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Should we worry about America's recession?

Should we worry about America's recession?

The US economy is growing faster than expected. Is America headed for a recession? Business AM asked Herman Mathijs, professor of public finance at Ghent University and VUB. He explained what the problem was and why we should be concerned.


Listen to the full conversation with Professor Matthijs here:


Essence: The dollar is depreciating, but for now there is little concern in the US. A recession may be coming, but how long it will last remains to be seen. We don't have to worry too much for now. If China and Japan follow the US, there is a big problem.

  • Matthijs explains: “The budget deficit in the US is as bad as ours, but it's not as much a political topic as the debts. Americans think they have a relatively large amount of debt and that they have to borrow a lot, but they are ultimately the owners of the world's leading currency. And US interest rates are also European. Higher interest rates have attracted European savings to the US for years.
  • “Americans are very interested in real estate. Houses are falling in value. A bad thing for the banks. On the other hand, there is a good thing for the Europeans, because the dollar is falling against the euro. All commodity prices in the world are expressed in US dollars, so this is a good thing for European gas and oil imports. matter.

Consequences

  • Will Recession Derail Presidential Campaign? “The question is how long the recession will last and what will be the consequences. Elections are not until November 2024. If it turns into a nine-month recession, it will be in the middle of the election campaign in the summer of 2024,” notes Matthijs. “If this is a very short recession, which will end before the summer of 2024, the problems for current President Joe Biden will be much less.”
  • “The United States accounts for 25 percent of the world's GDP. That is no small feat. China trails a bit further. Then Japan and Germany will follow,” says Matthijs. “If they go into recession, of course we will bear the consequences. However, a weaker dollar is an advantage for us to import raw materials.
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