The U.S. economy may be at a critical moment.
For years, the U.S. government has championed spending, creating a larger deficit and soaring debt levels, which could require trillions of dollars in interest payments over the next few decades.
If billionaire Ray Dalio previously proposed that the economic situation could have a terrible impact, meaning the government was forced to restructure its debt.
Related: Billionaire Ray Dalio's blunt news turn on the economy
Those who have seen things that have analyzed the market for decades, including Michael Bloomberg, the founder of Billionaire, who is usually found on the tables of most major hedge funds, mutual funds and trading businesses, will not lose that risk.
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Bloomberg recently assessed economic challenges and conducted a blunt assessment that every investor should consider.
The Fed puts itself in the corner.
In 2021, Fed Chairman Jerome Powell tried to argue that inflation was temporary and shortly afterwards, the Fed began adopting the strictest and hawkish monetary policy since Fed Chairman Paul Paul Volcker in the early 1980s.
Related: Jim Cramer's blunt response to 20% tariff
Powell's war on inflation works, but it comes at a price. Although inflation has retreated from more than 8% in 2022 to below 3%, the impact of higher interest rates on economic growth has brought unemployment to 3.5% in 2023.
The rise in unemployment prompted the Fed to lower the benchmark Fed's fund rate in the fourth quarter of 2024. However, given that the Consumer Price Index showed inflation index at 2.8% in February, up from 2.4% in September, we have not seen any improvement in the job market and the slowdown has slowed down inflation.
Worse, sticky inflation and unemployment are closely related to the slowdown in economic growth.
Atlanta's Fed's GDPNOW forecasts 3.7% in the first quarter. While this may improve as more data is available, it seems like the first quarter GDP is likely to be farther away from the 3.1% rate in the second and third quarters last year.
Things may get worse given the level of consumer confidence. The conference committee's consumer expectations index is 65, which is south of the past 80 levels, indicating the recession.
The short-term outlook for the economy is fragile. However, the long-term prospects can be totally dangerous.
