Risk of US Recession is Below Average for the Next 3 Years
Goldman Sachs predicts that the US economy stands only a “muted” chance of plunging into recession in the near future and a “below average” likelihood during the next 3 years.
Goldman economist Daan Struyven modeled the current run, which is just 10 months away from being the longest expansion in history.
“The good news is that the model still classifies the expansion as mid-cycle,” Mr. Struyven said in a note.
He cautioned that a sudden growth spurt could change things and switch the recovery from mid-cycle to late cycle.
“Cyclically, the financial system and the economy have spent a long time climbing out of the deep hole torn by the crisis and Great Recession,” he wrote. “And structurally, better anchored inflation expectations allow the Fed to increase interest rates at a more gradual pace than in past cycles.”
“The less good news is that further strong growth could push us to a late-cycle setting relatively soon,” he said. “The labor market is already there, and it would not take much additional wage and price acceleration for the model to indicate an inflation overshoot late-cycle. A financial overshoot late-cycle diagnosis is slightly further off, despite the telltale high levels of confidence.”
But, the Fed is being very careful in here to manage a very soft landing along side President Trump aggressive GDP growth policies.
But, not everyone is so optimistic about the economy’s future.
Economist pundit Nouriel Roubini warns “voodoo economics” is part of a “perfect storm” brewing that will plunge the US into recession in Y 2020.
He also speculated that such an economic downturn could prompt President Donald Trump to start a war with Iran.
“It’s voodoo economics. President Reagan tried it, Bush tried it… So you might have, by Y 2020, a perfect storm for the US and the global economy,” the professor at NYU Stern School of Business recently warns.
Voodoo economics is a phrase used by George H. W. Bush (41) in reference to President Ronald Reagan’s economic policies, which came to be known as “Reaganomics.”
The Chairman of Roubini Macro Associates explained that the current surge in economic growth will last because an “unsustainable” fiscal stimulus will evolve into a “fiscal drag.”
Mr. Roubini also echoed many of the same themes that appeared in a recent op-ed written for Project Syndicate with fellow economist Brunello Rosa.
We will see, Yes?
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