Suze Orman Says We're in an 'Economic War.' Here's Why

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KEY POINTS

  • Suze Orman says that China and Russia will use commodities and supplies as weapons.
  • The financial guru warns listeners to prepare as there could be rough economic conditions ahead.
  • Orman thinks that there's a high likelihood the U.S. will enter a recession.


The popular financial guru says a recession is now a probability.

Suze Orman's latest Women & Money podcast raises some worrying questions about what might happen to the economy in the coming years. Orman is particularly concerned about rising costs and the high likelihood of a recession. She thinks commodities and supplies have become weapons in what she describes as an "economic war."

Why Suze Orman says we're in an economic war

Orman tells listeners to consider why inflation has stayed so low for so long. "Why were all of you able to enjoy going into Walmart and all these stores that were selling everything at such lower prices?" she asks.

Up until now, people have been able to maintain their standard of living, even though wages haven't increased by much. This is because the cost of the things they wanted to buy has gone down. According to Orman, these three factors have kept prices low:

  1. Immigrant labor. Low-cost immigrant labor is a key reason why the U.S. has been able to produce things cheaply.
  2. China. China played a pivotal role in keeping inflation down because it could produce items at a fraction of the cost.
  3. Russia. Russia was selling cheap gas to Germany and Europe. As a result, European countries could manufacture low-cost goods and export them to the U.S.

The issue is that America's relationship with China and Russia is changing. And Russia's relationship with Europe is changing too. "Now we are in an economic war almost with all three of those sectors," says Orman. This isn't a war of weapons, it's about supplies. "They are going to war with commodities and holding the supplies that we need," she says of China and Russia.

Put simply, we can't depend on the things that have kept prices down. Orman thinks high inflation is likely to stay with us for quite a while and the Federal Reserve will continue to raise interest rates. She also thinks a U.S. recession is a strong probability.

How you can protect your finances

Increasing costs, recession, and an economic war all sound like pretty scary prospects. But Orman says it's important to be realistic about what is happening. Rather than panicking, focus on future-proofing your finances. Here are some ways Orman says you can do this:

  • Build a 12-month emergency fund. Many financial experts suggest having an emergency fund that will cover three to six months' worth of living expenses. Orman thinks we should go further and aim for 12 months in case the worst happens. Put it in an easy-to-access savings account so you aren't tempted to dip into it for non-emergency expenses.
  • Stay out of debt. If we enter a recession and you encounter financial difficulties, any debt you carry will weigh you down further. Try to pay down debt and avoid taking on any more.
  • Dollar-cost average into reputable index funds. Dollar-cost averaging involves putting a set amount of money into an investment at set periods of time rather than investing a lump sum. Orman is concerned that the stock market could fall, and suggests that dollar-cost averaging could help protect against volatility.

Orman isn't trying to panic her listeners, she just wants people to be realistic and prepared. As she points out: "If you have a realistic view of what's going on in this world, and you live below your means but within your needs, we can make the best out of any situation."

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