↑↑If ❤❤ you want to see more exciting content, remember to "follow" me! Thank you for your support!❤❤↑↑
The U.S. economy has long been considered the engine of the world economy, and its stability and strength have a significant impact on global markets. However, it is reported that the U.S. economy is facing unprecedented challenges and crises, with increasingly serious internal fiscal deficits, debt levels, inflationary pressures, and other problems, as well as increasingly complex external competitors, trading partners, geopolitical and other factors.
According to Fox News, a growing body of data suggests that an economic crash more devastating than the Great Depression may be on the horizon in 2024. If the White House and Congress don't cut government spending soon, the results could be catastrophic. What's going on here?
1. The plight of the U.S. economy: high debt, high inflation, high interest rates
The predicament of the U.S. economy is mainly manifested in three aspects: high debt, high inflation, and high interest rates. These three aspects interact with each other, forming a vicious circle that has brought tremendous pressure and risks to the US economy.
As of the end of September 2023, the total federal debt of the United States has exceeded $28.4 trillion, or 127% of gross domestic product (GDP). This is the highest percentage since World War II and well above the 60% safety line recommended by the International Monetary Fund (IMF). The debt problem of the United States stems mainly from its chronic fiscal deficit, that is, the government spends much more than it earns.
In fiscal year 2023 (October 2023 to September 2024), the U.S. government's budget deficit is expected to reach $1.84 trillion, or 8.2% of GDP.
This is largely due to the trillions of dollars in fiscal stimulus packages rolled out by the U.S. government in response to the pandemic and recession, which has led to a significant increase in spending.
The U.S. government's revenues are largely dependent on taxes, which in turn are affected by economic growth and employment levels. Due to the impact of the pandemic and the trade war, both economic growth and employment levels in the United States have been hit hard, resulting in a decrease in income.
As a result, the U.S. government can only cover its fiscal deficit by issuing more bonds and borrowing money from domestic and foreign investors, which has led to the accumulation of debt.
Inflation in the United States has reached its highest level in nearly 30 years. This means that the price level in the United States has risen by 5.4% over the past year, well above the 2% target set by the Federal Reserve.
The inflation problem in the United States is mainly due to the excessive increase in its money supply, that is, the Federal Reserve printing too much money. In response to the pandemic and recession, the Fed has adopted an unconventional monetary policy, slashing interest rates, expanding asset purchases, and injecting a lot of liquidity into the market. Interest rates in the United States have begun to rise, putting more pressure on debt and the economy.
In order to curb inflation, the Federal Reserve has begun to tighten monetary policy and raise interest rates. Since June 2023, the Fed has raised interest rates 11 times in a row, raising the federal funds rate from 0.25% to 2.75%. The Fed's interest rate hike has directly led to an increase in the yield of U.S. bonds, thereby increasing the U.S. government's debt burden.
The Fed's interest rate hikes also indirectly affect the growth of the U.S. economy, as it inhibits borrowing and investment by consumers and businesses, thereby reducing demand and output.
2. The crisis of the U.S. economy: debt default, stock market crash, recession
The plight of the U.S. economy, if not effectively addressed in a timely manner, is likely to turn into a serious crisis, perhaps even beyond the Great Depression of 1929.
A U.S. debt default could trigger turmoil and panic in global financial markets. The debt problem of the United States is no longer a purely financial problem, but a political problem. If the U.S. government does default on its debt, the consequences will be catastrophic.
Because U.S. bonds are the underlying assets of global financial markets, they are widely used as reserve currencies, investment instruments, and benchmarks for credit ratings. If the United States defaults on its bonds, it will lead to a collapse of confidence in global financial markets, a massive withdrawal of funds, huge losses to financial institutions and investors, and possibly even a global financial crisis.
A stock market crash in the United States could trigger a recession and depression in the global economy. The U.S. stock market is a barometer of the global economy, and its ups and downs and fluctuations often have a significant impact on global economic growth and expectations. However, the U.S. stock market is already in a highly bubble state, and its valuation and price, which is seriously out of touch with its fundamentals and profitability.
The U.S. stock market is mainly stimulated and supported by the Federal Reserve's monetary policy, namely low interest rates and quantitative easing. These policies have led to excess liquidity in the market, and a large amount of capital has poured into the stock market, pushing up stock prices. However, as the Fed tightens monetary policy and raises interest rates, there will be less liquidity in the market, and money will flow out of the stock market, causing stock prices to fall.
The economic recession in the United States could trigger global social unrest and political crisis. The economic recession in the United States will affect not only the society and politics of the United States itself, but also the society and politics of the world.
The economic recession in the United States will lead to an increase in unemployment, a decline in income, and a widening gap between the rich and the poor. The economic recession in the United States will also lead to increased political division and confrontation in the United States, making it more difficult for the two parties to cooperate and compromise, and the efficiency and credibility of the government will decline.
The economic recession of the United States will also lead to a decline in the international status and influence of the United States, changes in the attitudes and actions of its allies and adversaries, and an increase in the diplomatic and security challenges and crises of the United States.
epilogue
The economic collapse of the United States may bring huge crises and disasters to the world, and may also bring new opportunities and changes to the world. How should we deal with and grasp this problem? Protect and promote our interests and well-being? These issues require our common wisdom and efforts, joint cooperation and action.
If you have any comments and suggestions, you are welcome to leave a message in the comment area to communicate and share with me.