Experts say the U.S. economy is expected to show its biggest growth since 1984. A major driving force behind that growth is stimulus spending, and COVID vaccinations, but what happens when that spending stops? Right now, that’s unclear; however, economists say one-time spending has rarely been a supporting factor for long-term growth. While many factors can contribute to the decline of the economy, like U.S. officials calling for a pause on Johnson&Johnson’s COVID vaccine, Jerome Powell says that cyber threats pose a bigger threat. In fact, he says those threats are a greater risk than another systemic breakdown in the financial system seen during the 2008 recession.

 

CNBC/Jeff Cox
The economy is running on a stimulus-fueled caffeine high. What will happen when it wears off?

The setting for 2021 seems clear: A powerful growth trajectory fueled by an influx of government spending as the U.S. recovers from the COVID-19 crisis and heads into the fastest economic acceleration in nearly 40 years.

But after that, then what?

The path beyond this rocket-fueled year looks far less clear.

One-time spending has rarely been the catalyst for long-term growth. Fiscal and monetary policy that now serve as irresistible tailwinds could soon turn into headwinds. On the other side of this huge burst of activity will be an economy beset by inequality and a two-speed recovery that likely will take more than the occasional government transfer payment.

So while gross domestic product growth in 2021 could reach 7% or beyond, don’t get used to it. An economic reckoning is likely ahead.

“I don’t see growth as being particularly durable,” said Joseph LaVorgna, chief economist for the Americas at Natixis. “The economy is going to slow a lot more next year than people think and probably will be well under 3%.”

Continue reading, here.

 

Fox Business/Megan Henney
Fed’s Powell reiterates cyber threat as bigger danger to US economy than 2008-style financial crisis

Federal Reserve Chairman Jerome Powell reiterated on Wednesday that cyber threats pose a bigger threat to the U.S. economy than the risk of another systemic breakdown in the financial system seen during the 2008 recession.

In an interview with David Rubenstein at the Economic Club of Washington D.C. on Wednesday, Powell said that “cyber is the new frontier” and financial institutions are devoting resources to thwart attacks.

The comments echo remarks he made during a CBS’ “60 Minutes” interview that aired on Sunday night when Powell said that policymakers at the U.S. central bank believe cyberattacks on financial institutions that halt their ability to track payments could trigger a market collapse similar in magnitude to the global financial crisis.

“You would have a part of the financial system come to a halt, or perhaps even a broad part. And so we spend so much time and energy and money guarding against these things,” he said. “There are cyberattacks every day on all major institutions now. That’s a big part of the threat picture in today’s world.”

A 2018 report from the International Monetary Fund found that cyber threats could cost banks 9% of their net income globally, or around $100 billion annually.

“The world changes,” Powell said. “The world evolves. And the risks change as well. I would say that the risk we keep our eyes on the most now is cyber risk. That’s really where the risk, I would say, is now, rather than something that looks like the global financial crisis.”

Read the full story, here.

 

Kitco News/Anna Golubova
Gold price keeps early-morning gains as U.S. retail sales surge 9.8% in March

Gold prices remained largely unchanged after much better-than-expected retail sales data from March, Kitco News reports.

U.S. retail sales jumped 9.8% last month following an upwardly revised drop of 2.7% in February, according to the latest data from the U.S. Commerce Department. Economists were expecting to see a rise of 5.9% in last month’s headline number.

Immediately after the publication, June Comex gold futures traded at $1,749.90, up 0.73% on the day.

Core sales, which strip out vehicle sales, were up 8.4% last month versus the expected 5% increase. The report’s control group, which strips out autos, gas, restaurants, building materials, and parts, was at 6.9%.

Last month’s retail sales benefited from stimulus checks that consumers received courtesy of the $1.9 trillion American Rescue Plan Act that was passed in March.

“U.S. retail sales climbed sharply in March as re-openings continued, the weather improved, and fresh fiscal stimulus funds were sent out,” said CIBC Capital Markets economist Katherine Judge. “This data is another indication of the scale of the dramatic acceleration that is underway in the U.S. economy. Spending will increasingly be tilted towards services, including restaurants, that are re-opening ahead, while some other retail sales categories will benefit from a return to in-store shopping.”

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