Global Recession Risks: Comparing 2024 to 2008 Crisis

The interconnected global economy suggests the U.S. may not escape an impending recession.

### Global Economic Outlook: Is 2024 Set to Outperform 2008?
* 🌍 Several of the world's largest economies are currently in recession, prompting concerns that **2024 could be worse than the financial crisis of 2008**.
* 📉 The interconnected nature of the global economy means that while the U.S. appears to be thriving, countries like Germany, China, and Japan are experiencing **economic downturns** that could ultimately affect U.S. GDP due to **reduced demand for exports**.
* 📊 Despite low unemployment rates and stock market highs in the U.S., the fact that many major economies are officially in recession suggests that the U.S. may not be **immune to a similar fate**.
* 🏦 The banking systems across the globe are also interconnected, and the dynamics that contributed to the **2008 Global Financial Crisis** are arguably **more extreme today**, increasing the **risk of a new financial crisis**.
* 💰 The Federal Reserve's approach to managing economic downturns has evolved, with **quantitative easing (QE)** now being a common response, but this strategy may not be effective in addressing the **underlying risks in the banking system**.
* 🔄 Historical patterns suggest that each crisis leads to **more aggressive interventions**, which could result in **diminishing returns** and a **greater likelihood of a severe recession** if central planners fail to respond adequately.
* 📉 If the central planners do intervene, it might lead to a **significant wealth gap**, benefiting asset holders while leaving the average citizen with **diminished purchasing power** and a **declining standard of living**.
* ⚠ Overall, while there are no certainties about the future, the current economic landscape indicates a **higher probability of facing challenges in 2024** that could **surpass those experienced during the 2008 crisis**.

Several of the world's largest economies are now in recession, so we have to start asking the question: could 2024 be worse than 2008? I'm going to explain this to you in three simple fast steps. Step number one: let's go over this global recession that we're likely entering, or maybe we've already entered. Now, I know a lot of you right about now say, St. George, what are you talking about? The stock market is at all-time highs. The unemployment rate here in the United States is almost at all-time lows. Okay, fair point. We're going to get to that in just a moment, but before we do, let's take a look at how the global economy works. I want to point out initially that the global economy is very interconnected. All right, we've got the United States right here, we have the UK, Germany, China, Japan. Okay, well, right now Germany is in recession. In fact, the whole Eurozone is most likely headed for recession. We've got China that is reporting outright deflation, the worst deflation they have had in decades. Now

officially they're not in recession yet, but tell me how a modern-day economy can have quarter after quarter of deflation and not eventually go into an economic contraction. Japan, they're in recession. The UK, they're in recession. But the United States, our economy is booming. Well, how does that work? First of all, we have to recognize that the four main economies for manufacturing would be China at 28%, United States at 16%, Japan 7%, Germany 5%. The percentages might change slightly, but the four major players are still going to be the same. So, let's think through how this works. China exporting goods to Japan, Japan exporting goods to China, China exporting goods to Germany, and Germany doing the exact same thing, and even with the United States. We produce way, way, way less than we consume. We still export a lot, so it's a similar type of relationship. We're China exporting a lot of goods to the United States, but we're exporting goods to China, UK. It's all interconnected. So, what happens is if Germany, China, Japan

UK go into a recession. Well, that's going to impact the demand for all of the people that we're exporting to. That means our export reports go down. So, what likely happens to our GDP? 70% of our economy is consumption. So, if we don't have demand outside of the United States, then we'll just consume all of that extra stuff right here in the good old US of A. Okay, well, that really doesn't make a lot of sense because what we have to realize is that all the stuff that we are exporting is a surplus. In other words, there's not enough demand for that stuff in the United States of America. Let me give you a specific example. We export a lot of food. Let's just say corn and poultry and chicken. I don't know that anyone would argue that Americans can eat more than they already do. I think they eat plenty as it is. So, if we didn't have these customers, let's say in China, buying our chicken and buying our corn, could we just sell that right into the United States at the

