United States in crisis mode as government spending reaches levels not seen since the Great Recession
The economic landscape of the United States is facing a growing concern over increased government spending, which many believe is not sustainable. According to data shared by the global capital markets commentary platform, The Kobeissi Letter, in a recent post on X (formerly Twitter) on June 10, these concerns are reminiscent of the 2008 Financial Crisis.
Reports from Bank of America’s Global Investment Strategy and Bloomberg indicate that government expenditures as a percentage of Gross Domestic Product (GDP) have risen to 43%, matching levels seen during the Great Recession. Surprisingly, current spending levels are only 1% lower than those seen during World War II, a time of global conflict and extraordinary circumstances that are notably absent today.
The platform emphasized the seriousness of the situation by stating, “The U.S. government is spending as if we are in a crisis. U.S. government expenditures as % of GDP just hit 43%, matching levels seen during the 2008 Financial Crisis. This is a crisis.” Further historical peaks in spending, such as the U.S. Civil War, World War I, World War II, the Great Financial Crisis (GFC), and the COVID-19 Pandemic were also outlined.
Despite the Federal Reserve advocating for a “soft landing” in the economy due to robust economic data, The Kobeissi Letter’s analysis suggests a more precarious situation, hinting at an underlying crisis masked by current financial indicators. The data projects that by 2033, U.S. government spending could surge to 44% of GDP, echoing levels seen during World War II. This projection raises concerns about the sustainability of current fiscal policies and their long-term economic impact.
Additionally, the platform highlighted troubling economic trends in the U.S., such as soaring inflation rates – the highest in 40 years – driven by persistent deficit spending and prolonged low interest rates. This has led to concerns about a potential recession, with some predicting a downturn in the latter half of 2024. Experts warn of further economic challenges as elevated inflation and decreasing consumer sentiment could limit spending, exacerbating fears of a recession.
In fact, macroeconomist Henrik Zeberg cautioned that the U.S. economy may face one of the worst recessions since 1929, suggesting that the stock market and crypto sector would peak before the recession hits.
