What lessons to learn from past financial crises?
Ever since the monetary system has been conceived and the barter system deemed obsolete humanity depended on money, and with money comes lending which is subsequently followed by periodic economic crises. This is an inherent property of debt that no matter how hard we try we can never get rid of, it’s like when you stay up late and wake up early you’ll be tired all day, or when you drink too much you’re sure to have a hangover the next day. Those all are inherent properties of the activities in question and so do economic crises in an economy that is dependent on debit and credit.
And with an economic crisis recession always follows, to the point that people think both are the same thing when they’re not, a recession which -in laymen’s terms- is simply a drop in the economic exchange in a certain economy where everyone is holding on to their money and no one is courageous enough to buy except their most basic needs.
When we say economic crisis, our generation is programmed to think about two major crises in particular; the great depression of 1929 and the economic crisis of 2008.
In 1929, the crisis started when the US stock market collapsed starting a crisis in the United States and then transmitting it across the whole world, with every major city in the world getting impacted by the crisis and the GDP of the entire planet fell by 15%. And a lot of major economic sectors getting decimated like the construction industry which was deemed to have died with construction getting halted globally and crop prices falling by around 60%.
While in 2008, the United States housing bubble caused a global economic collapse where banks and financial institutions engaged in what is known as predatory lending where they targeted the lowest income tier of home buyers with high-risk loans the eventual collapse happened and the crisis took the whole world by storm affecting most major economies as well, it took massive bail-outs by governments and strict legislation to save the world from what was dubbed “the great recession”.
And today in 2022, we are yet facing another financial crisis, and even though this crisis was triggered in part by the Covid 19 pandemic and the mandatory halting of many economic sectors worldwide, the real reason behind the crisis remained the unwise monetary policies by many governments and in particular the government of the United States where literal free money was given to the people and some estimates say that about 70% of the circulating USD was issued in the last 24 month alone. And even though many economists issued warnings, the United States government was preoccupied with internal policy and elections that they chose to impose this crisis on the world than lose poll points by their voters, knowing full well that the next administration will have to face this crisis.
But the history lesson apart, we need to ask the million dollar question, is an economic crisis all bad?
Can we as small investors and regular people use this crisis to our advantage?
And the answer is definitely yes, the notable thing in the 2022 crisis is that not only traditional markets have been touched by it, but also the cryptocurrency market collapsed as well. While we were predicting the crisis during the pandemic we always thought of the crypto market to act as a haven during this crisis, but when it eventually came, this prediction was wrong and even the crypto market faced a collapse albeit for a different reason but when the crisis hit, the crypto market didn’t look as appealing as it was before. Still, the fact remains that with the correction that happened in the cryptocurrency market, it became as safe an investment as it could be.
And even though the cryptocurrency market is not the only haven now, it remains one of the best investment outlets available worldwide and for almost everyone.
In earlier articles, we specified a few guidelines that would help the average investor find safe investment options in the cryptocurrency market, the most important of which in our pov is having real-world assets and projects tied to the currency. For example, here at Futira, we’re building the first crypto-enabled mobile network in the whole world, tying regular telecommunications networks to the blockchain, and using Futira Coin as the sole means of payment for services in our network. As soon as Futira mobile is up and running, we believe that our network will be one of the few projects worldwide that are recession-proof, and if we learned anything from the 2020 pandemic is that a lot of industries may face recession and shrinkage but the telecommunication sector will keep on growing as long as the world’s population keeps on growing. We do believe that there are other sectors that will remain a safe investment even in a depressed economy like the gold or oil sector for example, but the fact remains that Futira is more readily available for the average investor, and combines two sectors in one token; the telecommunications sector and the cryptocurrency sector.
As a final note, in a time of recession and inflation keeping your money in the bank without any form of investment represents a loss because the value of your money decreases even if the amount stays the same.
