The end of YOLO / Opinion column | Analysis | Opinion

The end of YOLO / Opinion column | Analysis | Opinion
The end of YOLO / Opinion column | Analysis | Opinion

A careful reading of the international economic media reveals two major trends: those who are trying to understand whether the boom on Wall Street is a sign of expansion and those who anticipate that we are heading irremediably towards a recession.

The truth is that the growth stimulated by the Biden administration’s public spending has reached its limits.

The consumption impact of the checks handed out by the current administration during the pandemic, estimated at an impressive $2 billion, is also running out. The post-pandemic private consumption frenzy has been defined by the acronym “yolo,” which means “you only live once” and reflects a desire to live intensely after the long quarantine.

This exhaustion of the effects of this budget package explains the increase in the US public deficit by 25 percent in 2023, which translates into the accelerated growth of public debt. In 2023, that economy paid the impressive figure of 800 billion dollars in interest and this year the amount will be close to one trillion dollars in debt service. Artificial consumption explains, to a large extent, the resistance of inflation to fall, which prevents further interest rate cuts. Short-term treasury bonds confirm that the yield curve is inverted, anticipating a recession. The Federal Reserve hesitates between continuing to maintain its restrictive policy or accelerating the cuts to avoid a recession that many consider inevitable.

The pre-election environment is not helping, as the presidential options anticipate greater polarization in the coming months. There is much concern about the effects that the bursting of the debt bubble related to the retail and office sector could have. The pandemic hit shopping centers that are now empty and there is a balance of unoccupied offices due to the advance of virtual work. Banks, especially local ones, could be greatly affected by the deterioration of this mortgage portfolio.

Some optimists believe that low unemployment and record-breaking Wall Street prices should be interpreted as positive signs. But others, like Warren Buffett, the “genius of Omaha,” are betting on a fall in asset prices and are stocking up on an impressive $190 billion in cash so they can buy aggressively when stocks plummet. The U.S. economy is sickened by low savings, excessive consumption and the debt spiral. Tough times are ahead.

***
Postscript: The presidential campaign is shameful. Having to choose between a boor like Trump and a consummate mediocre like Biden confirms that American democracy is going through its worst moment in history.

Miguel Gomez Martinez
Business Consultant.
[email protected]

 
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