exact same price. No, we might be able to get rid of it. We'd have to reduce the price, decrease margins. If we decrease the price, does that do to nominal GDP? Brings it down, but that's not all. Let's look at it from the flip side of the coin. Like we said earlier, the United States does export a lot, but we import way, way, way more, which is why we have these massive trade deficits. Okay, well, if Germany is going into recession, China depression, all of this economic activity is decreasing. What that means is there's probably going to be a lot of entities that will go bust. A lot of those entities are providing goods, the goods that we consume here in the US. Obviously, New York is an extreme example, and I'm not saying that if the economies of Germany, China, and Japan continue to go downhill, more their businesses go bust, that we have some sort of Mad Max situation here in the United States. It'll happen to a much lesser degree, but the concept still remains. If we have less stuff for us to buy in the United

States it is true prices may go a lot higher, but economic activity will definitely slow down. All you have to do is just look at the S&P 500 for heaven's sakes, look at the unemployment rate here in the US. It's impossible for us to go into a recession right now. The economy is booming for heaven's sakes. Okay, fine, valid point. Let's go ahead and throw up a chart of the Nikkei in Japan stock market. It's at all-time highs, and let's look at the unemployment rate under 3%. But they are in fact in a recession. And that's not all. Let's look at the stock market in Germany, all-time highs. Let's look at the stock market in the UK, all-time highs. Let's look at the German unemployment rate. Creeped up lately, but it's very, very low relatively speaking. And the UK unemployment rate, also very, very low. So all of these economies have stock markets at all-time highs, they have extremely low unemployment, and they are all officially in recession. So I don't

think that's a valid argument for the United States avoiding an economic slowdown, let alone our economy running on all eight cylinders. So, the bottom line, put it in very simple terms, is if we look at what's happening outside of the United States, it's a global recession. Let's just call a spade a spade, and the probability of the United States avoiding that is extremely low. Step number two. So, we know the global economy is very interconnected, but what about the banks in the global economy? Remember, we got Chinese banks, German, Japanese, United States, UK. They all have banks that are also connected to one another, just like the economies. In fact, I would argue they're probably even more connected. Let's remember that back in 2008, we had the GFC, but what did the G stand for? You all know this. Global financial crisis. It wasn't a financial crisis; it was a global financial crisis. But why? Because I left the boom there, not to represent an economic boom, but our financial system going boom, basically blowing up. Why? Because of the

real estate market crashing. So, the real estate market crashing impacts the United States banks, which impacted the banks in the UK, Germany, China, Japan. In other words, the banks in the euro-dollar system that turned a real estate crash into a global financial crisis. And I would argue today the dynamics that were at play within the monetary system are even more extreme than they were in 2008. Step number three, to determine if 2024 could be worse than 2008, we have to ask ourselves what is different about today than 2008, or maybe we should go back even a little further and say 2007. Here's what I'm referring to. I think you now realize how important crucial treasuries are to the global monetary system. In fact, I think we could go so far as to say that they're not just crucial, they're absolutely mandatory. They're basically the oil in an engine. If you take out that oil, the engine is going to seize up, it's going to freeze, it's not going to work. So, we've got bank

a bank B Bank C and we have to remember that these Banks could be geographically located anywhere. It doesn't really matter. They all just make up this very interconnected Network. So, Bank a could be in China, Bank B could be in Singapore, Bank C, the Bahamas, or the Cayman Islands, or even in the United States. But they all run on the same oil because it's all the same system. It's all the same network. So, let's assume for a moment that we do have a global recession. That's your base case. All right, what's going to happen to the risk within the banking system? That's going to go up. Well, in that case, what's going to happen for demand for the collateral? In other words, demand for the treasuries? That's going to go up as well. But prior to the GFC, what was the typical response mechanism for the central banks? I mean, go back to the recession that we had in the early 90s, the recession that we had during the dot bust. What did the FED do?

