The glob­al econ­o­my is always in a state of flux, and while it’s impos­si­ble to pre­dict the future with cer­tain­ty, there are often warn­ing signs that indi­cate an impend­ing finan­cial cri­sis. As we approach 2023 and 2024, experts are keep­ing a close eye on the econ­o­my and iden­ti­fy­ing key indi­ca­tors that could sig­nal trou­ble ahead. From ris­ing debt lev­els to unsta­ble hous­ing mar­kets and geopo­lit­i­cal ten­sions, there are sev­er­al fac­tors that could con­tribute to a poten­tial finan­cial cri­sis in the years to come. In this arti­cle, we’ll explore five key warn­ing signs that could indi­cate an impend­ing finan­cial cri­sis, and what steps indi­vid­u­als and busi­ness­es can take to pre­pare for the worst. Whether you’re a finan­cial expert or just want to stay informed about the state of the glob­al econ­o­my, this arti­cle is a must-read. So buck­le up and let’s dive in!

Understanding a Financial Crises

Before we delve into the warn­ing signs of an impend­ing finan­cial cri­sis, it’s impor­tant to under­stand what finan­cial crises are and what caus­es them. Sim­ply put, a finan­cial cri­sis occurs when there is a sig­nif­i­cant dis­rup­tion to the finan­cial sys­tem that leads to a sharp decline in eco­nom­ic activ­i­ty. This dis­rup­tion can be caused by a vari­ety of fac­tors, includ­ing debt crises, asset bub­bles, and bank­ing pan­ics.

In the past, finan­cial crises have had dev­as­tat­ing effects on indi­vid­u­als, busi­ness­es, and entire economies. The Great Depres­sion of the 1930s, the Asian Finan­cial Cri­sis of the late 1990s, and the Glob­al Finan­cial Cri­sis of 2008 are just a few exam­ples of the far-reach­ing con­se­quences of finan­cial crises. While it’s impos­si­ble to pre­vent all finan­cial crises, under­stand­ing the warn­ing signs can help indi­vid­u­als and busi­ness­es pre­pare for the worst.

The Current Economic Climate Based on the Latest Banking News…

It’s worth not­ing that the bank­ing indus­try is noto­ri­ous­ly cycli­cal, with peri­ods of growth and expan­sion often fol­lowed by peri­ods of con­trac­tion and retrench­ment. This is a nor­mal part of the eco­nom­ic cycle, and while it can be painful for those affect­ed, it’s not nec­es­sar­i­ly a “typ­i­cal” sign of sys­temic fail­ure.

Sec­ond­ly, it’s impor­tant to remem­ber that bank­ing is a high­ly reg­u­lat­ed indus­try, and banks are required to main­tain cer­tain lev­els of cap­i­tal and liq­uid­i­ty to ensure they can weath­er eco­nom­ic down­turns. While some banks may strug­gle in the short-term, they are gen­er­al­ly well-posi­tioned to ride out any storms.

That being said, there are some spe­cif­ic chal­lenges fac­ing the bank­ing indus­try at the moment. One of the biggest is the low inter­est rate envi­ron­ment, which has made it hard­er for banks to make mon­ey on their lend­ing activ­i­ties. This is par­tic­u­lar­ly true for banks that spe­cial­ize in areas such as com­mer­cial real estate or small busi­ness lend­ing, where mar­gins are already tight.  It also seems that region­al banks that invest­ed in long term trea­sury bonds have been adverse­ly affect­ed by the increase in inter­est rates.  It makes one think, with the impend­ing con­cept of a dig­i­tal cur­ren­cy, whether or not the encour­age­ment to invest in these trea­sury bonds was by design in order to work to suc­cess­ful­ly fail a region­al banks bal­ance sheet so they have to sell to a larg­er bank, help­ing to fur­ther cen­tral­ize the finan­cial sys­tem.

Anoth­er chal­lenge is the increas­ing com­pe­ti­tion from non-bank finan­cial insti­tu­tions, such as fin­tech star­tups and peer-to-peer lenders such as Pay­Pal, Ven­mo, etc.  These com­pa­nies often have low­er over­heads and can offer more com­pet­i­tive rates, putting pres­sure on tra­di­tion­al banks to inno­vate and adapt.

