In the article A Crisis Is Coming by Desmond Lachman he makes the prediction that a major economic event will occur in a relatively short time period. He says that by this time next year there will be a situation similar to the 2008-2009 financial crisis. He beliefs this because of rising interest rates which could trigger price bubbles. Also he believes the mistakes taken by the Federal Reserve and the U.S. government are going to contribute to this future crisis. He goes on to talk about the mispricing of credit risk in certain countries and the very high level of debt. Also there is the highest levels of expansion in the past 40 years because of the very low interest rates. Personally I think Lachman brings up some very interesting points but he makes a recession seem like a new concept. He does not mention business cycle fluctuations and that periods of boom in the economy are followed by recessions. Overall it was a pretty interesting article as he gave specific reasons for his prediction.
https://www.usnews.com/opinion/economic-intelligence/articles/2018-02-14/us-economy-is-in-danger-of-overheating-and-exploding-into-financial-crisis
https://www.usnews.com/opinion/economic-intelligence/articles/2018-02-14/us-economy-is-in-danger-of-overheating-and-exploding-into-financial-crisis
2 comments:
I am just curious. Do you have a prediction of what industry this potential crisis will occur in, as it was specifically problematic in the housing market in 2009?
If an economist like him is concerned about the future and he thinks the economy could go into a recession in a near future, the Fed and the government should try to do something different, especially the Fed with the interest rates in order to avoid a recession, or at least that the recession ends up being as long as the one in 2008. The should learn from the experience of this and do something different in order to reduce the swings in the economy (business cycles). We will be able to analyze the impact of decisions like tax breaks, increase in tariffs, increase in interest rates, and how this is going to contribute or stop the next recession.
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