I hate to be the bearer of bad news, but a recession looms. In fact, we may already be in a recession and just don’t know yet. Let me briefly explain why recessions are natural, why this is nothing to fear, and why the longer we put it off – assuming we can with interest rate cuts and “stimulus” deficit spending – the worse it plummets and hurts in the long run.
Recessions are a natural, even mandatory, part of any economic cycle. Good times lead to excess. Excess can lead to greed and over-extension, and inevitably, the economic cycle will bring it back into balance.
Fact: The US economy goes into a recession every 5 to 8 years.
Fact: The US economy has been without a recession since summer 2009. Over 10 years. And counting.
Let the “and counting” part worry you. The bigger they grow, the harder they fall. The “good” news is that the economic contraction has probably already started, artificially, due in no small part to Trump’s tariffs. Trump’s tariffs have been a government imposed softening of the strong economy that has run for so long it risks overheating into something worse than a run-of-the-mill recession.
Don’t fear a recession. Many will ride through it unscathed, so why fret or worry for them? And for the worst suffers, the bankruptcy process and welfare programs like SNAP are designed to ease the transition that comes with failure.
Failure is good. Growth comes from failure. Failure beats inaction any day.
And you can make money in a recession. And not just in foreclosures.
But most of all, why fight it? It would be like standing guard at a hurricane with an umbrella and a big industrial fan arguing that you can beat it back. You can’t. Not even if you’re President of the United States.
The important takeaways:
- Recessions happen. Let them happen.
- Look for opportunity in the downturn. I bought my house in 2009 for $201,000. It’s value has dipped some over the last year. It’s down to around $350,000. I expect that value will fall in the short term and rise in the long term.
- Don’t panic. Stick to your plan.
- Compared to the last recession, affectionately known as The Great Recession, why, this one shouldn’t be that bad at all. Easy for me to say.
- Long term, never bet against America. We’re the greatest country around, the greatest economy ever. We will not only bounce back, we will bounce back bigger and stronger than ever.
- Remember Warren Buffet’s old adage. Be fearful when everyone is greedy, and be greedy when everyone is fearful. Accumulating cash now could lead to some great deals in a few quarters.