Document Type

Article

Publication Date

10-2022

Abstract

The risks of the next U.S. Financial Crisis are increasing. Many Americans are fearful of the very negative financial impact of the next crisis especially since it could occur so soon after the negative impact of the Covid Pandemic on the economy. Financial safety nets are weak. The scope of the crisis includes decreasing values of assets, a recession caused by government policies, decreases in the value of existing bonds, and significant social stress fueled by political polarization after the 2022 midterm elections. We believe the solution to the fear begins with knowledge and a logical approach to assess key risk signals that open the door to formulate and implement actions that can effectively reduce the negative effects. This paper introduces a new risk index, which is called the Economic Crisis Index™. Five national policies and issues are identified as signals of changing risks. A review of policy actions and economic trends in the first two quarters of 2022 verifies that the risks of a crisis are increasing and nearing a tipping point from the post midterm election to mid-2023 period. Ironically, in the 1780s James Madison declared that financial and economic crises were increasing stress, which threatened the stability of the U.S. In that case, the political struggles were primarily between “the class with property and the class without property.” Much has changed in 240 years, but history has a strange habit of repeating itself unless appropriate early actions are taken. A list of financial information references is provided in the Appendix. These references provide potential information that practitioners and individuals can review, consider, and discuss with their financial resources to devlop the best solution(s) for their situation.

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