Founder of DigitalGen Financial Services. Focusing on financial and crypto education.

Many countries around the world are facing problems because of the coronavirus that is spreading globally and are afraid of a global recession. Central Banks are thinking of solutions to deal with the big economic problems that will be caused and preparing for a possible economic crisis. The stock markets are crashing, businesses and banks are already facing liquidity problems and as the data show, things will get worse the next weeks.

We are on the edge of a global economic collapse and many people, as it seems, are unprepared and it's the main reason that panic is everywhere, but most importantly, banks and governments are unprepared as they also were in 2008. Businesses and employees are worried for their expenses and their reduced income because of lockdowns and investors are seeing the value of their portfolio shrinking. The main question is, how well prepared are you for another economic crisis?

The most important thing, when a crisis is about to happen, is liquidity. Liquidity means how much money you have available right now. In order to survive an economic crisis, it is required to remain calm, have a good plan and strategy, not act too fast and definitely to have patience. What do we need?

1. Emergency Fund: It is essential to have an emergency fund of at least 6 months (measured in overall monthly expenses) where you will contribute an amount each month and you will only use in case of an emergency. Furthermore, having a budget and tracking your expenses in details for each category is very important in order to create a good emergency fund and know what you really need. If you have your money in a bank account, it would be better to get them out, have cash in hand and take them home. If an economic crisis hits, banks will have liquidity problems, which means that they will impose limits in withdrawals and some may go bankrupt which will lead to not having access to your money.

2. Reduce Expenses: The best you can do before and during an economic crisis is to limit your expenses. Do not buy things you don't need, try not to spend much and eat out, live as simplier as you can for some time and definitely do not buy a car or a house, it's not the time for that. You need as much liquidity as possible, you need to save as much as possible and if you are thinking of buying a car or a house, you should wait until the economy stabilizes, not only for liquidity reasons, but also because house prices and other things tend to have reduced prices as compared to before the crisis.

3. Pay Off Debt: If you have debt, either it comes from bank loans, credit cards or just bills, you should better pay it off as fast as you can (if you can) and not let it rise. During a recession, many people may lose their jobs or even their homes, leading them to a dead end, especially if they haven't built an emergency fund and they don't have a plan.

4. Liquidation of assets: If you have assets like real estate or cars that you want to sell, then better do it the faster you can. This is because you need the liquidity before the crisis hits and during or shortly after that, you will not find buyers very easily and prices will have fallen too.

5. Alternative Income Sources: Having multiple income streams is important, not only during a recession, but generally in your life, especially if you are an employee and you have a stable income. Some alternative income sources might be renting real estate, dividends from stocks or selling your own handmade stuff and finally in the era of internet it's easy to make money either from websites or apps by making different tasks, writing articles or by creating your own website or online business that you will manage in your free time.

6. Investments: During a recession, many small investors panic and worry for their investments thinking if they should sell, hold or buy precious metals for hedging. Here is the thing, you can't time the market and if you are a long-term investor in good companies, then you have not much to worry about. When markets crash, it's the best time for an investor to buy stocks of good companies and generally assets that are worth it. In the long-term, the good assets tend to increase and overcome any difficulties when the recession is over. As for the precious metals such as Gold, even though they tend to increase when the economy is unstable, they do not perform well during an economic crisis which means that you should not bet your money there. With that said, you should continue contributing to your retirement plan, if you have one and you should. The best solution is to have a good diversified portfolio, have a risk management plan and be ready to buy and invest in the assets and companies that are worth it and you like, when the markets crash. You are given a big opportunity.

7. Patience: Don't let fear control you. If you are well prepared, you have nothing to be afraid of and the best you can do is wait for the situation to clear up and the economy to stabilize again. Remain calm, follow your strategy and plan that you should have built and everything will be fine. Every crisis sooner or later passes.

Bonus: Look for new emerging technologies like Blockchain, digital assets and AI both as a solution to some of your problems, either you are a company or an individual, and as an investment. Look into the future and see what technologies will thrive and why. Have you wondered why companies invest more in technology during or after a recession? Companies are vulnerable and new technologies are a solution to many problems, making these companies more transparent, more flexible, and more efficient. The global economy is becoming more and more digital and decentralization and transparency are more important than ever before. This is the start of the digital era.

Over the past decade, we have witnessed the emergence of revolutionary technologies and innovation. This decade was full of technological advances, from smartphones to drones, AI, Cloud, online streaming, electric and self-driving vehicles + many more, and finally blockchain technology and digital assets. For the past 4 decades we moved from simple PCs to the Internet to Social media and now to Blockchain.

After the financial crisis, people were exhausted and tired of the current broken and corrupted financial system. Fiat money didn't “work” anymore and letting banks printing money out of thin air didn't had good results. A liquidity crisis occured and what did the governments do? Not only they didn't solved the problem, but instead they only did some marginal improvements on regulations and printed and injected trillions and trillions of dollars to the markets for the next few years which was mainly to save banks with the hope that this will solve and restore everything. After so much corruption, inflation, no transparency and many more, It was time for a change. Bitcoin was created and this was the start of a revolution with the goal of open and decentralized (digital) money for all with transparency and security. As Satoshi Nakamoto described it in the whitepaper, a P2P electronic cash system.

