According to Nobel Prize-winning economist Joseph Stiglitz, assuming no major external shocks, the US economic expansion should continue in the coming months.
The Columbia University professor told Business Insider on April 22, „I think it’s more than likely we’ll continue to have the economy we’ve had.
Traditional recession indicators, the Treasury yield curve and the Conference Board’s leading economic index, have been pointing to a downturn for more than a year. But the consensus among economists and investors over the past several months has been that the U.S. economy is headed for a soft landing, where inflation slows without recession.
So far, the data support this view. Consumer spending, which accounts for two-thirds of the U.S. economy, is still positive, and job prospects are strong. The unemployment rate is also at a historically low level, below 4%.
Despite his generally upbeat outlook, Stiglitz worries about a number of risks. In the interview, he listed four in particular.
4 Economic Risks to Watch for
First, economic slowdowns elsewhere could seep into the United States.
„There’s a global recession. Other countries don’t have the fiscal policy that we’ve had. Parts of Europe are in recession,” Stiglitz said. „China’s economic recovery is weak. China plays a major role in the global economy. Even if we reduce our trade with China, it affects us globally because it affects Europe, it affects the rest of the world, and it comes back. We are all very closely integrated.”
Second, geopolitical tensions are heating up. To begin with, there are two wars going on – one in the Middle East, now directly between Israel, Palestine, Lebanon and Iran, and the other between Ukraine and Russia. A further increase risks pushing up oil prices. Brent crude oil prices have already risen to $88 from $75 in December due to the conflicts. Rising oil prices strain consumers by increasing shipping costs and fuel inflation.
And then there’s the icy relationship between the U.S. and China, Stiglitz said. The latter continues to threaten to invade Taiwan, which is critical to the supply chains of many US companies.
Third, within the United States, congressional inaction persists, Stiglitz said. The body has avoided a shutdown at times over the past several months, and House Speaker Mike Johnson has put off voting on several bills until the last minute to avoid angering the right wing of his Republican Party. Party.
„American politics, to use a rhetoric, is complicated. Congress could be shut down again, and we might not get some of the bills we need to keep the government going,” Stiglitz said. „This could result in a fiscal contraction, and that, if the central bank is not flexible enough, would be bad for the economy.”
Finally, Stiglitz said he believes many people are underestimating the policy changes that would come with a Republican administration if Trump is elected in November. For example, if Trump withdraws US support for Ukraine, it could raise grain prices. It also means Putin will be free to pursue his expansionist efforts in Ukraine and Eastern Europe. He said US-China relations could further deteriorate.
„Any of these things are so fragile that unless they’re in a steady hand, with a steady team — things can explode in the hands of Republican flamethrowers,” Stiglitz said. „It’s clear they’re throwing grenades and seeing what happens. Markets don’t like grenades.”
But again, Stiglitz’s fundamental outlook remains positive for the next six months until election results become clear.
„It’s very difficult to assign probabilities to any of these events. They’re very unique. So I’m still a little concerned,” he said. „But in the normal course of events, we’re on a steady path.”
„Oddany rozwiązywacz problemów. Przyjazny hipsterom praktykant bekonu. Miłośnik kawy. Nieuleczalny introwertyk. Student.