The US economy cannot avoid recession
The US economy is 100% certain to enter recession in the next 12 months - according to a model released by two Bloomberg economists on October 17, based on 13 financial indicators. Worse yet, the seemingly inevitable recession could come sooner a 73% chance of occurring within 11 months and a 25% chance of occurring within 10 months.
These results are significantly worse than the last time Bloomberg ran the model, when the company predicted a recession with a probability of only 65%. The result was gloomy than President Joe Biden predicted, who has asserted that the US will avoid a recession, unlike many economists who believe a recession is lurking right around. Mr. Biden said that if there was a recession, it would be very easy.
Not all experts are convinced about the US recession. A survey of 42 economists predicted a 60% chance of recession in the next 12 months. However, their predictions have also been worse since the last prediction, showing that the US has a 50% chance of escaping recession.
Another survey by economists, conducted by the Wall Street Journal on October 17, shows that the likelihood of a recession in the US in the next year is 63%. The study shows that the reason for the US Federal Reserve's (Fed) interest rate increases is getting higher after many years without any adjustment. More than half of the surveyed see the Fed continuing to raise interest rates above healthy levels will eventually cause instability in the economy.
Inflation continues to fluctuate near a four-decade high, even as the Fed continues to raise interest rates in an effort to curb rising living costs. While President Biden praised the number of jobs in the hope of giving voters something positive to recognize him as economically, affirming that Washington's finances are extremely strong and the rest of the world is having problems, Mr. Biden's presidency has left a major financial loophole. Since entering the White House less than three years ago, Mr. Biden has added $3.37 trillion to the national debt, reaching a record high of $31 trillion.
While many Republicans and even some Democrats have blamed Mr. Biden for US financial problems, his predecessor Donald Trump has also added more than $7 trillion to the national debt, largely due to the unprecedented printing of money during the COVID-19 pandemic.
The global economy faces challenges
Meanwhile, according to former US Treasury Secretary Larry Summers, the global economy is facing the biggest challenges in the past four decades.
RT quoted Mr. Summers as saying at the annual meeting of the International Finance Institute in Washington: "This is the most complex, unique and consistent challenge situation I have been able to remember in the past 40 years." He criticized the International Monetary Fund and the World Bank, along with central banks, for underestimating the risks of prolonged high inflation and failing to act appropriately to deal with the crisis.
With rising interest rates, a stronger US dollar, energy and food shortages, geopolitical tensions and climate change, someone should propose an important solution to change the situation for the better, Summers said. However, he did not specify more about this.
The Fed has raised interest rates five times so far this year and other central banks around the world have also followed. However, Summers said managers have waited too long to act to curb rising prices and interest rates will have to increase further even if that puts the economy in recession.
"If we try to avoid raising interest rates, we will only fall into a state of stagnant inflation and will have to take a more difficult step afterwards. And this will lead to all the consequences for the rest of the world, he warned.
One such consequence would be the difficulty in providing finances for the debt market, Summers said. He gave an example in the UK: The Bank of England launched an emergency government bond purchase program last month to deal with the sharp decline in bond prices after the government announced a major tax cut.
Given what has happened in the UK, some of it is self-inflicted wounds, but some are shocking about what is happening in the global system... And when there are shocks, there are not always earthquakes, but perhaps we should think about protecting against them, he explained.
