Recently, Jesse Colombo, an economic analyst at the US Real Investment Advice, who accurately predicted the outbreak of the financial crisis in 2008, recently issued another warning that the new crown pneumonia epidemic is not the main reason for the sharp drop in U.S. stocks and , and said that the US economic bubble has long existed. With the bursting of the bubble, the United States may encounter a financial crisis again.
Trump has also become pessimistic. The US economy is entering a period of economic recession
The new crown pneumonia epidemic has spread in the United States in just a few weeks. The number of confirmed cases in the United States has exceeded 17,000. Various orders from closure of restaurants to avoiding the epidemic at home have put American economic activities at risk of sudden suspension. The US financial market has not been peaceful recently. US stocks plummeted, and four circuit breakers have triggered in March, resulting in a sharp drop in gold prices and US Treasury yields.
Bank of America warned investors on March 19 that the economic recession caused by the epidemic is inevitable and that the United States has shown signs of an economic recession. Bank of America also predicts that the GDP in the United States will fall by 12% in the second quarter, and the annual GDP will fall by 0.8%.
Bank of America American economist Michelle Meyer wrote in the latest report, "Following the footsteps of the rest of the world, we officially announce that the U.S. economy has fallen into recession - jobs will be lost, wealth will be destroyed, and confidence will be hit."Bank of America expects that the U.S. unemployment rate will double, with a decrease of about 1 million jobs per month in the second quarter, a total of about 3.5 million. Data released by the U.S. Department of Labor showed that the number of people applying for unemployment benefits in the week ended March 14 was as high as 281,000. Goldman Sachs economists estimate that the number will increase by 2.25 million in the next period.
At present, many investment banks have given similar analysis to Bank of America. Deutsche Bank predicts that due to a severe global recession, the US domestic GDP may fall by 13% in the second quarter; JPMorgan Chase estimates that the US domestic GDP may fall by 4% in the first quarter, 14% in the second quarter, and may fall by 1.5% for the whole year.
Regarding the "recession theory" of the US economy, US President Trump, who has always been optimistic, also gave pessimistic expectations. Trump recently held a press conference to warn that the epidemic crisis may continue until the summer and the United States may enter an economic recession. Trump said bluntly at the press conference: "The worst situation is that the epidemic may not end until July, August or later... The United States may enter an economic recession."
Previously, the US government has not attached enough importance to epidemic prevention and control work, but recently, with concerns about the economic prospects of all walks of life, the Trump administration has stepped up the introduction of epidemic prevention and control measures. Trump suggested that at least 10 people gather in the United States should have at least 10 people, and called on people to reduce going out and stay away from restaurants, bars and other public places. He suggested that state governments with community infections close all kinds of public places and purchase more medical supplies.
is all bubbles. Economic analysts reveal the truth about the false recovery of the United States
once accurately predicted that the US Real Investment Advice economic analyst Jesse Colombo, who broke out in the 2008 financial crisis, said in an interview with Fox News in the United States that the situation of the US economy is worse than most people expected, but the pneumonia epidemic that caused the sharp drop in US stocks in March was not the main cause, and said that the US economy had long shown signs of "recession". He said that the US economic bubble has long existed, and the epidemic is just a needle that has penetrated the US economic bubble.
Jesse Colombo uses "bubble-driven economic recovery" (Bubble Covery) to describe the recovery of the US economy after the 2008 financial crisis in recent years. In Jesse Colombo's view, this recovery is a "false recovery" driven by the bubble. He pointed out that the economic recovery of the United States from the recession in the early 2000s between 2003 and 2007 was also a "bubble-driven economic recovery", because the housing and credit bubble in the United States continued to expand, causing economic and employment growth in construction, mortgage and other financial sectors to reappear economic and employment growth, but its effect was only temporary.
Since 2019, Jesse Colombo has used major media to start issuing serious warnings to the US "bubble economy". To this end, he also used the New York Fed's latest "recession possibility model" to support his views.The New York Fed uses this model to predict the possibility of a recession in the U.S. economy in the next twelve months. Jesse Colombo said that the model's level was already 30% in July 2019, which is surprisingly similar to the July 2007 data. Previously, Jesse Colombo also used this model to predict the 2008 U.S. financial crisis . He believes that according to this model, the probability of an economic crisis in the United States will be as high as 64%.
Jesse Colombo also gave strong evidence for the statement of "economic bubble", he pointed out that the Federal Reserve has created a huge American household asset bubble by "injecting water" into the real estate and stock markets. After comparing the net assets of the United States with domestic GDP, he found that since 1952, the average ratio of total household assets to domestic GDP has been 384%, while the current figure has reached 535%, far exceeding the peak before the outbreak of the financial crisis in 2008. Once this huge bubble bursts, most American families will suffer a heavy blow.
bid farewell to false prosperity, the US economic recession may drag down the global economic recovery
Trump has always been full of confidence in the US economy. In the latest version of the State of the Union address released in February, he also boasted about the economic "report card" and claimed that he had successfully reversed the "failed economic policies" of the previous administration. The economic recession that had lasted for many years has ended; the US stock market soared 70%; the US has achieved energy independence and became the world's largest oil and gas producer; the average unemployment rate in the United States has dropped to the lowest wages of the blue-collar class in half a century and achieved rapid growth in pensions... Trump attributed his series of achievements to the policies adopted such as tax cuts and regulatory reductions, and he also bluntly stated that "the best days have not come yet."
But in less than two months, this situation has undergone a shocking reversal. The US government obviously does not want to admit that the previous prosperity is an illusion, so it attributes the current US economic problems to the epidemic, but it is also a disguised "blame-passing". So will the US economy reappear in the 2008 crisis as Jesse Colombo said? At present, it seems that there is a high possibility of another financial crisis.
From historical experience, many economic and financial crises in the history of the United States have been accompanied by a plunge in US stocks, or the plunge in US stocks may trigger US financial crisis , which will trigger a recession in the real economy when it is serious. As US finance penetrates into every corner of economic life, once the US stock market collapses, it will trigger a series of chain reactions - the balance sheets of US financial institutions deteriorate, market liquidity drys up, financial system is unstable, market investment and financing activities are blocked, and corporate capital chains and business activities are interrupted.
In addition, the plunge in the US stock market will also lead to a sharp shrinkage of assets of institutions such as pensions and insurance funds, and the "negative wealth effect" will drag down residents' consumption expenditure. The plunge in US stocks may also impact global markets through business, financial product chains and capital flows. If the turmoil in the US financial market further evolves into an economic crisis, it will drag down the global economic recovery through channels such as trade, investment, consumption, and international capital flows.
text: Sijia
