The U.S. economy has always been considered the engine of the world economy, but in recent years, the U.S. economy has experienced a series of problems, resulting in slowing growth, rising inflation, debt accumulation, and widening the gap between the rich and the poor. Some experts predict that if the United States does not take effective reform measures, then in 2024, the United States may suffer the worst economic collapse since the Great Depression of 1929.
So, what are the causes of the US economic crisis? According to a study from Harvard University, the U.S. economy faces four major risks:
- First, the fiscal deficit. As the U.S. government dramatically increased public spending in response to the pandemic and stimulated the economy, its fiscal deficit reached an all-time high of 15% of GDP in 2020. Moreover, the US government plans to introduce more infrastructure and social welfare programs, and the fiscal deficit is expected to remain high in the next few years. This means that the U.S. government needs to constantly borrow money to fill the fiscal gap, increasing its debt burden and interest payments.
- Second, currency overissuance. In response to the economic crisis and the low interest rate environment, the Fed has heavily implemented quantitative easing over the past decade, which is to increase the money supply by buying Treasury bonds and other financial assets. This has led to a depreciation of the dollar and a rise in inflation. According to the US Department of Labor, the US consumer price index (CPI) rose 5.4% year-on-year in September 2021, hitting a 13-year high. And, inflationary pressures are likely to persist due to factors such as tight supply chains and rising energy prices.
- Third, financial bubbles. Due to the stimulus of monetary easing and low interest rates, high valuations and speculation have occurred in the US stock market, housing market, cryptocurrency market, etc. For example, as of the end of September 2021, the S&P 500 has risen nearly 20% to an all-time high. House prices also rose 19.7% year-on-year, a new high in more than 30 years. Once these bubbles burst, they will have a huge impact on the financial system and the real economy.
- Fourth, social fragmentation. In the past few years, American society has been seriously divided and antagonistic, mainly manifested in politics, race, class and other aspects. For example, in the November 2020 presidential election, the gap between the two parties' candidates was very small, and some supporters refused to recognize the results and violent clashes broke out. And between May and August 2020, the death of a black man, George Floyd, while police enforcement was enforced, sparked nationwide protests and riots. These social problems not only affect the stability and security of the United States, but also weaken the soft power and international influence of the United States.
To sum up, the US economy is facing unprecedented challenges and crises, and if reforms and adjustments are not made in time, then in 2024, the United States may suffer a catastrophic collapse. So, how does this affect us? Can we escape?
The answer is: not necessarily. On the one hand, the collapse of the US economy will have a huge negative impact on the global economy, resulting in global market turmoil, shrinking trade, shrinking investment, and declining employment. On the other hand, the collapse of the US economy will also bring opportunities and challenges to other countries, prompting other countries to accelerate economic transformation and innovation, improve their competitiveness and resilience.
Therefore, we should be prepared to deal with the US economic crisis, both to guard against risks and to seize opportunities. Specifically, we can start from the following aspects:
- Improve their financial management ability and financial literacy, reasonably plan their income and expenditure, avoid excessive borrowing and speculation, and maintain asset diversification and liquidity.
- Improve their professional skills and learning ability, adapt to economic changes and market demand, and increase their employment competitiveness and entrepreneurial potential.
- Pay attention to the political and economic situation and policy changes at home and abroad, analyze their impact and opportunities on themselves, and make contingency measures and plans.
- Enhance their sense of social responsibility and citizenship, actively participate in social and public affairs, and maintain social stability and democracy and the rule of law.
In short, the US economic crisis is a problem that cannot be ignored, and it will have a profound impact on us. We should remain sober and vigilant and fully prepared to meet the challenges and opportunities ahead.