Overheated Asset Markets, National Debt
Driving Over-Consumption; U.S. Net Asset Position Now
In Worst Deficit Position In History
LOS
ANGELES, July 17, 2024 /PRNewswire/ -- The
U.S. economy will continue its steady expansion for the foreseeable
future, but by the end of the decade may be facing a crisis of
severe proportions, according to Beacon Economics' new
outlook for the United
States economy. A colossal Federal deficit and overvalued
asset markets are driving excessively hot consumer spending, which
may be supporting the nation's current expansion, but could be
building into a serious future threat.
According to the new outlook:
- Elevated spending by American households is being driven by
unusually high asset values and the $5
trillion in (stimulus) money injected into the economy
during the pandemic.
- The savings rate for U.S. households is below 4% for the first
time since the runup to the 2007 Great Recession.
- Today's excess spending is being fueled by public, not private,
sector borrowing.
- The nation's current account deficit is twice what it was prior
to the pandemic.
- The United States' net asset
position is in the worst deficit position in history.
"There is no version of the future in which these trends are
sustainable," said Christopher
Thornberg, Founding Partner of Beacon Economics and the
outlook's author. "In any smaller economy the warning signs would
already be flashing red to global asset markets, but the United States is too big and relatively
safe for the danger to be acknowledged… yet."
The new outlook lays the intensification of the problem
squarely at the feet of the Federal Reserve and its policies
throughout and after the pandemic. "These issues began long before
the pandemic struck, but actions by the Fed in response to the
crisis have made the nation's long-run economic situation
significantly worse," said Thornberg. "Their decision to firehose
an extreme amount of new money into the economy expanded U.S. money
supply by 40% in an 18 month period – show me a nation that
wouldn't see a surge in spending and prices after such an
aggressive increase."
In the near term, the forecast finds:
- The United States will almost
assuredly experience a steady pace of GDP growth in 2024, probably
in the 2% to 2.5% (in the past year the nation's economy has grown
by 2.9% in real terms).
- While inflation jitters linger, price increases have
decelerated from 7% to between 2% and 3% year-over-year, not enough
for the Fed to cut rates repeatedly but enough to assuage investors
and consumers.
- There has been a surge in consumer confidence and sentiment,
the effects of which can be seen in the record high stock market
indexes.
According to Thornberg, the U.S. economy is not currently at a
crisis point but the day of reckoning could be as close as the end
of this decade.
View the new The Beacon Outlook United States including
full forecast tables here.
Contact Victoria@BeaconEcon.com for comment or to set up an
interview with Dr. Christopher
Thornberg, PhD.
Beacon
Economics LLC is an
independent economic research and consulting firm based in
Los Angeles. Learn more at
www.BeaconEcon.com
Contact: Victoria Pike Bond
Phone: 415-488-7195
Email: Victoria@BeaconEcon.com
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SOURCE BEACON ECONOMICS