pretty much nothing other than drop rates in terms of going out in the marketplace and buying treasuries by creating Bank Reserves. In other words, QE. They hadn't yet put that tool in their toolbox, but now obviously that is their default. So, whenever we have a little hiccup, they go straight to the QE. That's why we've seen QE 1, 2, 3, 4 for much infinity, even though they're doing QT now. The Fed's balance sheet, or at least the level of Bank Reserves, is around 3.5 trillion, where in 2007 it was 40 billion, with a b. No one here would argue that if we go into another crisis that looks like 2008, that the Fed won't do QE. I think we can all agree that that's going to be the very first thing they do. All right, well, let's think that through. If the Fed does quantitative easing, what they're doing is they're taking all of these treasuries out of the monetary system, which actually needs

more treasuries because the amount of risk is increasing, and they park them on their balance sheet. One of the foremost experts on this system is a gentleman by the name of Manmohan Singh of the IMF, and he calls this siloing of collateral. Now, you could be saying to yourself, Okay, George, but yeah, they're creating these bank reserves. Well, that doesn't really help the banks out here. Why? Because they don't have access to the Fed's balance sheet. They don't have access to those bank reserves. So, there's a very strong argument that while the banks that do have access to these reserves or the Fed's balance sheet do have some sort of benefits, this system as a whole has a net negative. Because these treasuries were useful or more useful not just to the banks that don't have access to the Fed's balance sheet, but even for the banks that do have access to the Fed's balance sheet. Why? Because they are connected to the entire network. Now, let me be very clear. I am not saying

that the FED coming out and bailing out a bank in the United States system by creating more Bank Reserves and taking assets off their balance sheet doesn't help that bank. It absolutely does, and it might be able to prevent a complete collapse of the system. But we have to look at the tradeoffs, like Thomas Sowell says, there are no Solutions, they're only tradeoffs. So by taking collateral or oil out of the system, you're just replacing it with something that over the long term is going to be less effective. And if it's less effective for the banking system, the global monetary system, that's going to increase risk, which is going to make the recession a lot worse. Why? Because of that circular relationship that we discussed earlier between the real economy and the monetary system. You cannot have a collapse of the monetary system without a collapse in global economic output, and you can't have a collapse in global economic output without having a collapse in the global monetary system. So is the next Crisis, regardless of what year it falls, going to be worse than 2008? Well, there

are no certainties; there are only probabilities. I can't tell you what's going to happen in the future. None of us know, but what this video should make very clear is the amount of risks we have in the system. The amount of potential problems we have is definitely greater today. This time it is not different from the standpoint of how the cycle usually plays out, meaning inversion first, uninversity. That's what we'll see play out again. If we're going to use the thought experiment of the government not doing anything, if the government doesn't do anything, and I think even if the FED wants to come out and buy, you know, do QE, I don't think that's really going to do anything either. And when they drop rates again, they don't drop rates to fix something; they drop rates in response to something that's already happened. Now, maybe if they came out and started buying stocks like the BJ, that may change my mind. But let's just assume for a moment that the FED just comes out

with their standard, okay, we're going to start doing QE again, and the government doesn't do anything in the form of fiscal or bailouts, then I completely agree with Jim Rogers. No certainties here, only probabilities. Why? What we're seeing play out right now with all the markets is maybe not exactly, but definitely rhymes with the bust where we just had kind of like a garden variety recession. So, that's definitely on the table, but it probably wouldn't be my base case. My base case would be we see probably like a GFC type of thing, but maybe even more deflationary if the central planners stepped back and didn't do anything. But when the central planners do respond to it, because I fully expect that they will, you would probably see, I'd probably just assume it's more of the same, meaning that when we get the bust, okay, they respond to that with just interest rate drops, okay, fine. Then we get the GFC, and they respond to that by dropping interest rates and doing QE and doing all these bailouts. So, my point there is