We all know what happened next. Bitcoin got popular, many other digital assets were created and many blockchain companies were formed. Two of the most important ones? Ripple and XRP. The creators of the XRP Ledger saw a few problems with Bitcoin in 2011, so they decided to built a better one that it wouldn't have the Bitcoin flaws like the lack of scalability, the unecessary mining and PoW that was vulnerable in 51% attack. After they started building the XRP Ledger, they formed a company with the goal to solve a big problem: cross-border payments.

Moving money was very costly, time consuming and opaque. The internet of information is great but it has a big weakness: You can not store and move value efficiently and without an intermediary. Until digital assets came along, no one had the ability to move value at a distance without the permission and support of a third party. This is the core of what blockchain technology makes possible. This simple, but revolutionary idea of instant value transfer.

Ripple had started another revolution and that was the Internet of Value. Working within the system and trying to change how the financial system worked from inside, was a big deal and that was how real change could only happen and be allowed. For those unfamiliar with the term “Internet of Value”, as Ripple describes it in simple words, it is moving value like information moves today. We could share information and send messages instantly but we still couldn't move money efficiently. And unfortunately, this is true until today in a big part of the world.

How has Internet of Value evolved since then?

Interledger Protocol (ILP) which was built in 2015, was the foundation of the Internet of Value in order to make it truly efficient. We can't enable IoV if there is no interoperability among the different networks and ledgers that exist. There are different layers which are all important and complementary as we can see in this pyramid:

Having interoperability and the right scalability + the right digital asset we can have a fully efficient and instant value transfer. XRP Ledger has been proven to be the most reliable, stable and scalable blockchain throughout all these years, which means that using Interledger Protocol with the features of XRP Ledger (payment channels etc.) and with the digital asset XRP as a settlement tool (bridge currency), we can have truly efficient payments and movement of value all around the world. Only with the right tools, Internet of Value can be enabled and be efficient:

Bitcoin was the start, the napster of cryptocurrencies as Brad Garlinghouse has said, but other digital assets and companies will lead and push the industry to mass adoption and eventually maturity. Ripple and XRP are two of the best examples.

Moving to remmitances, according to the World Bank, the money workers send home to their families from abroad has become a critical part of many economies around the world. Remittances have reached a record high of $551 billion in low- and middle-income countries in 2019, up by 60.6% compared to 2010.

So, moving value cheaply, fast and securely enough is more critical than ever before. The average cost of sending money is still very high at 6.9%

Changing these, will impact these people signifcantly.

The Next Decade

As the calendar turns to 2020 and we move to the next decade, we can't but be confident and optimistic of what we will see unfolding. We will certainly see further Decentralization and disintermediation. The blockchain and digital assets industry is maturing year by year and with Ripple leading the industry and having made a huge progress and with XRP building more and more liquidity and revealing its power to more and more people we can only expect extraordinary things. The only barrier at the moment is regulations, but governments and Central Banks can't ignore them anymore as they have also started working in their own DLT systems and CBDCs. The next decade will bring the masses to blockchain and digital assets.

The ultimate goal is one: Being interconnected with each other and being able to share and move value as easy as information moves today. Will the vision of Internet of Value be completed the next decade? It seems certain, but only time will tell.

S&P 500 and Dow Jones Industrial Average hit all time high and suddenly everybody forgot what is going on beyond the US stock market bull run. Does this mean that the economy is booming as well? Let's look at the numbers:

In the first half of 2019, world debt added $7.5 trillion and is sitting at $250 trillion at the moment and it is going to surpass $255 trillion by end of the year. That’s a whopping 330% of the world’s GDP!

The US National Debt is also ballooning while the economic growth is slowing down not only in US but in all the top economies and it is set to decline even more in 2020.

So, what's all the fuss about a short-term boost in the stock market? Is the market overreacting? Is this a bubble that will burst sooner or later? Is the market overinflated? The answer is: Most probably, yes. And don't forget... the 93.2% of the stock market is owned by the top 10%.

Fed's balance sheet has been growing again and has increased by over $261 billion in just 2 months, surpassing $4 trillion.
The “not QE” QE is on.

“What has transpired is private sector banks that used to create money supply by leveraging their deposits by ever-increasing multiples have been restricted from creating money using fractional banking leverage so now the Fed has to do this magic itself. This is good and bad news. The good news is that we no longer need to trust the private sector to not abuse the money supply system to the point of collapse as per 2007, but the bad news is that rather than let the market define the demand and supply of money, it is now down to a small committee of humans at the Federal Reserve to get the balance right. Committees have, over time, been shown to be a fragile system for navigating complex economic matters, so a distributed flawed system has now been replaced by a centralized flawed system. What could go wrong?”

