Remember the year 2008 when we lost all hope in our economies and were feeling as low as the Dow Jones? Chances are you and I have some psychological scars that still ache when only we think of them. Yes, it has been over 10 years since massive banks collapsed, people got fired rather than hired and money turned out to be nothing but a bubble. Things were bad and dark, no wonder we would rather forget those nasty years. But, to be fair, in the 10 years that followed the situation has turned around. Despite a few little setbacks such as Trump getting elected, a political war here and there and all the Brexit crap, many economies have flourished. GDPs grew steadily, employment rates were up and economists would even smile every now and then. How wonderful would it be if we could carry on like this? But people, let’s not get carried away here. Didn’t Newton teach us that what goes up must come down? This also counts for economies. The signs are here: winter is coming.
What’s Up With This Trade War?
The stock drops taking place in early August 2019 seemed to be both a flashback as well as a wake-up call for many. The big losers were all companies with any connection to China, such as Apple who relies on China for 20% of its sales. The result? Apple stock went down with 9% in the first week of August. Unsurprisingly, the plunge was the direct result of China striking back in the trade war against our good old friend Donald. The Chinese Yuan was brought down to its lowest exchange rate in eleven years. Why? As a manner of leveling the playing field after Trump announced another excessive rise in import tariffs as of September 1st. Both Trump as well as the Chinese President Xi Jinpig are having a hard time reconsidering their claims. As such, experts are worried that it all might escalate and turn into the largest trade war the world has ever known. Now what? Well, the two leaders have agreed to talk on the phone just before September 1st. The same experts claim that is going to be an interesting phone call. Fingers crossed.
But there is more to the story than just two world leaders having an argument over tea. US household debt as well as corporate debt are increasing, GDP growth rates are slowing down and all this political unrest makes the US economy fragile.
Let’s Get European
Time to take a look closer to home. What is going on in Western Europe? Economists argue that due to the shrinking German Economy and Boris Johnson continuing to push the no-deal Brexit, the odds of Europe suffering a second crisis soon are increasing. One of the reasons why Germany is suffering so much, is that due to its export of industrial products (think of cars and machines), it is affected more by the American/Chinese trade war than most European countries. On top of that, it is said that Europe’s largest economies are all distracted by their own, personal problems. Take Italy, for example, (who doesn’t love Italy?) Not only is the country’s debt bigger than its love for pizza, there is also a lot of economic and political uncertainty caused by the doubts of who is going to be Italy’s next leader.
How About Holland?
Although the Dutch economy is strong, the signs of economic downturn are to be found in the Netherlands too. Interest rates are historically low and simply represent a decrease in demand for money. Looking at employment, things seem relatively good. Over 9 million Dutchies are employed and the unemployment rate is extremely modest with only 3,4%
Still, last August, Het Financiële Dagblad announced that the peak in employment lies behind us. The same message is reflected in consumer confidence. Although this indicator was skyrocketing last year and people were spending away, consumer confidence has been falling rapidly again.
We don’t mean to ruin your upcoming week so let’s look at the bright side, shall we? The Dutch economy is still growing and doing surprisingly well, especially compared to its neighbours. This relative Dutch economy growth was mainly due to large investments in the real estate sector but also to increasing consumption, according to CBS. Consumers were buying more electronics and clothing, but also more gas due to the cold spring. Oh how we love Dutch weather.
At the end of the day, economies are just like the moon. They are fascinating, rather big and based on cycles. Fact is, that the 10 past years have been golden ones that boosted our economies globally. Now, political unrest is a main driver of change in the economic landscape. Although the size and timing of this change are uncertain, it might be wise to start preparing for the potential effects the economic downturn could have on you or your business.
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