you'll notice each time we have a crisis, they do more and more. They take more and more of the medicine, and they get diminishing returns. And then we fast forward to COVID. It made the GFC, or the response to the GFC, look like Child's Play. Trillions and trillions. I don't know what the CARES Act was, like four, five trillion, something like that. I would expect that they'd probably do the same, that instead of a CARES Act, we do like a CARES Act 2.0, and instead of four trillion, it's like eight trillion or something like that. And so, assuming they do that, I would expect—I don't want to call it a v-shaped recovery because that implies that growth goes back to trend, and I don't think it will. I think that growth will kind of notch down, and that will be a new trend line. But I do think we will see a repeat of the wealth gap getting much bigger. It's going to benefit people with assets because central planners realize that to keep

this game of D Jenga going. They've got to prop up asset prices even if it creates all the homeless that we've seen, even if it creates the drug problem, even if it lowers the standard of living, even if it decreases the purchasing power for the average Joe and Jane. They realize that if the stock market goes down by 50% this time, it's going to be a much, much different story than even 2008-2009 because the US economy is so much more dependent now on asset prices than it was even back then. And I always use this as a thought experiment to take it to an extreme. I live in Medan, Columbia. If the stock market went down here by 50%, no one would even know. I literally don't even think it would make like the Daily News because no one owns stocks, no one even cares about it. It's not even really a thing. But the stock market goes down by 50% one day in the United States, and you're going to have a not just a US

meltdown, but you'd probably have a global meltdown, and that just shows you the fragility, I think, and the central planners know that. So, I think that'll be their focus, and unfortunately, you know, look at the difference that we have seen in society and the standard of living just since 2019. Nowadays, I only go back to the United States when I have to speak at a conference or something like that, so it might be, let's just say, four times a year. And even in those four times a year, I notice huge, huge changes every single time I go back. And when you compare it to 2019, I think it's a night-and-day difference. It's just people are walking around like zombies, and you have the homeless problem and all these drugs, and it's obvious that, especially for the average Joe and Jane, their purchasing power has gone down significantly, even though their nominal wages have gone up, because they haven't kept up with the rate of consumer price inflation. And when they finally get a

break on that inflation. Well, what happens? The unemployment goes up, the unemployment rate, and aggregate demand goes down because the only reason prices are going down is because the economy is in contraction. So, you get this cycle where the price is always paid, unfortunately, by the poor and middle class. So, I would expect that to continue, but we have to realize that what you're seeing there is not just random. It's not just a result of, Oh, people are idiots, so they're doing drugs now. This is a result of government creating economic distortions. That's how this plays out. So, the response, or the quote-unquote solution to any problem we ever have, is more government intervention, more government, bigger government. And what that does is that increases the amount of government spending as a percentage of GDP. And if government spending goes from 50 to 60 to 70, all the way up to, let's take it to an extreme, 100%. Well, you would expect the economy to be far, far less efficient. And if the economy is far less efficient, then we're producing

fewer goods and services, and that is going to decrease the standard of living. It's just there's no way to get around it, unfortunately, other than to do the opposite, which is less government and get the government out of the equation and bring back free market capitalism. But in doing so, you also have to bring back bankruptcy. You have to let people fail, and that's just what we're, well, we as a society or the politicians and authoritarians refuse to do. Going back to kind of the mechanics behind how the dollar system is created and why the probability of the dollar crashing is very low, and therefore, it decreases also the probability of the dollar losing reserve currency status anytime soon. It also brings you to the sobering conclusion that there is no panacea. There's no panacea. The only way that we can improve things is if we get people, if we convince people that it is in their best interest to vote and to try to promote smaller government and

and like we said earlier, that involves taking a little bit of pain other than just a complete and outright collapse that could be, you know, I hate to go there, but that if you look at the fourth turning as an example. I remember I interviewed Neil Howe. This was maybe a couple years ago, and I was really trying to press him on what the probability is, how the fourth turnings usually play out. And, you know, as you know, he's been saying that we're right at the tail end of this fourth turning. We likely see it conclude at the end of the 2020s, going into the 2030s. And I kept trying to find, like, the glass half full or the light at the end of the tunnel. He kind of got snappy with me, and he's like, George, look, you don't understand. Every single time in the past, this has ended in war. That's the bottom line. And have a plan B because there are some bright spots in the world today. That's I look at Argentina. They're kind of been down at

