Potential Crash Predicted 2024

Economist are predicting that in 2024 we will se another depression like in the 30s. This is because the government is spending money ad inflation is not decreasing. Another reason is because over the past 3 quarters the money supply growth rate has been negative and inflation has not yet decreased and prices are still going up. The last time we saw this type of drop in the money supply growth rate was during the Great Depression. These are all effecting household savings which means people are have to get more lines of credit and touch deeper into their savings accounts just for simple life necessities. This could lead to a huge economic crisis if the government and Feds do not truly get involved and stop the spending. Who knows what will happen though but for our sakes I hope the government gets their crap together so we can get out of this economic downfall. With elections next fall I hope that will bring some change but who knows, maybe all of us US citizens are just walking in the dark right now praying we will be able to survive on what we got.  

https://www.foxbusiness.com/economy/new-data-reveals-crash-not-since-great-depression-could-hit-2024

U.S. Recession is Becoming Less Likely

     There has been a 10% decrease in the chance of a recession from the projection in early spring. The Early projection of a 35% chance that there will be recession in the economy was made after the failure of Silicon Valley Bank in March.  With recent moves in an agreement to raise national debt limit, the economy is projected to remain unchanged over the next 2 years. A main issue that is not completely certain is if the Fed will have to create a recession in order to bring inflation back to it's the targeted 2%. A key factor of this is if the labor market can rebalance or not. Unemployment has had a slight increase of .2 since the start of COVID-19 but is pretty much back to normal. The past year the economy has been able to create ways where jobs opportunities are increasing while keeping the unemployment rate at a "good" standard. Overall, even though there is still a decent chance the United States goes into a recession in the next couple of years, it seems to have become less and less likely as time passes.

Why a US recession has become less likely (goldmansachs.com)

Congressional U.S.-China Commissioner Warns of Global Tech Supply Chain Risk

    Rising risks of conflict between the United States and China is worrying big Tech companies who rely on hardware from China to produce their products. National security officials in Washington now predict about a 50% chance of a large scale conflict with China within the next 5 years. This would prove to be catastrophic to numerous industries that rely heavily on Chinese's manufactured goods to produce their products. 

    Companies are being advised to work with policy makers to help better understand the risks that such a conflict would pose on their business. These businesses are also being advised to wain off of their reliance on Chinese produced electronics. For companies who have already began sourcing materials from other countries, and companies who did not heavily rely on China in the first place, the threat is not as great. Over the course of the next few years, we will see if this threat will stay a threat or develop into something more detrimental to the American Tech Industry. 

Article:

https://www.wsj.com/articles/congressional-u-s-china-commissioner-warns-of-global-tech-supply-chain-risk-ae49ad2d?mod=economy_lead_pos1

Saudi Arabia's Economy Grows as it Diversifies

Saudi Arabia is actively working on transforming its economy by reducing its dependence on oil, diversifying income sources, and improving competitiveness. Non-oil growth has seen significant progress, with an average of 4.8 percent in 2022, and it is expected to remain close to 5 percent in 2023 due to strong domestic demand and reforms.

Reforms aimed at enhancing the regulatory and business environment have led to substantial increases in new investment deals and licenses. The Saudi Investment Fund (PIF) is also playing a role in stimulating private sector investment.

To sustain non-oil growth and economic diversification, Saudi Arabia must focus on macroeconomic policies and ongoing reforms. This includes ensuring that large projects generate returns and boost productivity, fostering an environment for innovation, investing in workforce skills, reducing fees and taxes for businesses, and closely monitoring interventions and industrial policies.

Key reforms driving the transformation include labor market reform, which has increased the share of Saudis in high-skilled jobs and female workforce participation, and digitalization, with the digital sector contributing significantly to overall growth, enhancing financial sector resilience, government efficiency, and financial inclusion.

Article:

https://www.imf.org/en/News/Articles/2023/09/28/cf-saudi-arabias-economy-grows-as-it-diversifies

Japan's Monetary Trilemma

    Core prices are used to measure consumer prices in the the country, Core prices exclude the volatility of fresh foods but factor out energy costs. In August, core prices were 3.1% compared to the previous year, a figure that has remained consistent over the past seven months. This stability places inflation above pre-pandemic levels yet below the peaks witnessed in 2022. This suggest that Japan is grappling with underlying inflation not seen since the early 1980s, raising concerns about the nation’s inflation problem.