So, what does all this mean for indi­vid­u­als and busi­ness­es who are look­ing to nav­i­gate the cur­rent eco­nom­ic cli­mate? First­ly, it’s impor­tant to be aware of the risks and chal­lenges fac­ing the bank­ing indus­try, but not to pan­ic or make hasty deci­sions based on short-term fluc­tu­a­tions. Banks are still “gen­er­al­ly” safe and sta­ble insti­tu­tions, and the reg­u­la­to­ry frame­work is designed to pro­tect depos­i­tors and investors. Not to men­tion that the FDIC con­tin­ues to ensure funds up to $250,000.

That being said, it’s always wise to diver­si­fy your invest­ments and spread your risk across dif­fer­ent asset class­es and sec­tors, if you can. Mon­ey for us always seems to be a “lit­tle tight” and it is hard for us to diver­si­fy.  It can help to mit­i­gate any loss­es in the event of a bank­ing or finan­cial cri­sis.

Final­ly, it’s impor­tant to stay informed and keep an eye on the lat­est devel­op­ments in the bank­ing indus­try. This can help you to make more informed deci­sions and stay ahead of the curve when it comes to invest­ing and man­ag­ing your finances.

While there are cer­tain­ly chal­lenges fac­ing the bank­ing indus­try at the moment, it’s impor­tant not to over­re­act or assume the worst. I was watch­ing a Glenn Beck video the oth­er day and encour­aged peo­ple not to make a run on their banks because of FDIC insur­ance.  By tak­ing a bal­anced and informed approach, indi­vid­u­als and busi­ness­es can nav­i­gate the cur­rent eco­nom­ic cli­mate and emerge stronger on the oth­er side.

Warning Sign #1: Increase in Debt Levels

One of the biggest warn­ing signs of an impend­ing finan­cial cri­sis is an increase in debt lev­els. This goes for busi­ness­es, indi­vid­u­als, gov­ern­ments, etc.  When indi­vid­u­als, busi­ness­es, or gov­ern­ments take on too much debt, it can become unsus­tain­able and lead to a debt cri­sis. In the years lead­ing up to the Glob­al Finan­cial Cri­sis of 2008 after the Clin­ton loos­en­ing of the reg­u­la­tions around lend­ing, for exam­ple, there was a sig­nif­i­cant increase in sub­prime mort­gage lend­ing, which led to a hous­ing bub­ble and a sub­se­quent col­lapse in the hous­ing mar­ket.  If you’ve not seen it, watch The Big Short for an enter­tain­ing rep­re­sen­ta­tion of what hap­pened kick­ing off that cri­sis in our own back­yards.

Today, glob­al debt lev­els are at an all-time high, with both devel­oped and devel­op­ing coun­tries expe­ri­enc­ing high lev­els of debt. We’re tak­ing painstak­ing lev­els of effort NOT to put stuff on cred­it cards, but it is dif­fi­cult in this infla­tion­ary cli­mate.  Accord­ing to the Inter­na­tion­al Mon­e­tary Fund, glob­al debt reached a record high of $281 tril­lion in 2020, or 355% of glob­al GDP. While some debt can be pro­duc­tive and fuel eco­nom­ic growth, too much debt can be dan­ger­ous and lead to a finan­cial cri­sis.

Warning Sign #2: Decrease in Economic Growth

Anoth­er warn­ing sign of an impend­ing finan­cial cri­sis is a decrease in eco­nom­ic growth. When eco­nom­ic growth slows or falls into neg­a­tive ter­ri­to­ry, it can lead to job loss­es, reduced con­sumer spend­ing, and a decline in busi­ness invest­ment. This can have a rip­ple effect through­out the econ­o­my, lead­ing to a reces­sion or even a depres­sion.  While the Biden Admin­is­tra­tion main­tains we are not in a reces­sion, we’ve had two quar­ters of con­sec­u­tive decrease in eco­nom­ic growth.  “Tech­ni­cal­ly,” and in accor­dance with the actu­al def­i­n­i­tion of a reces­sion, we’re in one already.  Not sure how you can suc­cess­ful­ly down­play it, but they con­tin­ue to try.

In recent years, there have been con­cerns about a glob­al eco­nom­ic slow­down, with some experts pre­dict­ing a poten­tial reces­sion in the near future. 

