The US economy is Near to the Financial Recession

The US economy is Near to the Financial Recession

Former Fed chair Janet Yellen said the economy of the United States is in excellent shape. However, it is facing some risks.

Due to the fall of the businesses, there is a small room for the Federal Reserve System to move. Janet Yellen adds that the tariffs on Chinese imports are no good for the U.S. economy.

Wealth inequality is the main threat to the U.S. Economy.

Janet Yellen

Janet Yellen was the leader of the central bank from 2014 to 2018. She acknowledges the harmful effect of the U.S.-China war of tariffs and their impact on consumers and business.  Higher prices of goods are the cause of uncertainty.

Yellen says that, currently, the United States is not suffering a recession. Nevertheless, it might appear on the horizon soon.

The former Fed leader said at the World Business Forum that she thinks there will be no recession next year. Despite this, she added, odds of the recession are quite higher than average.

There is not enough scope for the Fed to be able to respond to three rate cuts this year. Janet says that there is a reason to worry.

She also referred to the inequality topic. Yellen claims that the problem is the unequal distribution of wealth. Money is mostly going to those with post-high school education levels and top earners.

The central bank had an effort to guide the economy, but there was no meaningful advance. The United States workforce is not getting ahead. They are getting small-term economical benefits on infrequent occasions.

Gains of the United States economic system are not reasonably and widely shared, and it is a severe social and economic problem. People think that the economy is not working for them, and it makes sense.


Trade War

President Donald Trump started the trade war, and it is not helping at all.

Yellen claims that the past year and a half the White House and the U.S. are spending to stop the theft of intellectual property and technology, to level up in the global playing field, and to lob tariffs back and forth on billions of goods.

Federal Reserve

But the economy has not progressed.

Protectionist trade actions have not been successful. The tariffs are also taxes on American businesses and consumers.

Now, it is more complicated to control costs. It has also been more expensive to do business. Also, consumers see higher prices on most of the products.

Yellen acknowledges the fact that the Fed is at fault in this situation. Fed’s policies have a historically low-interest rate. Low-interest rates penalize people who try to save for their retirement.

The Fed, under the Yellen’s leadership, held near-zero short-term rates, which were during and after the economic recession. She made only two rate increases.

The most disturbing situation for Janet Yellen was when she got notes from various people saying they had worked and played by rules, they saved for retirement, and they have money in the bank, but they got nothing. She says it is true; savers are getting penalized.