I often write on Quora.com, where I am the most viewed writer on financial matters, with over 521.2 million views in recent years.
In the answers below I focused on the following topics and issues:
- What are your outlooks for the global economy in 2023?
- How unrealistic are most people who start a business and why?
- What caused Ghana to default on its external debts?
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Source for all answers – Adam Fayed’s Quora page.
What are your outlooks for the global economy in 2023?
Anybody who has been alive for any decent period of time, should have worker out a basic fact.
Economic forecasts are seldom accurate.
Let’s look at some recent misses
- Few economists saw the 2008 crisis coming. The late Queen famously asked why so few professional economists saw it coming.
- Few people saw the rebound of the Irish economy in 2012–2013
- Most thought the BRIC economies (Brazil, Russia, India and China) would keep doing well. Only India is now growing fast.
Most economists are pessimistic about 2023.
One of the best pieces of analysis was ‘a bad year for the economy, a better one for the stock markets’, from JP Morgan.
I suspect this analysis will prove relatively correct.
In other words, bonds and stocks will have a good year compared to 2022.
Many countries will go into recession or low growth and things will look a bit more optimistic by New Year 2023 because inflation will have fallen by then, and many countries will have a better 2024.
BUT take forecasts with a pinch of salt. There are too many unknown unknowns and known unknowns to forecast the future.
We would all be trillionaires if we could consistently predict the future.
Best to just stick to long-term business and investing plans, and be greedy when others are fearful and vice versa.
If things get bad in 2023 or any year, that brings about risk but also many opportunities.
More new millionaires are created during recessions than in regular times.
How unrealistic are most people who start a business and why?
Some people are very realistic. They start a business they have experience in.
Most successful businesses are like this. A doctor who gets good at his/her job, and starts their own clinic.
Or a legal advisor who starts their own practice.
Others want to start a lifestyle business.
Examples of this include:
- Those who are semi-retired who become paid hourly consultants. This is more akin to being self-employed
- Starting a cafe or restaurant
- Doing some sort of side gig online
Most people who start lifestyle businesses, and those who start businesses with experience in the domain, are very realistic.
In fact, some people are “overly” realistic. Ask any business owner who has succeeded in a big way what their biggest regrets are.
By succeed in a big way, I don’t just mean somebody who has made billions.
I mean even somebody who is inside the top 1% in their industry – for example somebody earning 500k after tax on a consistent basis.
Almost everybody says they wish they had gone all in sooner, set their sights higher or taken more risks – especially during moments like recessions which presents as many opportunities as risks.
At the other end of the spectrum, is people who are very unrealistic.
They watch people like Andrew Tate make millions online:
Or for that matter, some influencer who is less controversial and isn’t accused of committing crimes, also making millions.
So, often they think it is easy to make loads of money in business from being good looking or controversial.
It isn’t. If somebody is easy, it won’t be easy for long, as others copy.
The middle ground is to be a “realistic dreamer”, and starting thinking big after you start getting sone traction.
Thinking big when you haven’t even made your first $1 in business is often not a good sign, with a few exceptions.
You see it all the time on business shows like Dragons Den and Shark Tank. People who have huge valuations based on a good idea, and no revenues or profits.
What caused Ghana to default on its external debts?
The biggest reasons is, stating the obvious, that the debt isn’t sustainable.
Too much of the budget is being used to service the debt, which has resulted in inflation shooting up.
We also have to remember that:
- The IMF has said that debt restructuring is needing as part of a bailout
- The local currency has been depreciating for years, showing that the market didn’t have confidence in the economic situation.
- Too much debt is not in its own currency. If a country even has 200% debt-to-gdp, that isn’t always a problem if a country has its own currency, as it can always push up inflation marginally to repay. If your debt is in another currency, that isn’t the same.
In terms of the last point, we have to remember that many debt crisis in history have been caused by having too much debt in foreign currencies.
Look at the Latin American debt crisis.
To quote wikipedia: “The Latin American debt crisis was a financial crisis that originated in the early 1980s, often known as La Década Perdida, when Latin American countries reached a point where their foreign debt exceeded their earning power, and they were not able to repay it”.
The East Asia Financial Crisis in the late 1990s was also partly caused by too much external, foreign currency, debt.
Thailand couldn’t defend the Thai Bhat, which resulted in contagion around the region.
There is a lot of talk about Japanese, American, Chinese, British and European debt, but at least these jurisdictions have the vast majority of debt in the local country.
With interest rates increasing, more countries could go in Ghana’s direction in 2023, before interest rates stabilize and probably fall, once inflation starts to decline.
People should seek USD-alternatives to protect themselves, because nobody knows who “the next Ghana” will be.
We are already seeing incredibly weak currencies in Turkey, Egypt, Pakistan, Argentina and countless other countries.
I am not saying there will be an East Asian or Latin American debt crisis in emerging markets in 2023 or 2024, as nobody can predict that.
The risks are merely higher than they have been for a while.
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Adam is an internationally recognised author on financial matters, with over 588.1 million answers views on Quora.com and a widely sold book on Amazon and a contributor on Forbes.