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The last three years have seen an enormous amount of change in the world economy. The world is in debt, and a lot of it. With the demand for debt still increasing, we took a look at some of the catalysts that have caused the deficit and how you, as an individual, can take advantage of the current market conditions.
How Much Debt the World is in:
Globally, we are hitting record-high debt with approximately $300 trillion as of June 2022, according to the Institute of International Finance. That figure includes the accumulated amount from governments, corporations and households across the planet. Let’s break down the numbers…
Three hundred trillion dollars is 349% of global gross domestic product. That’s roughly equivalent to $37,500 per every single person in existence, while the GDP per capita is only $12,000. Gross domestic product (GDP) is the standard measure of the value added, created through the production of goods and services in a country during a certain period. As such, it also measures the income earned from that production, or the total amount spent on final goods and services (minus imports).
Since the recent global financial crisis, the world’s leverage is substantially higher. The US government debt-GDP ratio reached an astronomical 102% by 2022. These figures indicate that the debt accumulated is doing so at a faster and higher rate than the income being generated. Specifically, the debt per person globally is 68% higher than the average GDP.
Why Does it Matter?
According to a report released by S&P Global Ratings, the demand for debt continues to increase. This demand is created through taking measures to help consumers with inflation, rebuilding infrastructure and tackling climate change
“Rising interest rates and slowing economies are making the debt burden heavier,” they wrote. Fed funds and European Central Bank rates were, on average, 3 percentage points higher in 2022. That potentially suggests $3 trillion more in interest expenses.
The report continues to say that the power of each added debt dollar, holds less impact than in previous years. That means the value that each additional dollar borrowed adds to the economy has decreased.
What Does it Mean?
Essentially, the trickle-down-effect is experienced by everyone on a micro or macro scale. This effects overall consumer sentiment and recession fears which play a role in how and where investors spend their money or reduce the amount that they spend in the markets.
Rising interest rates from bonds, mortgages and borrowing can also significantly impact the value of stocks. The interest rate hikes by the Federal Reserve in the USA in 2022, directly contributed to a 20% decline in S&P 500 Index.
Other stocks also declined substantially with some of the biggest names reporting some of the largest declines in revenue:
- Apple – 27%
- Microsoft – 29%
- Alphabet – 39%
- Amazon – 50%
- Meta – 64%
- Tesla – 65%
Is a ‘Great Reset’ Coming?
Unfortunately, getting out of a global debt crisis is no simple task. It usually requires unpopular actions and the policy-makers will need to develop a model for a ‘great reset’. When exactly does that moment arrive though? Well let’s look at the ‘debt ceiling’ outlined in the USA.
The self-imposed limit on debt in the US is approached much faster than desired. Treasury Secretary Janet Yellen warned that the US could hit it as early as Thursday 19 January 2023 and it did exactly that. Now there are a few options the government could take to combat the rising challenges.
If Congress decide to raise the ceiling further, as they have done in the past, that could help prevent potential cashflow shortfalls, partial government shutdowns and the potential to default; based on past experience with similar circumstances. This option has not been widely supported, with Republicans making demands on the democrats regarding spending cuts and other concessions, before committing to supporting it
According to Yellen, if no action is taken soon, the US could default as early as June 2023. “Failure to meet the government’s obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability,” she wrote. “Indeed, in the past, even threats that the U.S. government might fail to meet its obligations have caused real harm, including the only credit rating downgrade in the history of our nation in 2011.”
Other statistics and data platforms have shared similar sentiments and concerns. Moody Analytics has described a ‘cataclysmic’ event should the debt ceiling not get raised again, with further predictions of millions left jobless and stock prices plunging. The US is already at $31 trillion in debt at the time of writing.
China’s Economic Decline
China attempted a zero-tolerance to Covid-19 policy which resulted in widespread Covid lockdowns. This combined with the historic downturn of the Chinese property market and extreme heatwaves, resulted in the economy expanding a miniscule 3% for 2022; well below the target set by the Government.
Kang Yi, director of the NBS, told a press conference in Beijing that “The triple pressures of demand contraction, supply shocks, and weakening expectations continue to evolve, and the complexity, severity, and uncertainty of the environment are increasing”.
Perhaps a bigger shock than a declining Chinese economy is the decline in the nation’s population. Down by 850 000 people, the population fall is the first in over 6 decades and suggests there may be more turmoil in the future.
Experts speculate that China’s population has been falling since 2018, as it possesses one of the lowest fertility rates in the world. This, according to economists, could result in a looming economic crisis that could be worse than Japan’s ‘Lost Decades’ in the 1990s.
The yuan has been off to a promising start in 2023 though, rising nearly 2% against the US dollar. At the Revolutionary broker, LonghornFX, you can trade the Chinese yuan, Alibaba and over 170 other global assets; taking advantage of either bear or bull markets with tools like Take Profit and Stop Loss.
Is Bitcoin Worth Buying Right Now?
The crypto winter has been extensive and tiring for many cryptocurrency enthusiasts and Bitcoin certainly cooled off in a big way, but is it thawing out now? The short answer – Yes!
The most popular and prominent of all cryptocurrencies, Bitcoin, managed to break through its $20k resistance barrier and possibly start a new bullish trend that many investors speculate could have a massive impact on the overall market, let alone the Bitcoin community’s sentiment.
In a recent article by Forbes, it is suggested that Bitcoin could potentially recover to values between $30k – $50k. ‘’…Bitbank projects Bitcoin prices will recover to between $20,000 and $50,000 in the second half of 2023, but only if the Federal Reserve can stop interest rate hikes by mid-2023 and begin cutting rates by early 2024’’.
