SaysWho? Posted August 28, 2018 Share Posted August 28, 2018 https://www.theguardian.com/business/2018/aug/28/us-will-lack-fiscal-space-to-respond-when-next-recession-comes Quote The US Bureau of Economic Analysis estimates that GDP growth in the second quarter of 2018 reached 4.1% – the highest since the 4.9% achieved under President Barack Obama in 2014. Another year of growth will match the record 10-year expansion of the 1990s. Add to that low unemployment and things are looking good. But this cannot continue forever. Given massive global corporate debt and a soaring US stock market – the cyclically adjusted price-to-earnings ratio is high by historical standards – one possible trigger for a downturn in the coming years is a negative shock that could send securities tumbling. Quote Whatever the immediate trigger, the consequences for the US are likely to be severe, for a simple reason: the US government continues to pursue procyclical fiscal, macroprudential, and even monetary policies. While it is hard to get countercyclical timing exactly right, that is no excuse for procyclical policy; an approach that puts the US in a weak position to manage the next inevitable shock. During economic upswings the budget deficit usually falls, at least as a share of GDP. But with the US undertaking its most radically procyclical fiscal expansion since the late 1960s, and perhaps since the second world war, the Congressional Budget Office projects that the federal government’s fast-growing deficit will exceed $1tn (£775bn) this year. The US deficit is being blown up on both the revenue and expenditure sides. Although a reduction in the corporate tax rate was needed, the tax bill that congressional Republicans enacted last December was nowhere near revenue-neutral, as it should have been. Like the Republican-led governments of Ronald Reagan and George W Bush, the Trump administration claims to favour small government but is actually highly profligate. As a result, when the next recession comes, the US will lack fiscal space to respond. Quote Link to comment Share on other sites More sharing options...
Commissar SFLUFAN Posted August 28, 2018 Share Posted August 28, 2018 One of the reasons why the Fed is rasing interest rates is to provide some monetary space to respond to a recession. Quote Link to comment Share on other sites More sharing options...
Chairslinger Posted August 28, 2018 Share Posted August 28, 2018 1 Quote Link to comment Share on other sites More sharing options...
b_m_b_m_b_m Posted August 28, 2018 Share Posted August 28, 2018 Don't worry I'm sure the solution will be found with the policy wonks in the Trump administration Quote Link to comment Share on other sites More sharing options...
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