In 2020, the United States will get the worst economic data after World War II. GDP will shrink by 3.5% in the whole year. The prospects of employment, investment and debt are not optimistic. With the opening of the economic downturn, the US has emerged as a “zombie economy”. In addition to printing banknote printing machines, I am afraid that there is no other option on the road of quantitative easing.
People walk inside the world trade center station in New York, USA, on January 28. Photo by Guo Ke (issued by Xinhua News Agency)
In 2020, the United States will get the worst economic data after World War II. The prospects of employment, investment and debt are not optimistic. As the door to the economic downturn opens one by one, the United States has become a “zombie economy”. I’m afraid it has no choice but to start the money printing machine and ride out the dust on the road of quantitative easing.
According to the latest data released by the US Department of Commerce, the US GDP will shrink by 3.5% in 2020, the first negative growth since the 2008 international financial crisis, and the worst economic performance since World War II. The U.S. economy has suffered severe setbacks in employment, foreign investment and debt.
Employment difficulties bear the brunt. Epidemic prevention measures and related business restrictions have brought about a major impact on the U.S. economy. Businesses and schools have closed down, demand for goods and services has dropped sharply, and the scale of job losses has set a record. Labor department data show that despite the recent slowdown in layoffs, the cold winter in the labor market is not over. As an indicator of layoffs, the number of first-time jobless claims dropped to 847000 in the week ending January 23. In recent months, the number of jobless claims in the United States has been far higher than the pre epidemic peak of 695000.
At the same time, it has become a trend for foreign investors to “dislike” the United States. Novel coronavirus pneumonia is spreading in the United States, and economic output has dropped sharply, according to data released recently by the United Nations. In 2020, new investment from overseas companies in the United States will drop by 49%. This data shows that foreign investment is no longer favored by the U.S. market has formed a trend. For decades, the United States has been the preferred destination for overseas investment. Since the peak of foreign investment in the United States reached 472 billion US dollars in 2016, the investment in the United States has declined year by year since 2017.
Moreover, the debt burden of the United States has soared, and the number is very ugly. In view of the $2.2 trillion coronavirus aid, relief and Economic Security Act launched in March 2020 and the $900 billion aid package launched in December 2020, the half yearly financial monitoring report of the International Monetary Fund predicts that the debt to GDP ratio of the United States will soar from 108% in 2019 to 129% in 2020, and it will further jump to 133% in 2021.
The huge amount of liquidity spurted by low interest rates and loose policies has made the stock market, housing market and other financial markets increasingly crazy. According to the data of the National Association of real estate brokers, ultra-low interest rates have raised the sales of existing homes in the United States in 2020 to the highest level since 2006. According to the data, the sales of completed houses in December 2020 increased by 22% year on year, and the sales of completed houses in 2020 reached 5.64 million sets, an increase of 5.6% compared with that in 2019. According to the S & P case Schiller national house price index, metropolitan house prices rose 9.5% in November from a year earlier. In 2020, U.S. housing sales have risen to the highest level in 14 years, second only to the record of 6.48 million units in 2006. As we all know, the subprime mortgage crisis broke out after the housing market broke the record.
In the soaring stock market, the number of zombie listed companies in the United States has accounted for 19% of the total number of Listed Companies in the United States. In this era of low interest rates, big companies are getting bigger and bigger. As the government intervenes in the economy to eliminate the recession, the recovery becomes weaker and weaker, and productivity growth slows down. This vicious circle forces each stimulus to increase. The government is even willing to buy corporate junk bonds, which distorts capital allocation and fails to improve labor productivity, resulting in the “zombie economy” characteristics of the U.S. economy as a whole.
To keep the economy running, the federal government has injected trillions of dollars. The Fed is well aware of the situation, but has no choice but to continue easing.
The Fed said recently novel coronavirus pneumonia cases have been booming again, and economic activity has weakened. The current vaccination campaign is slow and cautious about the economic outlook for the coming months. “We think it’s going to be very difficult,” Fed chairman Colin Powell said “This pandemic still poses a considerable downside risk to the economy,” he said The low interest rate policy needs to be maintained and the government is preparing more rescue plans.
Common sense suggests that these days of capital are spawning speculative financial bubbles. However, the prospect of “zombie economy” is unpredictable, and the monetary and fiscal authorities of the United States dare not stop. Recently, Powell ignored the fact that bitcoin had broken up 40 thousand US dollars, especially downplayed the risk of dangerous asset bubbles. There were many depressed demands. The rise in housing prices was, to a certain extent, a one-off event related to the epidemic. The new U.S. Treasury Secretary Yellen, the former “quankuan Yangma”, also believes that it is imperative to continue easing. This shows that the United States has no choice but to continue easing, and the next bubble burst is doomed.
Reprint indicated source：Spark Global Limited information