Bank of America analyst Alkesh Shah also had this to say ‘’…recent cryptocurrency price declines and bankruptcies have overshadowed the long-term thesis for digital assets and blockchain technology. The top 100 cryptos are still up more than 2,000% on average since the end of 2016, and developer blockchain activity actually accelerated in 2022’’.
Shah goes on to say that the industry is still in a nascent phase and will continue to grow and develop in 2023. “Bitcoin is 14 years old, but dozens of blockchains and hundreds of applications have emerged that are less than 3 years old and remain in version 1.0”.
How Do You Make Money During a Global Financial Crisis?
Inflation and recession fears can dampen anyone’s appetite for investing however, one thing is certain: There is ALWAYS opportunity in the market. Whether you are a believer in buying the dip or you are a loyal short seller, CFD trading with the right broker is a very strong candidate to win over your investment.
CFD trading not only allows for shorting, meaning you are able to profit off both falling and rising markets, regardless of investor sentiment; but they also offer tools such as high leverage options and multiple asset classes with which to diversify your portfolio.
Diversifying your portfolio, if you haven’t already, is one of the key components in any professional trader’s portfolio. Especially during economic instability, similar to what we are experiencing presently. We’ve partnered with an excellent CFD broker to bring you this brilliant deal…
LonghornFX and Learn 2 Trade:
Stay on top of your investments and never miss an opportunity to enter a trade at the price you want; or exit quickly when the price turns. Not only do we offer free VIP signals, but with Learn 2 Trade you have access to comprehensive trading guides, breaking market and investment news and all the tools required to start your trading journey with your strongest foot forward.
Simply sign up with LonghornFX, make your first deposit of $250 and you can then immediately feel the reward of trading on a large range of stocks, forex, indices, metals, commodities, cryptocurrencies and futures with free signals for an entire year from Learn2Trade. Should you require any assistance while setting up your account or during your trading activity, LonghornFX offers their customers 24/7 support via Live Chat, Email or a call-back.
What are The Benefits of CFD Trading in a GFC?
Some brokers offer impressively high leveraged-trading options, across a variety of different financial markets. Leverage trading allows investors an opportunity to gain greater market exposure with less upfront capital, at a ratio outlined by the broker. LonghornFX offers unbeatable leverage options up to 1:500.
Global Market Access
– LonghornFX offer a unique vantage in that you are able to access a range of international markets from different geopolitical locations, all in one convenient location.
Shorting Your Trades
There are certain investment firms that do not allow for shorting however, with CFD trading you can short a stock or asset and still earn, regardless of investor sentiment and market health.
Low Commission and No Hidden Fees
Every broker will have their own policy set up regarding how they make money however, in most cases, brokers offering CFDs will allow trading on a commission basis and do not charge for depositing or withdrawing your funds, nor do they charge extra for using tools such as stops and limit orders. LonghornFX charges zero fees for depositing and withdrawing your funds, they operate on a commission basis only, whereby a very reasonable $6 is charged per full lot traded.
*a lot is equivalent 100,000 currency units.
Range of Assets Available
There are many different aspects to trading and this includes which sector you are investing in. CFD brokers usually offer a wide variety of different asset types with possible leverage. Enjoy trading on forex, cryptocurrencies, indices, futures, commodities and stocks, with LonghornFX.
Day Trading, Hedging and Scalping
This is something that is decided by each CFD Broker but often you will find there are little to no restrictions with these trading strategies. You are able to day trade, hedge or scalp with CFD brokers, as they usually do not place any limits on the number of order executions that can be made in a single day. This is true for LonghornFX, which allow these strategies and more.
What platform does LonghornFX use?
LonghornFX partners with the widely acclaimed, award-winning MetaTrader4 terminal. MetaTrader4 is an advanced trading system, designed for contemporary, professional and beginner traders. The internationally-awarded platform offers various trading tools such as technical analysis, trading signals as well as the use of electronic assistants also known as ‘Bots’.
Mitigating Risk with MT4
Understanding the risks involved with this type of trading requires a little time and experience familiarizing yourself with the basics of chart reading. This is best done by physically executing your strategy by placing trades. To best gain this experience we recommend you practice risk-free trading on a Demo account with LonghornFX – a revolutionary CFD broker offering unlimited Demo accounts to all their clients.
Clients are able to trade anywhere, any time. MT4 is compatible with web browsers, laptops, desktops and mobile devices and is iOS and Android friendly. Take advantage of rapid order executions and over 2000 free indicators with this prudent partnership.
Why Choose LonghornFX?
LonghornFX has lightning-fast, reliable and instant order executions. The revolutionary broker also offers some of the tightest spreads available and well over 170 assets to invest in. Choose professionalism and benefit from trading on the award-winning MT4 platform with no dealing desk; all orders are processed straight through an aggregator; thus, you have instant order execution speeds and the tightest spreads available.
Reminder: Opportunity is Abundant in Falling Markets
CFD trading allows investors the opportunity to speculate on falling prices and execute sell orders, also known as going short. Thus, traders are able to profit off falling markets, sometimes generously. At LonghornFX, they offer their traders tools such as ‘Take Profit’ and ‘Stop Loss’ which can be used to mitigate risk in the event the trend suddenly turns against you while actioning a sell order.
* This article is for general information purposes only. It is not investment advice or a solution to buy or sell assets. Opinions are the authors; not necessarily that of Learn2Trade or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Make sure to do research and prepare before engaging in this type of trading strategy.
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