Should we worry about America’s recession?

The US economy is growing more slowly than expected. Is America headed for a recession? Business AM asked Hermann Matthijs, professor of public finance at Ghent University and VUB. He explained what the problem was and why we should be worried.

Listen to the full conversation with Professor Matthijs here:

Essence: The dollar is depreciating, but for now there is little concern in the US. A recession may be coming, but how long it lasts remains to be seen. We don’t need to worry too much for now. If China and Japan follow the US, there is a big problem.

• Matthijs explains: “In America, a budget deficit is as bad as it is with us, but it’s not as much a political topic as debt. Americans think they have a relatively large amount of debt and they have to borrow a lot, but ultimately they own the world’s leading currency. And As US interest rates are also higher than European interest rates, a lot of European savings have been moving to the US over the years.
• “Americans are very fixated on real estate. House values ​​are going down. Bad business for banks. On the other hand, there’s a good thing for Europeans because the dollar is falling against the euro. And all raw material prices in the world are expressed in US dollars, so it’s a good boon for European gas and oil imports. matter.

Consequences

• Will Recession Hurt Presidential Campaign? “The question is how long the recession will last and what will be the consequences. Elections are not until November 2024. If it turns into a nine-month recession, it will be in the middle of the election campaign in the summer of 2024,” notes Matthijs. “If this is a short recession, ending before the summer of 2024, the problems for current President Joe Biden will be much less.”
• “America accounts for 25 percent of world GDP. It’s nothing. China is a little further behind. Then Japan and Germany will follow,” says Matthijs. “If they go into recession, we will definitely bear the consequences. A weak dollar is only an advantage for us to import raw materials.

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