An economic collapse is becoming a scary possibility.
There are warning signs that the market is due for a painful correction.
But one U.S. enemy could also be making moves to trigger one financial crisis.
The economy usually goes through a recession every seven years or so.
The Great Recession of 2007-08 led to a cascade of financial collapse around the globe.
The market has been overdue for at least a correction, but Donald Trump’s policies of cutting corporate taxes and slashing regulations has breathed life into an economy that experienced the slowest recovery under Barack Obama.
While the economy is doing relatively well, there are still indicators that we’re teetering on the brink of a recession.
Two key markers, the high Shiller P/E (price to earnings) ratio and the inversion of the yield are signaling that trouble is looming.
And it gets worse.
China, our main geopolitical foe, is making belligerent moves that could trigger disaster.
Ever since the U.S. helped industrialize China’s economy by opening trade in the 1970s under Richard Nixon, the Chinese have been making moves to become a superpower.
The thought was that free trade would break the back of China’s communist government.
While China has somewhat liberalized its markets, it still remains an aggressively authoritarian state.
Chinese President Xi Jinping essentially entrenched himself as President for life.
Trump believes that the trade imbalance with China is out of whack and they need to lower their tariffs in the name of fairness.
Trump is raising tariffs to get China to feel the heat of its long-lasting lopsided trade deals.
However, President Xi is willing to crush his own people in order to win a trade war with the U.S.
China is hoping a Democrat wins in 2020 so they can go back to the status quo of one-sided trade agreements.
In the meantime, Chinese tariffs could accelerate a financial crisis.
Not only do the tariffs raise prices on goods, they could create market uncertainty, which may spur investors and business owners to pull capital.
Also, China is exacerbating the problem by manipulating its currency, as designated by the U.S. Treasury.
By devaluing its currency, China encourages investment from foreigners who are looking to take advantage of the favorable exchange rate.
While this strategy may be unsustainable over a long period of time, it can have harmful effects in the midst of a trade war.
If that isn’t bad enough, China is also stealing intellectual property from American companies, which equates to billions and billions of dollars siphoned out of the U.S. economy.
These maneuvers don’t even touch on the other insidious moves China is making, such as embedding spies within the country.
California Senator Dianne Feinstein had unknowingly employed a Chinese spy for years and former New York mayoral candidate John Liu was actually working in league with the Chinese government.
China is pursuing multiple forms of attack, and they’re perfectly willing to use their own citizens as pawns to achieve their goal.
And one of those goals involves messing with the U.S. economy.
It’s important to protect yourself from the uncertainty of the market and adversarial forces like China that wish to do harm.
Make sure your portfolio is diversified and you hedge against market turmoil with some investment in precious metals.