Goldman Sachs CEO David Solomon has a bold prediction for the US economy: there may not be a recession, but it will feel like there is. According to Solomon, the country could face slow growth and persistent inflation, which would make economic conditions more difficult. Solomon was surprised by the resilience of the markets and employment, but also warned that the Fed could continue to raise interest rates to combat inflation. Solomon said that it was a time of uncertainty and you had to be cautious.
Solomon sees “blows and pain” for the economy (USA). Even with a soft landing, it will feel like a recession for Americans. That’s what Solomon said in an interview with CNBC, where he raised concerns about supply shortages and inflation. Solomon predicted that the economy would slow in the coming months, but not enter a technical recession. However, he said that would be no consolation for consumers, who would have to pay more for everything from gasoline to groceries. Solomon also criticized the government’s fiscal and monetary policy, which he said has created many imbalances. Solomon said it was time to be prudent and realistic.
Now, people love to buy things on credit. Because that way they can have what they want without waiting. But credit is not free, it has a cost that depends on what central banks charge for lending money. These gentlemen are the ones who rule the financial world, and when they want to curb inflation, they raise interest rates. And what happens when interest rates rise? Well, credit becomes more expensive, and people buy less. And what happens when people buy less? Well, companies sell less, and earn less. In other words, in the end we all lose. This, ladies and gentlemen, is what is called an economic slowdown, and it is what we are experiencing now. The “bumps and pain” are in a sense part of the package.
What do Americans think about the economy? There is everything. There are those who see the good side and the bad side of things. And there are those who only see one of the two. Among all, there is discussion about whether the US economy is going to sink or not, and how much and how. But there are some who believe that there is no need to be so negative, and that the United States will be able to get out of a possible crisis with little damage and quickly.
A recent CNBC survey revealed that 69% of the public have a negative opinion of the economic situation. That’s a lot of people, isn’t it? But it turns out that these same data also show that the economy is growing, that there is employment, that there is investment, that there is consumption…How is this contradiction explained? Well, perhaps because people get carried away by emotions, by headlines, by politicians… And they don’t pay attention to the facts.
Have you noticed that people no longer talk about reality? It seems that doesn’t matter anymore. What matters is to make noise, confuse and contradict the other. This is how you live in a fragmented, extremist and polarized society. Reality has faded into the background. Now what is being debated is not what happens, but what is convenient. Now what is necessary is said and believed so that the other loses. In other words, they no longer debate to reach an agreement and find out the truth. He fights to win.
However, There is no denying that there are signs that the economy is cooling off and that a crisis is looming. For example, there is less industrial production, manufacturing, and retail sales. But not everything is bad, the services continue to grow. For example, the respective ISM shows a level above the average of the last two years, according to the Investing.com website. The strongest data is the behavior of the labor market. The unemployment rate has fallen dramatically and steadily since the peak of the recession in 2020 when it hit nearly 15%, according to the Bureau of Labor Statistics report. What can be called a rate of full employment.
According to the economist Krugman, there is no need to be alarmed by low unemployment. No.It is not that Americans have grown tired of working, but that they have grown older. The population is aging and that means that there are fewer active people. In fact, labor participation is the same as before the pandemic.
The recession may not hit until late 2023 or early 2024. And it will be a mild and short recession, like a cold. The Federal Reserve is doing the work to prevent a disaster. In addition, the labor market is strong and it does not look like there will be a collapse in employment.
In an inflationary environment like this, having such a strong economy can be counterproductive. Because? Because that means there is a lot of demand and little supply, which drives up the prices. What we want is a strong economy, but with falling inflation. So we can buy more things with less money. How is that accomplished? That’s the million dollar question.
The Fed is like a doctor who has to control the fever of the economy. If the economy is very hot, there is a lot of inflation and prices go up. So the Fed ups your dose of a remedy called interest, which makes borrowing money more expensive. Thus, people buy less and inflation goes down. But if interest rates rise too much, the economy can get too cold and go into recession. In addition, there are other factors that can affect the temperature of the economy, such as wars, crises or aliens. That’s why, The Fed’s job is not easy.
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