short, the economy begins to be  irresponsible with its money. So it’s important that we have times of saving and  times of spending.  

Historically, the US Market goes up for an average of 2.5 years before a  recession hits. But today’s economy has been going up for 7 years straight! Is it  possible that we are past due for another recession? If so… 

Why Hasn’t the Recession Hit Yet?

In 2009, our economy began to recover from the 2008 recession. After 2.5 years  of strong economic growth, we were on the brink of a new recession. Interest  rates were high, so people began saving their money. Businesses braced for  another economic downturn with haunting memories of 2008. People began  selling their stocks and exiting their investments. The stock market showed signs  of an imminent crash. But before it could happen, the Federal Reserve decided  to “prop up” the economy when it forced bank interest rates down BEFORE the  recession could start. With lower interest rates, saving money became less  attractive, and people kept spending it. Because customers kept spending,  businesses did not attempt to adapt and improve. New businesses could start-  up, but there were no new customers left by other failing businesses. Why?  These bad businesses were not forced out by a recession! So while new  businesses could start, it was harder for them to grow, which makes an economic  recovery very long and slow. The Federal Reserve was so worried about the  political backlash of a recession, it did not do what was best for the economy and  face a cleansing recession. Instead, it prolonged the inevitable. Now, there are  too many people looking for jobs and not enough good companies to provide  them. Instead, we have old stale businesses, that can’t grow, due to poor  business decisions. This does not bode well for our economy. So what does this  mean?

Is the Recession About to Hit?

The recession will hit, when people stop spending their money. This will cause  businesses to do the same as they lay off employees, reduce costs, and improve  their practices. Then we will find ourselves in the next great recession. So how  close is the next recession? Consider what causes people to stop spending  money…fear. Now ask yourself, “What about our economy is there to be afraid  of?”

Due to unemployment, millions of Americans are stuck at home without a way to  make money. We have seen an entire country break ties with its European Union  when Britain declared its “Brexit.” (or Britain-Exit). We even have many  Americans, unhappy with USA’s current policies, who want to see their state  make an “exit” of its own. Terrorism is rising on a global scale with the Islamic  State shouting “Death to America!” Racial tensions in America have worsened  with the controversy of the Black Lives Matter movement and the All Lives Matter  response. Police officers are being executed in our streets. There is division  everywhere and where there is division, there is fear. Could the recession be  hitting soon?

How Can I Prepare for the Recession?

Now that you understand what could cause a recession, you may be wondering  what you can do to prepare for it. Could you sell your investments and put your  money in the bank? Yes, you could. But, if you do, you might fall victim to one of  the biggest traps of all, inflation. Inflation means your money loses value over  time. Losing value means losing money. Do you want to lose money for a year,  while your money sits in a bank? That’s how long the 2008 recession lasted. Can  you see why so many people fear a recession? It seems like a lose-lose  situation. It seems investing would lose money due to the crash and saving  would lose money due to inflation. But actually, there is a way to make  investment money, even if the stock market crashes! Why? Because wealth  doesn’t get destroyed, it just changes hands! You can be sure, it usually ends up  in the hands of the people who are prepared for it. The good news is, by reading  this and understanding what a recession is, you’ve already taken the first step  toward being prepared…

Now you just need to know how to find opportunities for the money to end up in  your hands. This requires investment knowledge. To begin learning how to invest  in a market crash, look for my article called “Trading Through the Crash.” In it, I  cover basic principles that make earning money, in a market crash, possible.  Watch your email for part 2 of 2 in the Recession Survival Series. 

To learn more, go to TRADEway.com and check out the live learning events. We  offer a money back guarantee and it could be the education you need to change  your life and help you prepare for a coming recession.
 
David Mitchell
www.TRADEway.com
support@TRADEway.com
877-777- 0703