Despite serious economic headwinds and unsustainable US spending, Powell Says he Doesn’t See a ‘Day of Reckoning’ Coming for the US Anytime Soon.
“If you look at today’s economy, there’s nothing that’s really booming now that would want to bust,” Powell said in testimony before the House Budget Committee. “In other words, it’s a pretty sustainable picture.”
He added that the dollar’s status as the global reserve currency is helping forestall any trouble from the nation’s growing debt load, which just surpassed $23 trillion.
“We are the strongest country, we have the best institutions, we have the best labor force,” he said. “We have such strengths, and I think possibly the day of reckoning could be quite far off.”
Powell said the nature of expansions now is to last longer than they have in the past.
“We think that really is because we are no longer facing high and volatile inflation,” he said. “What we’ve seen is three of the four longest business cycles in U.S. recorded history have been quite recent.”
He did issue warnings about several dangers such as a manufacturing slowdown and trade headwinds, and he again called the path of government debt unsustainable. The national debt is expanding at a faster pace than economic growth.
“I think by definition that makes it unsustainable,” Powell said of the debt.
Questions of the Day
- Did the US have the strongest economy, best labor force, and best institutions in 1929, in 2000, and in 2007?
- Did that stop the Great Depression, the Dot-Com bust, or the Great Recession?
1A: Yes, Yes, Yes
1B: No, No, No
Solving the problem, will require the economy growing faster than the debt, “and you have to do that for 10 or 20 years,” said Powell.
Apparently, that’s the plan.
Besides, “There’s no sign that things are overheating or anything like that,” Powell said.
Good luck with that.
Also note: Good Reason to Expect Recession: Greenspan Doesn’t
Mike “Mish” Shedlock
“The day of reckoning is far off.” as muttered by every Ponzi operator as they head for the bathroom.
Essentially we’ve been stagflation since 2010, since QE 1. Standard of living for middle class has substantially deteriorated. We are well pass The Day of Reckoning. Thanks FED.
If we can avoid another Dark Age from over-the-top Govt oppression, technology will once again save the day – it always has, and eventually always will. Exponential advances from the combination of AI, Virtual Reality, 5G, Quantum Computing, Blockchain, etc., will produce more productive societies that continue to reduce, what George Gilder and Pooly & Tupy call “time-prices” – the hours of paid labor to produce one unit of GDP. As Gilder notes, “this figure captures in one number both the rise in incomes and the drop in costs resulting from innovation, which is the source of all capita economic growth. Pooley & Tupy’s time-prices reveal no slowdown at all in the rates of technological innovation and true economic growth. Measured by time-prices, innovation has been increasing real incomes at a rate of 3.6%/year since 1980”.
The problem for the US is that China’s time-prices have been growing at a rate of 11.1% since 1980, and they are taking a leading role in the technologies of the future (for example, China has more blockchain patents that the US). While our establishment politician’s are worried about protecting their jobs, power, and two-martini paid lunches, China is preparing to eat our lunch.
Oh. Okay. Thanks.
I enjoy your optimism
“and I think possibly the day of reckoning could be quite far off.”
Does anyone else think that is a bizarre statement coming from the Fed chair? Why should there be a day of reckoning at all?!?
Did he basically just say, “we’re really f’d, but don’t worry, our kids and grandkids will pay the price.”?
“In the end we’re all dead”
–Keynes
If you go back through Bernanke in 2007 and Yellen…they never oversaw an economy in danger…Powell does appear to be the most clueless and I’m not sure if that is a good thing or a bad thing…LOL
“and I think possibly the day of reckoning could be quite far off.”
Does anyone else think that is a bizarre statement coming from the Fed chair? Why should there be a day of reckoning at all?!?
Exactly! Does this qualify as a ‘Freudian slip’?
Simple: no Ponzi ever lasted forever and it won’t be different this time. GDP stands for Global Debt Ponzi.
Most likely a huge contrarian signal, but with lots of infrastructure to maintain and a desire among our ruling class to keep this debtberg afloat to keep their ownership share of assets I would not be surprised to see a Japanese style fiscal policy emerge.
He’s probably correct, unfortunately. Unless the central banks turn on each other, they can collude to prop this Potemkin village up for a while longer.
The “day of reckoning” comes most likely not when the bankers lose control, but when these imbalances finally make people rise up in anger. There are varying degrees of unrest occurring around the world, but the torches and pitchforks won’t come out here in the Land of the Free™ until people stop thinking they have too much to lose. We’re still fat, dumb, and comfortable for the most part.
Until one day they aren’t!
Sir Rodney “Sire, the peasants are revolting!”
The King “You can say that again.”
Wondering if there is any difference between Powells praise of economy compared to how Kim Jong-un is praised in North Korea…
Powell the economic genius.
He is most likely right. My personal guess for the day of reckoning is in the 2036-2040 time range, when social security runs out of money, and by when the government is far too bankrupt to do anything about it.
We have the biggest military, the biggest institutions, the biggest government, the biggest people, and the biggest lies.
Of course we have the biggest bubbles and the biggest self-esteem.
Well, at least he is admitting that there is in fact a day of reckoning. I guess the first step in the rehab process is admitting that you in fact have a problem.
1: Yes, No, No.
But, as Powell mentioned, that Yes for 1929, as well as for the 150 preceding and 40 following years, did build up quite the seedcorn pile for Powell et al to redistribute to dunces and burn through.
On account of that pile, Powell is likely right that a Corralito style “day of reckoning” is still a decent ways off. While the easy leechings may be over, there are still some wealth and productivity left for the Fed enabled useless leeching classes to steal, before the so called 99%ers are robbed quite as barren as their Argentinian and Venezuelan colleagues.
This may well have been his “Sub-prime is contained” moment.