A Recession Could Become Reality Sooner Rather Than Later
Don’t get too complacent; the growth the U.S. economy saw after the financial crisis was great, but a recession could be fast approaching, occurring at the end of 2019 or early 2020.
There’s already a lot of data suggesting an economic slowdown is fast approaching. Just look at the U.S. housing market, for example. Home sales are down and home prices could be dropping.
American consumers aren’t as excited as before. Businesses are pulling back from investing and hiring. And the list of bad happenings like these just keeps growing.
Key Personalities Turn Against the U.S. Economy
What’s interesting to note here is that even those who have been very optimistic about the U.S. economy are now saying that things are taking a wrong turn and that problems could be ahead.
Take the vice chairman of the Federal Reserve, Richard H. Clarida, for example. In his recent speech, he said:
All that said, the incoming data have revealed signs that U.S. economic growth is slowing somewhat from 2018’s robust pace. Prospects for foreign economic growth have been marked down, and important international risks, such as Brexit, remain…
(Source: “U.S. Economic Outlook and Monetary Policy,” Board of Governors of the Federal Reserve System, April 11, 2019.)
Key personalities at the Federal Reserve don’t usually paint a dire outlook for the U.S. economy; they tend to be optimistic all the time. In other words, this statement by Mr. Clarida shouldn’t be taken lightly whatsoever. If the Fed is concerned, you should be too.
But that’s not all. Well-known economists are saying the U.S. economy is headed towards trouble and a recession is likely as well.
In particular, Nobel Peace Prize-winning economist Robert Shiller said that there’s a greater-than-average chance of a U.S. recession in the next 18 months. He claims this is because the rates have been low for too long, because home prices have increased immensely, and because stock markets have been stretched.
Essentially, Shiller is saying the economy could be in the late stages of growth but may not have enough push to manage it. (Source: “Nobel Prize winner Robert Shiller: Greater than average chance of recession in next 18 months,” CNBC, March 19, 2019.)
Why the Next Recession Could Be Really Bad
My worries are growing. After all, the U.S. economy could see a recession much sooner than later.
As it stands, there are nearly 40 million Americans who are already using food stamps. If an economic slowdown approaches, that number could grow immensely. (Source: “Supplemental Nutrition Assistance Program,” U.S. Department Of Agriculture, April 5, 2019.)
I also question what the Federal Reserve and the U.S. government will do.
After the great recession, the government and the Fed joined forces to revive the U.S. economy. It took a lot of money to do that, so how will they react now? Interest rates are already fairly low. Will the Fed take them below zero in the next recession?
The U.S. government is already spending immense amounts when the economic data suggests things are rosy. How much will it spend in case a recession prevails? Could an over-$1.0-trillion budget deficit become the new normal?