In Japan, goods prices surged by 4.2% in August, whereas services saw a more modest increase of 2%. The pace of wage growth is another concern which lags behind rising prices. Over the past 16 months, households have consistently experienced a decline in real earnings when adjusted for inflation. This growing disparity between incomes and prices underscores the challenges faced by Japanese citizens.

The Bank of Japan has argued that inflation is supply-driven, not demand-driven, suggesting that monetary policy tightening is unnecessary. However, despite the apparent easing of supply factors, inflation persists, signaling that it might be entrenched in market participants expectations. This raises questions about the Bank of Japan’s reluctance to adopt tighter monetary policies.

Reference:

Siegel, Mark. “Japan’s Monetary Trilemma Is a Warning to the World.” Atlantic Council, Atlantic Council, 12 May 2023, www.atlanticcouncil.org/blogs/econographics/japans-monetary-trilemma-is-a-warning-to-the-world/. 

Interest Rates in Ukraine

 Policy Rate: The National Bank of Ukraine (NBU) is responsible for setting the policy rate, or the critical refinancing rate or discount rate. The policy rate is a crucial tool central banks use to influence economic conditions. 

Inflation Rate: Inflation plays a significant role in determining interest rates. In Ukraine, inflation had been a concern in previous years, and the central bank aimed to keep it under control.

Economic conditions and external factors, including geopolitical tensions, also influenced interest rates in Ukraine. The country faced economic challenges and uncertainties due to factors such as the conflict in Eastern Ukraine and international developments. With the current conflict ongoing in Ukraine, it is interesting how it impacted the Interest rates by cutting monetary policies in September 2023 to 20%, easing from the summer to slow down disinflation. With improved prices and expectations and working with decelerating inflation much faster than expected, it turned out to be 8.6%—the summer mainly due to rich crops, the stable hryvnia, and imposed caps on utility services. The uncertainty around the end of the active phase of the war, the lasting destruction of critical infrastructures, the attacks on Ukrainian grain ports, import limitations, and higher global energy prices posed underlying risks. 

Article:

https://tradingeconomics.com/ukraine/interest-rate

Is the current UAW strikes hurting the US Economy?

 

        The current UAW strike isn’t likely to reshape the national economy, but its effects will still be felt in the future. The formation of this strike started when the UAW decided to do a “limited and targeted stoppage at three locations: a Stellantis plant in Ohio, a General Motors factory in Missouri, and a Ford plant in Michigan”. This stems from the current high inflation and fear of an imminent recession coming to the US Economy. At the current moment only 13,000 out of the 150,000 US workers are currently participating in the strike. This however could be a concern to the economy as a solution has not been solved yet causing worry that more workers will join the strike. 

The ways that it could affect the economy if things were to get worse would be the dismantlement of the US top 3 carmakers. Which economist project would cause billions in damage. Luckily, economists don’t believe the strike will go that far as they believe both parties will come up with a solution. How it is affecting the market currently however is that those who are on strikes are receiving a $500 stipend a week making consumption money go down. Economists believe this would continue over a six-month period. Small businesses in the surrounding areas would be devastated.

Sources: 

https://www.theatlantic.com/newsletters/archive/2023/09/the-economic-stakes-of-the-uaw-strike/675381/

PCE- Background

          The PCE or Personal Consumption Price Index is a measure of the prices that people living in the United States pay for goods and services. The PCE determines inflation in the United States by measuring changes in the cost of living for households. The Federal Reserve has preferred PCE over to CPI to target inflation since 2000. There are three reasons for this; PCE updates its weights more regularly, PCE provides broader coverage of the economy, and historical PCE data can be revised more completely. Core PCE Price Index Annual Change in the United States is tracking to be 4% by the end of Q3 2023. PCE is the largest component of GDP as it makes up consumer expenditures. The long term average is about 64% of total GDP, but more recently it has crept up to above 68%. Below is more places to find information on PCE and its role in targeting and managing inflation.

BEA- https://www.bea.gov/data/personal-consumption-expenditures-price-index#:~:text=What%20is%20the%20Personal%20Consumption,pay%20for%20goods%20and%20services.