Washington: Economists and investors are warning that the US economy may face a financial crisis like in the 1970s due to rising inflation, government funding and the policies of the Federal Reserve. It was revealed in a survey conducted by Bank of America, a leading financial institution in the US. About 92 per cent of fund managers who are part of US investment and capital markets warned that the country would face a ‘stagflation’ like the 1970s this year. Alan Greenspan, the former Chairman of the US Federal Reserve, forecasted that the US economy would soon go into recession.
US inflation has flared due to the Corona crisis and the Russia-Ukraine war that started after that. The inflation index has reached its highest level in the last four decades. Also, the Federal Reserve has implemented a policy of raising interest rates to curb inflation. In the previous year, the interest rate in the United States has increased as many as seven times, and currently, it has reached four and a half per cent. At the same time, the Biden administration has announced more than a trillion dollars in aid, prioritizing policies such as social programs and ‘Make in America’.
All of these have had adverse effects on the US economy. Inflation is still rampant, and demand for products has started to decline. Due to the fall in need, the financial equations of hundreds of companies were disrupted, and large-scale layoffs began. Companies in the US technology and consumer sectors have laid off more than 150,000 workers in the past year. Companies like Amazon, Meta, Microsoft, and Twitter are leading in this in the technology sector. Amazon CEO Jeff Bezos, Twitter CEO Elon Musk and heads of financial institutions like JP Morgan, Goldman Sachs and others have begun to highlight the issue of a financial crisis openly.
The new survey of Bank of America only confirms this. In this survey, the senior executives of the companies on ‘Wall Street’, the centre of the capital and financial markets in the United States, were interviewed. Among them, 92 per cent of fund managers said the US economy would face ‘stagflation’ this year. A state of rising inflation, slowing economy and growing unemployment is known as ‘stagflation’. Earlier in the 1970s, the United States had to face ‘stagflation’. Nearly 77 per cent of fund managers have expressed the opinion that the ‘stagflation’ in the US is dangerous for the global economy, which would also be facing a recession.
Alan Greenspan, the former Chairman of the US Federal Reserve, forecasted the US economy would go into recession. Greenspan stated that whatever decisions the Federal Reserve is making now would likely result in a recession. Greenspan served as the head of the Federal Reserve five times from 1987 to 2006. Therefore, his statement becomes noteworthy.
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