Hold Up: Could the U.S. Economy Really Be in Danger of Overheating? Let's Discuss
By:101 finance
Is the U.S. Economy Facing Overheating Risks?
Despite ongoing concerns about a possible recession and recent signs of labor market weakness, the U.S. economy may actually be more vulnerable to overheating than to a slowdown.
- Money supply is expanding again: The M2 measure of money is growing rapidly as banks increase lending and overall liquidity rises, even after the Federal Reserve's efforts to tighten monetary policy.
- Productivity gains fueled by AI: Advances in productivity, partly due to the integration of artificial intelligence, are helping to reduce labor costs and postpone inflationary pressures. However, these improvements do not fully remove the threat of the economy overheating.
- Wealth effect boosts spending: As asset values climb, affluent households are able to maintain strong spending levels, now accounting for nearly half of all consumer expenditures.
- Labor market weakness doesn’t mean excess capacity: A soft job market does not necessarily indicate that the economy has significant slack.
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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