The word “recession” has been passing more frequently from the mouths of economists and politicians, although it’s often almost whispered with a wince that indicates no one is ready for the dire economic conditions of the late 2000’s to return. There will be another recession. No one is doubting that, but many people are just waiting for the economic “shoe to drop” so they can try to make adjustments as necessary. It feels an awful lot like riding in a roller coaster that has peaked but has not crossed the crest enough to make its meteoric descent. A good sign that a recession will indeed happen is the retrained focus of some journalists and economists on the causes of an impending recession. If we can track the source, we can make adjustments for the future. However, the roadmap to this recession might be more convoluted than anyone expected.

Causes Of A New Recession

The causes of this oncoming recession, like many downturns from the past, are multi-faceted and debatable, but there are four major economic factors that Americans can look to as a source for a future downturn.


Many people remember how abysmal the housing market was in the last recession and how defaulted subprime mortgages and predatory lending practices were partially responsible for the housing bubble that widely contributed to the severity of the downturn. Luckily, we as a populace adjusted lending practices and have paid closer attention to the housing market for warning signs of an oncoming recession.

It’s no surprise that people are pointing to the declining housing market as an indicator that the recession is soon to arrive, citing the sharp decline of home sales from their peak in 2017. With a softened market and interest rates that the Fed continues to raise, the housing market decline is an indicator of overall economic decline as it’s worth about 14% of the American GDP.

The Collapsing College Bubble

For some time now, people have been predicting a “bubble burst” in academia similar to the burst that led to the housing market crash back during the last recession. Scores of experts believe that this has begun or may have even begun a few years ago. Rather than a burst, like a balloon with too much air, we are seeing the air leak out like a balloon with a hole careening around the room and getting smaller all the time.

Universities have suffered from a number of symptoms that have now turned into malignant tumors which are strangling their economic benefit. Government sponsored universities raise tuition exponentially every year and have less and less to show for their exorbitant cost. Instead of investing in teaching and student services, more colleges are focusing on aesthetic and cosmetic expansions. There are now more students and student teachers than tenured professors, which creates a bottleneck where seniors have to stay extra semesters to attend classes necessary to their major in order to graduate.

Overall, the ivy-covered walls are starting to crumble beneath the weight. Many students are turning to Massive Open Online Courses (MOOCs) which are free or inexpensive alternatives to expensive universities. And employers are finding that a bachelor’s degree is no longer a good metric for skill or aptitude and are hiring off of experience and demonstrated merit, which will have grim consequences for universities.

Default rates on student loans jumped more than double between 2003 and 2011 and tuition rates continue to rise. States are dolling out less taxpayer money, so universities are passing the buck onto students rather than find ways to save. Students are coming out of school with upwards of $100,000 for just one person and they might have a degree in a fully saturated field. These students are economically stagnant, can’t afford or get approved for business loans, mortgages, or even car loans and the default rate has risen above 8 million people. That’s a lot of unsecured debt.

The education track to the job market is nothing like it was even a decade ago. If these new members of the workforce can’t afford to move the economy forward, recession is imminent.

Oil And Gas

Oil and gas are staples of the American economy and are responsible for a tidy portion of the global GDP. At one point this year, price-per-barrel was rising at a fast pace, but because of a number of factors, the price fell sharply in November, dropping below 50 dollars a barrel. Factors that have driven the price per barrel down include a shale boom in the U.S., which in turn caused Iranian oil production to ramp up, and resulting a larger supply of oil than a global demand.

At the same time, the trump administrations looming trade war with the Chinese has caused speculation, fear, and flight among traders which has driven price down even lower. The stock market has been especially fickle and oil producers are taking the hit. While all of this feels great when you’re paying at the pump, the ripple effect of an oil crash will hit most industries, which can topple the tower that’s already leaning a bit more than people are comfortable with as we enter a new year.

A Glum Market

While many are trying to deny it, the market has gone from bull to bear in just one short quarter. Morgan Stanley indicated that we were already in the bear market back at the end of November. Momentum stocks that are normally healthy are falling and a lack of interest in tech advancements like the new iPhone are indicators that consumers are actually more wary with their money than the economy indicates. The FANG stocks (Facebook, Amazon, Netflix, and Google) are normally a good indicator of prosperity and their value had fallen in November more than one trillion dollars.

Doubters of the oncoming recession see the market troubles differently. David Kelly, chief global strategist for JP Morgan predicted that the slowdown would slow the Fed’s hand to raise interest rates, but they just raised rates from 2.25% to 2.5% as we head into the weekend before Christmas, so maybe the advice of financial experts is falling on deaf ears.

Sidestepping The Recession

At Factum Financial, we don’t produce these pieces to alarm you. Rather, some time is spent compiling information and links within our blog to keep you informed. Staying aware and informed of the economic conditions that could affect your daily life or your retirement is one of the only ways to beat a recession.

The other way to beat a downturn is to solidify a savings and asset growth strategy that isn’t affected by an economic slump and to solidify a banking system that puts you in charge. Through the Infinite Banking Concept, Factum Financial can work with you to create a unique cash-flow system that’s designed to protect your wealth from taxation and the volatility of the market, while boasting the only true compounding you can find. Your cash flow system has an inherent cash value and you can side-step the bank offsetting their costs on you and act as your own banker to pay down debt, make major purchases, or even take a vacation while everyone else stresses over money. Wouldn’t you like to experience that kind of freedom during a recession?

Contact a wealth strategist with Factum Financial now to receive the best gift of the holiday season, a free 30 minute wealth strategy session.

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