Are we really in a Financial meltdown? It sure seems like it.

 Are we really in a Financial meltdown? It sure seems like it.

by Donald H Marks 

physician scientist and 3rd generation veteran

Morris County, New Jersey

Are we really in a Financial meltdown? It sure seems like it to me, a non-economist. And at this very moment, I believe we are in what can best be called a “false lull” or deceptive calm before a major financial setback, either a recession or possibly a full depression.  The full economic consequences of current policies — especially tariffs, debt expansion, and monetary tightening/loosening swings — are still building like storm clouds. It is IMO not an "if," but a "when and how bad." Most people knowledgeable in this area seem to think that there are fundamental structural weaknesses accumulating under the surface. Collapse may not happen tomorrow, but the conditions are ripening. What are the causes?

1. The Tariffs and Trade Environment

Right now, the U.S. (and several other countries) are engaged in a much more aggressive use of tariffs and industrial policy than at any time in the last 40–50 years.

China tariffs are holding, and there’s bipartisan appetite to even increase them, especially in an election year. This artificially props up certain U.S. sectors (steel, aluminum, semiconductors), but globally raises prices.

Europe is retaliating softly, but preparing stronger responses.

Supply chains are not yet healed. “Friend-shoring” and “onshoring” are long-term plays but disinflationary forces from globalization are ending.

Tariffs act as an invisible tax on consumers and businesses — they don't pinch immediately, but they suppress long-term growth and feed inflationary pressure.

False lull: Businesses are still working through inventory stocked during post-COVID restocking. Once that buffer clears, costs hit home.

2. Debt and Fiscal Situation

Most people are aware that unsustainable debt eventually leads to either a deflationary collapse or an inflationary debt spiral.

U.S. debt-to-GDP is now well over 120% (officially ~124%, depending on source).

Servicing the national debt is consuming an alarming portion of federal revenue, especially as rates remain high.

There’s no political will to cut spending — entitlement programs and military spending are locked, and new subsidies (EVs, semiconductor manufacturing subsidiary, green energy) are flowing heavily.

False lull: Current market calm is built on expectation the Fed will cut rates soon. But cutting too early risks reigniting inflation. If inflation ticks up again, yields spike, and debt service becomes catastrophic.

3. Monetary Policy and Inflation

The Fed is trapped in a bind:

If they cut rates to support growth, inflation risks reigniting.

If they hold or raise, they choke off growth and worsen the debt load.

The markets are acting like the Fed will "thread the needle" — a so-called "soft landing." But history shows soft landings are exceedingly rare when you have this combination: high debt, asset bubbles, and geopolitical risk.

False lull: Market indexes remain elevated (S&P, NASDAQ), but under the surface, many small caps and sectors (commercial real estate, regional banks) are cracking.

4. Geopolitical Wildcards

I already mentioned tariffs, but let’s not forget:

China is internally unstable (property market collapse ongoing).

Middle East tensions (Red Sea, Strait of Hormuz threats) could spike oil overnight.

Russia/Ukraine war continues to disrupt European and global supply chains.

Any escalation here could quickly turn a mild recession into a major global shock.

5. Consumer Health

U.S. consumer credit card debt just hit a record $1.13 trillion. Delinquencies are creeping up, especially among younger borrowers. Savings rates have plummeted back to pre-pandemic lows. Consumers kept spending thanks to pandemic savings and stimulus. But as we all can assume, that fuel is running out.

Are we really in a Financial meltdown? It sure seems like it.:

We are, IMO, in a deceptive quiet period. The real effects of tariffs, debt overhang, and rate policies are still percolating. Historically, these conditions precede either: 1) a stagflationary period (high inflation + low growth), or 2) a sharp recessionary contraction (deflationary wave to clear the debt excess).

Timing is the hard part — these problems could stretch into late 2025 or 2026 before the full force is felt, especially with election-year liquidity injections. But the current calm feels rather artificial to me. Therefore, I believe we are in what can be called a “false lull” or deceptive calm. The full economic consequences of current policies — especially tariffs, debt expansion, and monetary tightening/loosening swings — are still building like storm clouds. It is not an "if," but a "when and how bad." There are fundamental structural weaknesses accumulating under the surface. Collapse may not happen tomorrow, but the conditions are ripening.

That is my best take, from where I sit, as an educated non-economist. If you like my writing and are interested in my take on another issue, Universal basic income and how it will apply to the homeless and to the addicted, you can find that article also here on my blog page www.DHMarks.blogspot.com  and  on my Donald H Marks YouTube page DHM49.