the dumps for quite a while, and obviously the standard of living in Argentina is not what the United States is, but they're on the right trajectory. They're going in the right direction. Who knows how long it'll last? I don't know, but I was just there a couple of months ago, and it's a fantastic country, beautiful people, speak English. I think from a cultural standpoint and just the way it looks, many Americans would not have an issue being there for a long period of time because it just kind of fits right in with what they're used to seeing, especially the middle of Argentina looks just like the Midwest. It's almost identical, and a lot of people speak English. But my point there is, yeah, see what you can do. Don't bury your head in the sand like an ostrich. I always say that's a very poor investment strategy. You know, this is nothing to lose sleep over, nothing to lose sleep over. It's just something to be aware of and to prepare for, so if in case things get a little worse.

then you've got that plan, and you might even be able to take advantage of opportunities that are created by a recession. And when we talk about things sliding down, with the exception of war, when we talk about things going into a recession, it doesn't mean that we're just, like Rickard says, it doesn't mean that we're living in caves, eating canned goods. It just means that we have a difficult period of time ahead, just like the GFC was very difficult. You know, although we had a rebound in the stock market, I remember the housing market didn't bottom out till 2012. I remember that vividly because that's when I retired and started buying houses. And I remember back then, I would put up an ad in Craigslist for just basic workers, you know, tile guys, electricians, plumbers, and whatnot, handymen, to help me remodel all of these houses that I was buying back then. I remember the very first ad I placed. It was like for 12 bucks an hour.

something like that, but this was 2012, and within an hour, I had probably 150 rums. 150 rums. Now, I went back. I didn't start selling my rental properties until 2018, so I went back in 2016, and I had to, you know, do some touch-up work on some of the properties. So, I placed the exact same ad, word for word. The only thing I did is I just ratted it up, you know. It was maybe 15 bucks an hour or something that was appropriate back in 2016, and I sat there. I ran the ad, and I waited, and I waited, and I waited, and after about 3 days, I might have had one or two resumés. So, that's what I'm talking about. I'm not talking about living in caves, eating canned goods. I'm talking about 2012, which sucks, which sucks for a lot of people, but it's not the end of the world. And just like real estate was an opportunity back then, we will see

probably just as good, if not better, opportunities in moving into 2025 or 2026, assuming that yield curve is correct again. So, the main model portfolio, what I've done is I set this up about, call it, 6 months ago, something like that. And I always start with gold, always. So, regardless of what my strategy is for the specific portfolio, I start with gold, just that's my insurance policy. And so, I do 10% gold, and then my second priority is just to make sure I don't lose money, and that should be priority number one, two, and three. For some people, that might not work; they might want to take a little more risk. It's just my personal preference. So, what I did is I went out and I bought T-bills, one-year T-bills. And then what I did is I took the interest that I was going to be paid when these T-bills mature, and I bought call options. And that's what gives the portfolio a bit of juice while I'm waiting for things to get

cheap such as commodity prices. I know we haven't talked about that, but I'm a firm believer that we are in the process or in the beginning innings of a long-term commodity super cycle. And these commodity super cycles, like everything else, the prices never go up in a straight line. It's always kind of a roller coaster ride, just like inflation is as well, always a roller coaster ride. So, we could be in a downturn here for the next 6 months. It's probably likely to see lower prices if we have a recession, but I think that's really going to be your opportunity to hold on to maybe some of these producers that are paying a great dividend over the long term. So, I want to have all this liquidity that's going back to the T-bills there, but I want to have some upside above and beyond just your 5% interest rate in the interim while you're waiting for this curve to play out. So, what I did back in April is I bought call options on the

