[Looking at the world] American people save less and debt increases American media: "high inflation" is giving a green light to economic recession | America | debt
"Here we go again. The Federal Reserve is expected to raise interest rates again on Wednesday after suspending interest rate hikes last month." This was a report by USA Today on July 26th.
The article states that the Federal Reserve will raise its benchmark interest rate by another 0.25 percentage points to the target range of 5.25% to 5.50%. This will be the 11th rate hike by the Federal Reserve and the highest level in 22 years.
The United States is unable to curb the spread of inflation in the long term.
WalletHub analysis shows that since April 2020, due to the soaring inflation, Americans' savings have decreased by 5.5 trillion dollars, which is lower than the level before the COVID-19 epidemic. Since mid-2021, inflation in the United States has been at a historic high, with prices of all commodities from energy to food soaring. The inflation rate reached a 40 year high of 9.1% in mid-2022, greatly eroding savings and increasing the debt burden on the public.
Experts believe that consumers will pay an additional $34.4 billion in interest expenses over the next 12 months. The report states that if interest rates are raised by another 25 basis points, they will lose an additional $1.72 billion, bringing the total annual cost of the Federal Reserve's recent rate hikes to as high as $36 billion. According to data from the New York Federal Reserve, as of the end of March, the total household debt reached $17.05 trillion, with an increase in the proportion of current debt arrears for most types of debt.
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American investor Bill Gross has warned that Americans may deplete their savings later this year, giving the green light for an economic recession.
After the Federal Reserve significantly increased borrowing costs since the beginning of last year, most economists predict that this will lead to an economic collapse as consumers cut spending, businesses cut employment, and expansion plans.
On July 20th, the US Bureau of Economic Consulting released a report stating that in June, the US Leading Economic Index fell 0.7% to 106.1. This is the 15th consecutive month of decline and the longest consecutive decline since the 2008 economic recession. In addition, the contraction of the index is accelerating, with a total decline of 4.2% in the first half of this year, which is greater than the 3.8% decline in the second half of last year.
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According to a new survey released by the American Business Economics Association, the vast majority of business economists still believe that the likelihood of the US economy falling into recession next year is 50%.
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Major banks such as JPMorgan Chase, Wells Fargo, and Citigroup have released reports stating that the US economy may face significant challenges in the third quarter due to the inverted yield curve and the impact of the small bank crisis.
Jeffrey Gundlach, the deputy chief investment officer of Double Line Capital and the deputy head of "New Bond King" Jeffrey Sherman, said that the market should be prepared for a severe recession in the United States. Many of the economic indicators he is concerned about either issue warnings or signal a recession, and it is expected that the Federal Reserve will cut interest rates sharply by 1 percentage point in one go.
BlackRock, the world's largest asset manager, has warned that as the United States faces the risk of roller coaster inflation and an unusual "full employment recession," the economy may fall into chaos.
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