The U.S. economy will continue its steady expansion for the foreseeable future, but by the end of the decade may be facing a crisis of severe proportions, according to Beacon Economics' new outlook for the United States economy. A colossal Federal deficit and overvalued asset markets are driving excessively hot consumer spending, which may be supporting the nation's current expansion, but could be building into a serious future threat.
According to the new outlook:
"There is no version of the future in which these trends are sustainable," said Christopher Thornberg, Founding Partner of Beacon Economics and the outlook's author. "In any smaller economy the warning signs would already be flashing red to global asset markets, but the United States is too big and relatively safe for the danger to be acknowledged… yet."
The new outlook lays the intensification of the problem squarely at the feet of the Federal Reserve and its policies throughout and after the pandemic. "These issues began long before the pandemic struck, but actions by the Fed in response to the crisis have made the nation's long-run economic situation significantly worse," said Thornberg. "Their decision to firehose an extreme amount of new money into the economy expanded U.S. money supply by 40% in an 18 month period – show me a nation that wouldn't see a surge in spending and prices after such an aggressive increase."
In the near term, the forecast finds:
According to Thornberg, the U.S. economy is not currently at a crisis point but the day of reckoning could be as close as the end of this decade.
View the new The Beacon Outlook United States including full forecast tables here.
Beacon Economics LLC is an independent economic research and consulting firm based in Los Angeles. Learn more at www.BeaconEcon.com