How far is the US economy from recession? Economists think so

category:Finance
 How far is the US economy from recession? Economists think so


Lawrence Summers, a professor of economics at Harvard University and former US Treasury Secretary, said in an interview with the media recently that he believed the possibility of a recession in the United States by the end of 2020 was close to 50%. The causes of the recession include the long time of economic expansion, the low unemployment rate hindering the development space, the abnormal financial indicators such as treasury bond yield curve, the weak industrial sector, the impact of the global economy on geopolitics, the uncertainties related to economic and trade frictions, and the deflation risk outside the United States.

The recent series of economic data released by the United States is mixed, which supports Mr. Summersview to some extent. The latest data show that the current round of economic expansion in the United States has lasted for more than 10 years. The treasury bond market has repeatedly sent out warning signals that the economy will enter a recession. For the first time in three years, American manufacturing industry has fallen into contraction.

Although it is generally believed that the unemployment rate in the United States remains at a historic low and consumption momentum is generally good, Summers pointed out that low unemployment rate means limited room for improvement, and the rise of unemployment rate has always been difficult to control, and consumer psychology is very volatile, once they perceive that big things are not good will quickly occur. The change has led to a sudden change in unemployment rate in some industries.

The U.S. consumer confidence index fell 8.6 to 89.8 in August, the biggest monthly decline since December 2012, according to a survey released by the University of Michigan. Richard Curtin, the head of the survey, said the volatility of the White House tariff policy had led to increased uncertainty, reduced domestic consumer spending and eroding consumer confidence.

Nobel Prize-winning Chairman Le: Next years recession is less than half the chance

Robert Schiller, a Nobel Laureate in economics and professor at Yale University, said in a recent interview with American media that the chances of a recession in the US economy next year are less than 50%, but if it happens next year, he would be no surprise.

For the long-term situation of the U.S. economy, Schiller believes that the most prevalent argument at present is long-term stagnation or Japanese of the U.S. economy. Japanization is mainly used to describe the developed economies represented by Japan taking radical measures to rescue the market in response to the economic crisis, resulting in interest rates close to zero and monetary policy nearly invalid.

Summers has pointed out that this near-zero interest rate state is like a black hole, once trapped, it is difficult to escape. In the black hole, weak economic growth and low inflation lead to low interest rates, while the decline in confidence makes it difficult for people to escape from low interest rates. At present, the United States seems to be pulling towards the black hole, only one recession away from Japanese.

Although there is still some distance between the US and zero interest rate, Federal Reserve Chairman Powell warned recently that the closer the interest rate is to zero, the more limited the ability of monetary policy to stimulate the economy. This is the biggest challenge facing the central bank. The Federal Reserve needs to introduce other policy tools.

Former Federal Reserve Chairman Alan Greenspan: Is the recession tied to U.S. stocks?

Alan Greenspan, former chairman of the Federal Reserve, said recently that the US economy is in recession because of US stocks. He pointed out that people underestimated the wealth effect of U.S. stocks, which would have unpredictable and incalculable effects in the case of sharp fluctuations in U.S. stocks.

In economics, wealth effect refers to peoples willingness to consume increases when assets are added. Greenspan said data showed that the S& P 500 index rose by 10%, which would boost GDP growth by 1%, but the current phase of the U.S. financial market is uncertain. Recently, the three major U.S. stock indexes fluctuated sharply under the influence of economic and trade situation and economic data. Greenspan pointed out that economic and trade disputes are a major global issue. People should be aware that the US economy will be affected if there is a huge adjustment in US stocks. Greenspan also pointed out that in the long run, the U.S. economy is sinking because of soaring welfare spending and an ageing population that is emptying domestic savings, which means less capital for investment. Source: First Financial Responsibility Editor: Liu Song_NBJ9949

In economics, wealth effect refers to peoples willingness to consume increases when assets are added. Greenspan said data showed that the S& P 500 index rose by 10%, which would boost GDP growth by 1%, but the current phase of the U.S. financial market is uncertain.

Recently, the three major U.S. stock indexes fluctuated sharply under the influence of economic and trade situation and economic data. Greenspan pointed out that economic and trade disputes are a major global issue. People should be aware that the US economy will be affected if there is a huge adjustment in US stocks.

Greenspan also pointed out that in the long run, the U.S. economy is sinking because of soaring welfare spending and an ageing population that is emptying domestic savings, which means less capital for investment.