Why Markets Could Crash Again: Global Recession Risks Explained

"according to weter the US economy accounts for around 26% of global GDP the Chinese economy accounts for around 177% of GDP the Japanese and German economies account for around 4% of GDP each and the Indian economy accounts for around 3% of GDP obviously this means that Global GDP is heavily dependent on the economies of these five countries as some of you have heard the US economy seems to be slowing the Chinese economy has been weak the Japanese economy is trying to to restart the German economy is essentially already in a recession and the Indian economy has likewise been slowing taken together this suggests that the world is headed for another Global recession and it looks like this one could be much more brutal than the ones before"

"the primary reason why they did this was because of the concerns around Trump's tariff policies and this is believed to be the same driver behind a decline in consumer spending and I'll remind you that it also seems to be the driver behind consumer sentiment this is extremely important to point out because it suggests that tariffs or something related to tariffs could be the murder weapon that kills the US economy and sends it into a recession"

"the bad news is that the response to the tariffs could do the trick if it escalates into a fullblown global trade war"

"the Chinese Yuan has been slowly decreasing in value against the US dollar in recent years and some of you might recall that we did video about how the Chinese Central Bank was doing everything in its power to prevent the Yuan from devaluing this seems inevitable if China continues spending and it could create civil unrest that threatens the Chinese economy"

"Japan's consumer spending has been flat in recent years and if you adjust for the depreciation of the Yen during this time consumer spending is technically negative data from Trading economics suggests it's been the same for government spending too flat for years in real terms a negative when adjusted for Yen depreciation lo and behold the same seems to be true for investment and exports and this would explain why Japan's GDP growth has been fluctuating around Zer for years"

"German exports have been falling like a stone since late 2022 and this might have something to do with the fact that it cut itself off from Russian energy closed its nuclear plants and tried to use wind and so instead lo and behold German government spending has been increasing exponentially to try and fix these admittedly self-inflicted wounds and chances are that you've heard that Germany wants to increase the amount of money that it can borrow at the time of shooting the German green party is reportedly trying to block this demanding that more of this new money be spent on wind and solar what could go wrong in any case the consequence of Germany's policies can be seen in its GDP figures thoroughly in recessionary territory with the most recent quarterly release being in negative yet again"

"both of their economies seem to be at risk of being killed killed by the same murder weapon an increase in geopolitical tensions in Japan's case this could be an escalation over Taiwan or escalation in the South China Sea which some believe is more likely that said geopolitical tensions involving China could end up being good for Japan as it could result in more economic activity moving out of China and into neighboring countries including Japan in Germany's case this could potentially be an escalation in the war in Ukraine but even if the war does end Germany's economy will continue falling if it doubles down on its existing policies"

"India's growth has been contracting since early 2023 when it hit a high of 99.7% and this might have something to do with the peculiar composition of this GDP believe it or not but almost 60% of India's GDP comes from consumption with most of the rest coming from investment this is believable when you realize that India is technically the largest country in the world by population and continues to experience robust population growth at the same time the Indian government has been doing everything in its power to get its massive population on the economic tread B through things like digitization the result has been a booming economy and lots of foreign investment however something seems to have changed in mid 2023 according to Reuters there was a notable decoupling between GDP and consumption during this period with consumption falling while GDP continued to rise the continued rise in GDP was presumably due to the continued rise in foreign investment which fueled a rally in India's stock market the thing is the rally ended last September believe it or not but the decline consumer spending seems to be due to the same thing driving India's economic rise its population growth the massive increase in the supply of labor has pushed wages down making it harder for the average Indian to spend as much money as they did before as for the decline in India's stock market well that's a no-brainer Trump's election and the threats of Trump's tariffs with India's population not expected to Peak until 2060 it looks like consumption could continue declining"

"the murder weapon though in India's case is a Timeless classic and that's social unrest arising from falling wages in fact we already see early signs of this Indian prime minister Nena Modi has been in power for over a decade and that's just because he was very popular with the voters in recent years though opinion poll suggests that his popularity it has been slipping and this is evidenced by the fact that Mod's party lost its parliamentary majority in the 2024 Indian election can you guess when Mod's popularity started falling that's right sometime in 2023 when Indians reportedly started to feel their wages declining to the point that they started cutting back on spending if this trend continues then political pressure within India could continue to increase"

"make no mistake the two are closely linked in the modern day if the markets were to continue crashing this would eventually cause economic growth to contract because of the wealth effect or otherwise but just like the economy a stock market rally doesn't die of old age it's murdered and this is because a lot of the money in the market comes from passive flows which continue to automatically buy unless there's some sort of Crisis that triggers all the algorithms to sell"

"millions of people would lose their jobs and millions more would lose most of their net worth to put things into perspective the last two Global recessions specifically 2009 and 2020 caused Market to Fall by 50% and 30% respectively and in retrospect the only reason Market fell by 30% in 2020 was because governments and central banks around the world stepped in with insane amounts of monetary stimulus it's safe to assume that the same thing would happen again if we were to see a global recession today and it's easy to forget the Pandora's Box that was opened during the pandemic it was the first time that governments sent money directly to Consumers you can bet that they will use this tactic again to revive the markets and the economy if either or both start to go into cardiac arrest"

"The outcome would be another 2 to 3 years of practically fake economic growth fueled by government spending that would inevitably result in even more inflation forcing interest rates higher and causing this fake economic growth to disappear then we'd be right back at square one and some would say this has been the case since the 2008 financial crisis all we wondering is how long it will continue for"