Will There Be A Double-Dip Recession?

The way our economy works is like a funnel: When you go out and you spend your money, you are supporting a business (such as a clothing store, a restaurant, or a car company). When businesses make more money, they can reinvest this money back into their business making new plans, renting new office spaces, and hiring new employees. This funnel basically helps grow the company so the more money you spend and the more money somebody else makes, the more money businesses make and the more they can reinvest back into their company, the more they can pay their employees (like you) and the more the economy expands.

I'm not saying this to make you go and spend your life savings on a shopping spree in the name of supporting the economy. I'm saying this so you understand how the system works and be smart by planning ahead (there's a difference between understanding the financial system and managing your own personal finances).

I am also saying this because I predict a Double-dip recession. A Double-dip recession is when the economy goes into a recession and then comes out of the recession with growth and then goes back to negative growth (a second recession).

The reason I predict a Double-dip recession, is because of consumer confidence. consumer confidence determines how much money people spend. At the top of the funnel, you make money and if you don't have confidence in the economy then you're not going to spend money. If you're not spending money, businesses aren't making money and if businesses aren't making any money, that means businesses don't have money to hire more employees, so people lose their jobs and the economy shrinks.

 Part of the reason for my Double recession prediction, is because I believe that our economy (or at least our stock market) recovered too much too quickly.

This is why:

When the pandemic first hit, our economy stopped, and we were put on life support. We were given unemployment programs, stimulus checks, and bailouts. But now, the economy is opening back up with all this free money floating around. What do you think will happen when the free money goes away?

When that happens, people will stop getting unemployment checks. Once people stop thinking about those checks and businesses stop getting support from the government, that's when our economy will be put to the test.

When there's less money floating around people are going to have less money to spend, so naturally, the economy will slow down. Because of that, some businesses that are alive because of the government support won't make it alive.

Even with government support, restaurants and retail stores have been going bankrupt left and right because of this pandemic and economic crisis, and this by itself is going to have its own effect on the economy because millions of people are permanently out of a job due to their businesses permanently closing. And that’s just the first part of the recession.

Remember the funnel? With even less money going around, the second part of the recession will kick in.

After business shutdown, the real estate market will follow because of the high amount of restaurants and retail stores that shut down and no longer paying rent.

If landlords aren't getting paid rent (whether it is an apartment complex or a shopping mall or a restaurant) then they won't have money won't make their bank payments, forcing banks to foreclose on the landlords.

My prediction doesn't mean that you shouldn't be investing your money, it means that you need to do your research before you invest it. Don't just throw your money into a company because you think "wow this company has been going almost straight up". Look at the numbers and make sure they make sense. Our economy is in a weird position and you need to be the person in charge of your money and your finances, based on your goals.