I per­son­al­ly pre­dict a mild depres­sion with all my eco­nom­ic expe­ri­ence…  There is very lit­tle, by the way…  But, fac­tors that could con­tribute to a decrease in fur­ther eco­nom­ic growth include con­tin­ued trade ten­sions, con­tin­ued geopo­lit­i­cal insta­bil­i­ty, and a decline in con­sumer con­fi­dence.  

Warning Sign #3: Increase in Interest Rates

Well, I know what you’re think­ing… This guy is a mas­ter of the obvi­ous… It’s true, no one ever said I had pro­found thoughts… How­ev­er, inter­est rates play a cru­cial role in the econ­o­my, affect­ing every­thing from con­sumer spend­ing to busi­ness invest­ment. When inter­est rates rise too quick­ly or too high, it can lead to a decrease in eco­nom­ic activ­i­ty and a poten­tial finan­cial cri­sis. This is because high­er inter­est rates make it more expen­sive for indi­vid­u­als and busi­ness­es to bor­row mon­ey, which can lead to a decrease in spend­ing and invest­ment.

In recent years, inter­est rates have been at his­toric lows, with many cen­tral banks imple­ment­ing accom­moda­tive mon­e­tary poli­cies to sup­port their economies. How­ev­er, there are con­cerns that inter­est rates could con­tin­ue to rise in the com­ing years, par­tic­u­lar­ly if infla­tion con­tin­ues to move up and fluc­tu­ate at a high­er lev­el. This could lead to, and is cur­rent­ly lead­ing to a poten­tial finan­cial cri­sis if it hap­pens too quick­ly or if it’s not man­aged prop­er­ly.

If inter­est rates con­tin­ue to rise rapid­ly and a finan­cial cri­sis ensues, the US econ­o­my could suf­fer severe con­se­quences. High­er inter­est rates can make bor­row­ing more expen­sive for busi­ness­es and indi­vid­u­als, lead­ing to reduced invest­ments and con­sumer spend­ing. This, in turn, can lead to low­er eco­nom­ic growth and job loss­es.

More­over, ris­ing inter­est rates can also make it more dif­fi­cult for com­pa­nies to ser­vice their debt, poten­tial­ly caus­ing defaults and bank­rupt­cies. This can have a rip­ple effect on the broad­er econ­o­my, lead­ing to wide­spread finan­cial insta­bil­i­ty and a decrease in asset val­ues.

The Fed­er­al Reserve, as we all know, which is respon­si­ble for set­ting mon­e­tary pol­i­cy in the US, would like­ly inter­vene to try to mit­i­gate the effects of the cri­sis. This could involve low­er­ing inter­est rates, inject­ing liq­uid­i­ty into the finan­cial sys­tem, and oth­er mea­sures designed to sta­bi­lize mar­kets and pre­vent a com­plete col­lapse. This is what they are try­ing to do by rais­ing inter­est rates today.

How­ev­er, if the cri­sis is severe enough, these mea­sures may not be enough to pre­vent a pro­longed reces­sion or even a depres­sion. There­fore, it is cru­cial for pol­i­cy­mak­ers to mon­i­tor eco­nom­ic indi­ca­tors and take proac­tive steps to address poten­tial risks before they become full-blown crises.  I’m not con­fi­dent that they are keep­ing their fin­ger on the pulse of what is actu­al­ly hap­pen­ing so they can be proac­tive about active­ly fix­ing the issues.  They seem very reac­tionary to me.  

Warning Sign #4: Failing Regional Banking Institutions

Region­al bank­ing insti­tu­tions play a cru­cial role in the econ­o­my, pro­vid­ing loans and oth­er finan­cial ser­vices to indi­vid­u­als and busi­ness­es, when need­ed, and cred­it wor­thy. When region­al banks start to fail, ala SVB, et al., it can have a rip­ple effect through­out the econ­o­my, lead­ing to a poten­tial finan­cial cri­sis. This is because fail­ing banks can lead to a decrease in lend­ing, which can lead to a decrease in eco­nom­ic activ­i­ty.  Not to men­tion the run on the bank to remove your cash so that you can have it handy.

In recent years, there have been con­cerns about the health of region­al banks in coun­tries like Italy and Ger­many. Do you remem­ber the bank in Cyprus that failed in the ear­ly 2010’s? While these banks are not as large as some of the glob­al bank­ing insti­tu­tions, their fail­ure could still have sig­nif­i­cant con­se­quences for the broad­er economies in their respec­tive coun­tries.  

