/ world today news/ The American economy will inevitably fall into recession within a year, Western analysts are confident. Authorities continue to raise interest rates in an attempt to curb record inflation. However, this provoked an increase in unemployment and an economic recession. What awaits the United States in the near future?
Recession is inevitable
Bloomberg economists predict a recession in the United States by October 2023 with a 100% probability. The decline in production will occur due to record inflation. In September, on an annual basis, it amounted to 8.2 percent. Overseas they are not used to this. Over the past decade, prices have risen by less than two percent a year.
However, the new conditions make them tighten their belts – people save on food and gas. Fuels represent the lion’s share of household expenses. Nearly half of Americans blame Joe Biden for rising prices. The head of state does not agree with the statements: for example, in California, according to him, a gallon of fuel “always costs seven dollars”.
These words of the Democrat caused outrage among the Republicans. “I’m sorry, Mr. President, but in California, gas wasn’t always seven dollars a gallon. In fact, before you became president, even five dollars was considered too high,” writes Senate candidate Mark “Elephants” with irony. Meiser.
“You clearly have no idea how your policies are destroying the nation,” he added.
The politician recalled that the average price of gasoline rose to almost four dollars.
“Great job Biden, thanks for helping us reach record high prices,” quipped California Republican Party Chair Jessica Millan.
In addition, according to the president, a recession in the US is unlikely.
Biden was echoed by his economic adviser, Cecilia Rose. Measures to combat rising prices are effective, she said. Also, the US suffered less than other countries.
Analysts’ fears, however, intensified amid the Federal Reserve’s active fight against accelerating inflation. The regulator changed the monetary policy sharply. On September 21, the main interest rate was raised for the third time in a row – to 3-3.25 percent. This is the highest level since 2008.
The Fed’s “hawkish” decision could lead to an economic downturn in the country. With the onset of the pandemic, the regulator began to print dollars without control. Loose monetary policy then gave way to shock rate hikes.
“All this can lead to a decline in industrial production and retail sales in the US. GDP risks showing zero growth rates in the first half of 2023,” says Georgi Svirin, a specialist in international financial markets.
According to analysts, the problems in the American economy have been building up for years. Many foreign experts believe that the country has never come out of the crisis since 2008. “In fact, everything we see now is the result of the measures of the American authorities, which simply “flooded” the country with money. Plus inflation, a record for 40 years , reducing the real income of the population, And this despite the fact that housing loans are the engine of any economy, especially in the USA”, says Fyodor Sidorov, founder of the School of Practical Investing.
Everyone will suffer
The Fed will continue to raise interest rates, the expert predicts. “This puts an end to affordable credit for the population and businesses. As a result, consumer demand decreases, which will intensify the recession,” he explains.
High global prices of energy resources, metals and agricultural raw materials will add fuel to the fire. It is impossible to solve these problems by tightening monetary policy alone. In addition, in the US there has long been talk of cutting spending on the social sector – unemployment benefits, medicine, education. In addition, there is a decline in transport and utility infrastructure.
“It is enough to look at what Detroit, the former center of American industry and automobile manufacturing, has become. Now the city is more of an illustration of the post-apocalypse. Business has long left the region,” Sidorov gives an example.
It is not the first time that there has been talk of an impending recession in the US. Treasury Secretary Janet Yellen warned about this last year. True, then it was only about accelerating inflation.
In addition, the drastic measures of the regulator will come back to haunt not only the Americans, writes the magazine “Atlantic”.
“The global economy has reached a state of chaos, and this chaos is intensifying. In recent months, the US Federal Reserve has been raising interest rates to regulate prices. The system cannot tame inflation in the country, but it will create difficulties of a different kind for us and the world,” the analysts warn.
The Fed’s tight monetary policy forces investors to buy bonds with dollars. And this, in turn, affects others negatively: countries with a depreciating national currency go into recession and cannot pay their government debt. As a result, their central banks also raise interest rates. As a result, there is a decline. “Since the United States consumes almost 40% of the world’s GDP (that is, all the goods and services produced in the world in one year), a crisis in the American economy will cause a global recession. And this is already starting,” emphasizes Sidorov.
Meanwhile, the U.S. national debt is rising rapidly. It has already crossed the record mark of $31 trillion. Basically, these are internal duties.
As long as the U.S. economy is the world’s largest and the dollar is the reserve currency, there is little to fear, analysts say. Another thing is that debt service costs are rising. By 2029, they should amount to $8.1 trillion. For now, however, they have found a way out: Joe Biden has already planned budget cuts.
“Even if a debt crisis occurs, as was the case, for example, in the peripheral countries of Europe in 2014, investors will actively buy US government bonds. Thus, they will support the demand for them, as well as for the US currency. The dollar will continue to strengthen in the coming months, by the end of the year it may not only be in the range of 70-75 rubles, but also rise higher – up to 78-80,” says Georgi Svirin.
As practice shows, during a crisis, global investors invest in the dollar, which few people manage to quickly abandon – everyone is too tied to the US economy. The American currency represents 41 percent of international payments, the euro – 35.5 percent. The top three is closed by the British pound – 6.45.
Translation: V. Sergeev
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