NASDAQ because I was under the belief that, you know, while the curve is still inverted and while bad news was still good news at the time, that you'd probably have a blowoff top or you would have, you know, something hit the fan. It's kind of like a binary outcome. I thought flat was kind of the probability wasn't too high, so I bought call options on the NASDAQ back in April. And when that started working well, I doubled down. And then, but when we got that soft CPI report, that completely invalidated my thesis because that's when I think that bad news became bad news. So I immediately sold, immediately sold. What I've done more recently is I bought calls on the TLT with that money. And but to be clear, I sold half the position. And I sold half the position because the liquidity, I'm still by no means an expert. I want to make that clear. I'm just an amateur, probably more of an amateur than a lot of your listeners and viewers. But I didn't realize that the

call options I bought were very illiquid because I was going about a year out, and I was going way out of the money to get as much pop as I could. And so, I'm like, Nah, I don't like the lack of liquidity here at all. So, I went ahead and sold half the position on Monday. The other half, I'll keep it just to see how it plays out. But what I'm doing now is I'm waiting for the FED to drop rates the first time. And when they do, I'll probably allocate that capital to more options to try to take advantage of the way the cycle played out in the past. And that's usually once the FED drops to state this again. That's when we see the biggest decline in the stock market and the biggest decline in yields.

"The Crash Will Be WORSE Than 2008" | George Gammon’s Last WARNING

An inspiring channel for those who are seeking growth.


FREENVESTING

Several major economies, including Germany, China, Japan, and the UK, are either in recession or heading towards one, raising concerns about a global economic downturn.

The interconnectedness of these economies means that their struggles will impact demand for exports, potentially leading to a decline in the US GDP.

The US, while currently booming, relies on these global partners for goods and is likely to feel the effects of their economic troubles through reduced demand and increased trade deficits.

The Interconnectedness of Global Economies and Banks

The argument that the US can avoid a recession due to low unemployment and high stock markets is weakened by the fact that other countries with similar conditions are already in recession.

The global financial system is highly interconnected, with banks in different countries influencing each other, as seen during the 2008 global financial crisis.

The importance of treasuries in the global monetary system is crucial, and a potential global recession could increase risk within the banking system and demand for collateral, such as treasuries.

The Federal Reserve's Role in Economic Crises

The Federal Reserve's balance sheet has grown significantly from $40 billion in 2007 to $3.

5 trillion, with quantitative easing (QE) becoming its default response to economic hiccups.

The process of siloing collateral by taking treasuries out of the monetary system and parking them on the Fed's balance sheet has a net negative effect on the overall banking system.

The circular relationship between the monetary system and global economic output suggests that a collapse in one will lead to a collapse in the other, raising the risk of a future crisis being worse than 2008.

The Uncertainty of Future Economic Trends

The video emphasizes the inherent risks and uncertainties in the current economic system, with potential problems greater than ever.

It suggests that the government's and FED's responses, such as QE and interest rate drops, may not effectively address the underlying issues.

The speaker predicts a possible repeat of past crises, with central planners likely to escalate their interventions, leading to a larger wealth gap and benefiting those with assets.

The US economy is increasingly dependent on asset prices, making a significant stock market drop potentially disastrous.

The resulting economic distortions have led to a decline in the standard of living and increased issues like homelessness and drug problems.

Government intervention has been the response to these issues, leading to higher government spending and a less efficient economy.

Government intervention is leading to fewer goods and services, which decreases the standard of living.

The author argues for a return to free market capitalism and allowing people to fail, as a way to improve the situation.

The likelihood of the dollar crashing or losing its reserve currency status is low, but the author emphasizes the need for smaller government and being prepared for potential challenges ahead.

Navigating Economic Recessions and Investment Opportunities

Recessions can create unique opportunities, as seen during the GFC, with the housing market taking time to recover.

The speaker's experience in 2012 and 2016 highlights the changing job market and the potential for real estate investment.

The speaker's current portfolio strategy includes starting with gold, prioritizing capital preservation, and using T-bills and call options for potential growth.

Navigating the Commodity Super Cycle and Investment Strategies

The speaker believes we are entering a long-term commodity super cycle, with prices fluctuating and a potential downturn in the next six months.

They bought call options on the NASDAQ in April, but sold them after a soft CPI report invalidated their thesis.

Recently, they purchased calls on the TLT, sold half the position due to illiquidity, and plan to allocate capital to more options after the FED's first rate drop.