If you want more on this check out our arti­cle on The Sil­i­con Val­ley Bank Fail­ure: What It Means for Your Wal­let and the U.S. Econ­o­my

Warning Sign #5: Decrease in Consumer Confidence

Con­sumer con­fi­dence is a key dri­ver of eco­nom­ic activ­i­ty, as it affects every­thing from con­sumer spend­ing to busi­ness invest­ment. Here in the US con­sumer con­fi­dence is on the decline, steadi­ly… When con­sumers are con­fi­dent about the econ­o­my and their own finan­cial sit­u­a­tion, they are more like­ly to spend mon­ey and invest in the future. How­ev­er, when con­sumer con­fi­dence starts to decline, it can lead to a decrease in eco­nom­ic activ­i­ty and a poten­tial finan­cial cri­sis. 

In recent years, there have been con­cerns about a decline in con­sumer con­fi­dence in coun­tries like the Unit­ed States and the Unit­ed King­dom. Fac­tors that could con­tribute to this decline include polit­i­cal insta­bil­i­ty, trade ten­sions, and glob­al eco­nom­ic uncer­tain­ty.

How the War in Ukraine is affecting Consumer Confidence

For instance, the war in Ukraine is indi­rect­ly caus­ing sig­nif­i­cant eco­nom­ic dam­age not only to Ukraine but also to oth­er coun­tries, like the US. The impact will be far-reach­ing and long-last­ing, with some of the most sig­nif­i­cant effects being:

  1. Food Sup­ply Shocks and Price Increas­es: Ukraine is one of the world’s largest wheat exporters, and the ongo­ing con­flict has dis­rupt­ed its agri­cul­ture sec­tor. As a result, wheat sup­plies from Ukraine are like­ly to decline, lead­ing to high­er prices for wheat and oth­er food prod­ucts. This can have sig­nif­i­cant impli­ca­tions for coun­tries that rely on imports of wheat from Ukraine, par­tic­u­lar­ly those with lim­it­ed agri­cul­tur­al pro­duc­tion capac­i­ty.
  2. Oil and Gas Short­ages with High­er Prices: Ukraine is an impor­tant tran­sit coun­try for Russ­ian gas sup­plies to Europe, and the con­flict has increased the risk of gas sup­ply dis­rup­tions. This can lead to high­er prices for nat­ur­al gas and oil, which can affect not only Ukraine but also oth­er coun­tries that rely on these ener­gy sources. High­er ener­gy prices can have a domi­no effect on the broad­er econ­o­my, lead­ing to high­er trans­porta­tion costs, reduced indus­tri­al pro­duc­tion, and low­er eco­nom­ic growth.
  3. Broad­er Infla­tion, High­er Inter­est Rates, and Low­er Cap­i­tal Inflows: The ongo­ing con­flict in Ukraine has increased eco­nom­ic uncer­tain­ty and risk, lead­ing to broad­er infla­tion­ary pres­sures, high­er inter­est rates, and reduced cap­i­tal inflows. Investors may become more cau­tious about invest­ing in coun­tries that are exposed to geopo­lit­i­cal risks, lead­ing to low­er invest­ment and cap­i­tal out­flows. This can lead to high­er bor­row­ing costs for coun­tries that need to finance their bud­get deficits or repay their debt, fur­ther exac­er­bat­ing the impact on their economies.

In addi­tion, aid need­ed for oth­er coun­tries may be (and is being) divert­ed to meet Ukraine’s enor­mous human­i­tar­i­an require­ments. The con­flict has led to 140,000 injured between Russ­ian and Ukrain­ian forces that we know of, and sig­nif­i­cant dis­place­ment of peo­ple from their homes and eco­nom­ic pros­per­i­ty (loss of liveli­hoods), which requires sig­nif­i­cant human­i­tar­i­an assis­tance, fur­ther com­pli­cat­ing exit­ing the con­flict when it final­ly comes to an end. How­ev­er, there is a risk that aid need­ed for oth­er coun­tries may be divert­ed to meet Ukraine’s needs, lead­ing to sig­nif­i­cant gaps in aid pro­vi­sion in oth­er areas.