Despite trade-war fears, a yield curve inversion and declining forward earnings forecasts, the stock market is booming.

With Central Banks resuming QE, lowering interest rates and the intervention of the Fed in the repo market, does this mean that liquidity is drying up?

Before the 2007 crisis, regulators could trust that banks had enough liquidity to remain solvent; however, following the financial crisis and failure of several banks like Lehman, that ceased to be the case. The new regulations mandated banks to hold pre-funded accounts, or existing pools of liquidity, to move paper currencies between banks in disparate countries. This creates a problem, because there is a huge amount of trapped liquidity ( trillions of dollars) that could be freed up and used most productively to help boost the world economy. How?

An example of a company that wants to disrupt and upgrade the entire financial system is Ripple. Ripple is focused on making value move like information moves today. And with the help of the digital asset XRP, to solve the liquidity problem and make pre-funded accounts unnecessary.

But what is XRP? XRP is a digital asset native to the XRP Ledger and mainly designed to bridge the many different currencies in use worldwide. It is the digital asset with the biggest utility and adoption at the moment and is already being used by companies and Financial Institutions like Moneygram. We could say that it is Bitcoin 2.0. Faster, cheaper transaction costs, more secure, more decentralized and a better, more efficient and eco-friendly system, unlike Proof of Work.

On-Demand Liquidity solution which leverages XRP, has the potential not only to provide instant liquidity in cross-border payments but in other markets as well. For example, the repo market which now faces liquidity shortage. With tools like this and with XRP's speed, low costs, transparency and security, we could help improve the global liquidity problem and upgrade the financial system, preventing probably a recession and a future liquidity shortage.

Price stability has become the main concern of central banks around the world. Both, inflation and deflation, are considered bad outcomes. On the one hand, we see countries like Venezuela and Argentina with big inflation and their currencies losing value and purchasing power day by day and people's wealth devaluating. On the other hand, we see the EU and the US trying to avoid deflation (also known as ‘Japanification') which would make economic recovery a lot more difficult should things go downhill.

Furthermore, we are seeing mass protests around the globe demanding that national leaders step down. Beyond Bolivia, people are rising up against their governments in places as varied as Chile, Lebanon, Ecuador, Argentina, Hong Kong (which now has entered its first recession for a decade), Iraq and Britain.

What is actually happening? Is this about socioeconomic inequality? Is this about corruption? Climate crisis? Political freedom? Or... a little bit of everything? Are the masses waking up and not tolerating all these anymore? Has a revolution started? And... what's the solution? Could blockchain and digital assets help? Is de-dollarization the solution? Should we get out of fiat currencies?

****What we can do now
****We see that in countries like Venezuela, Argentina and more, the use of digital assets have skyrocketed because they are a great hedge against their hyperinflated currencies. But this doesn't mean that we have to live in countries like Argentina or Venezuela to start using digital assets. All fiat currencies lose value and purchasing power year by year. USD has lost more than 97% of its value and purchasing power since 1900. Some currencies may lose more, some less, but all lose value which mainly affects (devaluates) people's wealth and there is nothing that can be done about that. This is how the system was created. So, what's the solution? Should we all abandon fiat currencies once and for all? No, because this would create huge problems as well, but we should be free to choose whatever currency we want and like, without facing any problem by any government. The solution lies somewhere in between. With the use of blockchain technology and having the freedom to use both fiat currencies and digital assets, it could help improve the current broken system. Connecting fiat currencies with digital assets would be a great boost to the world economy. And to do that, countries all over the world should first create the right regulatory frameworks around blockchain and digital assets... and the masses could help to achieve that by putting pressure to their governments with many ways. They would panic if they saw that people are leaving their fiat currencies for digital assets.

*The Ultimate Goal*
As we all may know, blockchain technology is a revolutionary technology and with the help of other emerging technologies, they could help decentralize the world and especially governments, by making them more transparent and reduce corruption, manipulation and control. Imagine a world in which real democracy exists and every citizen is a member of the country's network and can vote for any matter. It may sound crazy and utopian but this could be the ultimate goal and it is not something that will happen any time soon. We still have a long way to go. We can start small and see where it gets us. But how could we ever force the governments to implement this? Don't forget that the masses have the power and as we saw above, people have started waking up.

****The next economic crisis will introduce digital assets to the masses
****That's right. The upcoming recession (whenever it may come) will most probably be the catalyst for mass adoption of digital assets and not only. People will be buying and holding digital assets against fiat currencies and this will be a warning sign to the governments. They must and will adapt. There is no other choice. The system is broken. Everybody knows that, even if some people don't want to accept it. The world leaders know that and they are trying to save something that can't be saved. Another recession will be the signal to reform the system and build it on top of the new emerging technologies. People will and must fight for freedom, decentralization, more transparency and less corruption. It will be the start of a new digital era. It will be the democratization era.