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Recession around the corner for the U.S. Economy?

Recession US

The interest rate being hiked for the fourth consecutive time by the Federal Reserve seems to pave the way for the U.S. economy to head towards a recession in 2019. This was a calculation of Canadian economist David Rosenberg, a planner with Gluskin Sheff, an investment company in Toronto.

In a written article to Business Insider, he stated that the market is conducting itself similar to that of the 1929 downfall when the market crumpled down or was in for the most dreaded recession since the Great Depression. Quoting Warren Buffet if this cannot be termed as a bear market then what should it be?

Rosenberg confesses that he has in the past forecasted when the markets were in their bearish trend. In 2017 he had predicted the US economy to collapse the next year, which did not prove correct. This time again he uses the same lines for 2019.

Rosenberg, who does not extend much support to Donald Trump, was unhappy over the recent increase in interest rate in December 2018 by the Federal Reserve, which followed merely three months from the hike in September. According to him, the fed dared to raise the interest rate in December even after the September rise had tightened 125 basis points. He went on to add his concern that the situation so formed because of the increments will take time to stabilize.

Jerome Powell who holds Trump appointed the position of the chairman of Federal Reserve. In the two-year tenure of Donald Trump, he has raised interest rate seven times as opposed to just a single raise during Barack Obama’s eight-year term as a president.

The Fed’s tightening has resulted in the chances of a recession to almost double, and Rosenberg stands sure that it is definitely round the corner this time.

The Dow Jones Industrial Average rose by 747 points and closed at 23,433. This surge was mainly due to the statistics hinting that the US had given a considerable number of jobs in December than anticipated. The US employment rate had slid to a 48-year low, and 312,000 jobs were increased, which was way ahead than 177,000 marks expected. Even with these impressive figures, Rosenberg hints to a major slowdown.

The Dow is also sustaining the rise with the affirmations made by Jerome that the central bank would be more cautious before hiking interest rates in the future through two more hikes are forecasted this year. He stated that he was aware of the market situations and that he will consider those risks before making policies. Powell was heavily criticized for the hike of rates and was blamed that this could lead to a recession.

Retired US Congressman Ron Paul stated that Federal Reserve should market control interest rate. According to him, the Fed does not know rates. It twists prices, disfigures the economy and then makes its judgments by following these statistics. He concluded that this recession due to the Fed could be ultimately prevented if people could use duty-free digital assets.

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