The ongo­ing war in Ukraine is hav­ing sig­nif­i­cant eco­nom­ic con­se­quences, includ­ing food sup­ply short­ages and price increas­es, oil and gas short­ages with high­er prices, and broad­er infla­tion, high­er inter­est rates, and low­er cap­i­tal inflows. And, it is just the begin­ning.  While oth­er coun­tries con­tem­plate pro­vid­ing the Ukraine with addi­tion­al assets to defend them­selves, Chi­na and Rus­sia grow their alliance, con­tin­u­ing to com­pli­cate mat­ters and adding spec­u­la­tion to the finan­cial mar­kets, caus­ing dis­rup­tion in trad­ing con­fi­dence.  

The inter­na­tion­al com­mu­ni­ty must work togeth­er to address Rus­sia and Ukraine, the root cause of the con­flict and pro­vide ade­quate sup­port to affect­ed pop­u­la­tions to mit­i­gate the impact of the cri­sis on the broad­er econ­o­my.  More on thoughts about the US involve­ment in Ukraine lat­er…  I’ve got to sep­a­rate my inter­nal tin foil hat from what is hap­pen­ing.  

Warning Sign #6: Stock Market Instability

And, speak­ing of eco­nom­ic insta­bil­i­ty, enter Stock Mar­ket con­fi­dence (or lack there­of) and the mar­ket insta­bil­i­ty we see on a dai­ly basis today.  We’ve talked about this a bit ear­li­er a cou­ple times in this blog post.  The stock mar­kets glob­al­ly, today, are often seen as a barom­e­ter of the econ­o­my, and when it expe­ri­ences sig­nif­i­cant insta­bil­i­ty, it can sig­nal an impend­ing finan­cial cri­sis. Peo­ple get scared, sell off stock and invest­ments, and pull mon­ey out of cir­cu­la­tion.  It cre­ates a heavy decrease in investor con­fi­dence, which can lead to a decrease in eco­nom­ic activ­i­ty by investors…  This would not have hap­pened as rapid­ly 40 or 50 years ago.  With the advent of 24 hour news and instant break­ing news due to inter­net news trav­el­ing faster at warp speed, it’s hard today to get away from the peaks and val­leys of stock mar­ket insta­bil­i­ty.  This is par­tic­u­lar­ly in the wake of the COVID-19 deba­cle. While the stock mar­ket has recov­ered in many coun­tries, there are still con­cerns about poten­tial bub­bles and volatil­i­ty in many of them due to the above men­tioned war­ing signs..

What Can be Done to Prepare for a Financial Crisis

While it’s impos­si­ble to pre­dict the future (unless you’re a prep­per like you with good gut instincts) there are steps that can be tak­en to pre­pare for a poten­tial finan­cial cri­sis. 

These include:

  • Build­ing up an emer­gency fund 
  • Con­tin­ue to stock­pile prepa­ra­tions.  It does­n’t mat­ter whether it is food, bat­ter­ies, bub­blegum, or tooth­paste.  Con­tin­ue prepar­ing.
  • Pay­ing off debt.  It goes with­out say­ing, debt is a hand­i­cap.  Trust me, I have been there on more than one occa­sion.  
  • Diver­si­fy­ing any invest­ments. But do it your way, or by way of a finan­cial advi­sor you trust. 
  • Stay­ing informed about the econ­o­my and finan­cial news, so that you can be proac­tive and/or react appro­pri­ate­ly.
  • Seek­ing the advice of finan­cial experts, just not some of the nut jobs that said SVB was a sol­id invest­ment

By tak­ing these steps, you can bet­ter pre­pare your­self for a poten­tial finan­cial cri­sis and mit­i­gate its effects, let alone a SHTF where we are in a real finan­cial col­lapse or oth­er issue such as a nuclear event, EMP, etc.


While it’s impos­si­ble to pre­dict the future with cer­tain­ty, under­stand­ing the warn­ing signs of an impend­ing finan­cial cri­sis can help indi­vid­u­als and busi­ness­es pre­pare for the worst. From ris­ing debt lev­els to stock mar­ket insta­bil­i­ty, there are sev­er­al fac­tors that could con­tribute to a poten­tial finan­cial cri­sis in the years to come. By stay­ing informed about the econ­o­my and tak­ing steps to pre­pare for a poten­tial cri­sis, indi­vid­u­als and busi­ness­es can bet­ter pro­tect them­selves and their finances.

Let Us Know What You Think

Let me know if you have any ques­tions.  Feel free to reg­is­ter, and com­ment with your thoughts about the econ­o­my, if we’re full of $#!^ or what you are con­cerned about.  

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