Sep 14, 2023 3 min read

So far, the recession that many economists have been predicting has not happened. That does not mean that we are completely out of the woods. The economy is experiencing many things that it has not dealt with for decades. For many years, the economy had a zero-interest- rate environment. In most economic cycles, interest rate would be around 2 to 3%. This affected many things, including excessive spending and inflated stock market values.

Wages have been rising, as there is a shortage of workers brought on because of the pandemic, an aging population and runaway government spending. Although inflation has settled down from last year’s rates, it is still 50% higher than the Federal Reserve’s target. Prices are not going down to previous levels for most items. Consumer debt is rising and delinquency rates are increasing. Next year there will be a tremendous amount of debt maturing on office complexes. Many of these buildings are in having trouble with occupancy rates falling as many employees continue to work from home. There is an increasing risk of default on loans that are in the billions.

JPMorgan Chase CEO Jamie Dimon said Monday that while the U.S. economy is doing well, it would be a “huge mistake” to believe that it will last forever. Topping his concerns include central banks reining in liquidity programs via “quantitative tightening,” the Ukraine war, and governments around the world “spending like drunken sailors.”

The news has been full of stories about natural disasters killing tens of thousands of people and causing billions of dollars worth of damage. Whether it is wild fires, hurricanes, flooding or earthquakes, large amounts of money will be required to repair the damage. This is money that could have been spent on improvement or innovation to other things. The cost will add to inflation, supply chain issues, deficits and increased taxation.

Washington and many other central governments are operating in chaos. There is no cooperation or compromise. Dimon is right: “They are spending like drunken sailors.” Some day we must pay our bills. We cannot allow our grandchildren to inherit more mountains of debt than already exist. We are facing a brutal budget fight in the next few weeks.

Unfortunately, it is not just a U.S. problem. The war in Ukraine is amplifying the problem. While we must stop Putin, the cost is very high. We are spending billons of dollars in aid and many dollars in damage are occurring. Ukraine is a major grain producer for large parts of the world. Without their production, many are going hungry.

Finally, student loan payment is about to restart after three years of pause. Those who owe money think it is a great idea to forgive their debts. That is probably not fair to the millions who repaid their loans or all of the workers who never took out any. We are already hearing many people do not plan to start their repayments. If the White House allows that to happen, inflation and the deficit will worsen.

Since many of these issues are out of our individual control, we must take the steps we can to protect our families. Have a written financial plan, keep enough emergency money on hand and have a spending budget. While many people quiver at the thought of a budget, it can make your life much more enjoyable.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”