American economist Janet Yellen, the 15th head of the Federal Reserve, who resigned in February last year, made a sensational statement that shocked the Americans and should at least strain the Russians who keep their stash in dollars. Of course, everyone decides whether to run to the banks for exchange for «wooden» ones, or, on the contrary, buy another hundred or two bucks. Of course, if there is extra money. Nevertheless, knowing what they want to do with the “green” in the Fed will not be out of place.
So, Yellen said that «this year, a big mystery lies in the inflation deficit.» Its level since the beginning of Trump’s reign is estimated at 2.61%, which, according to Yellen, is fraught with “Japaneseization” of the American economy — that is, a drop in GDP growth and stalling into deflation.
The significance of Yellen’s recognition is due to the fact that she is the former head of the Fed and can afford to say what the current head of the Federal Reserve Jerome Powell is obliged to keep quiet.
Societe Generale’s Albert Edwards, a strategist from Societe Generale, added fuel to the fire, who predicted the “ice age” of the world economy caused by deflation two decades ago. His forecast for negative rates, by the way, came true, although at the end of the 20th century no one believed it. And so, according to Edwards, inflation in the US will soon collapse to zero, which in turn will lead to a drop in demand and a recession.
Even the current growth of America’s GDP will not help save the situation. It turns out that the Fed rate cut has only a short-term inflationary effect in the USA, after which the dollars “evaporate”. As a result, the cost of new homes froze in their tracks, although real estate demand previously predetermined a general increase in the price index. The same is recorded in the residential rental market.
There is another “one hundred percent” household indicator of the ill-being of any economy — the fall in the price tags for shoes. “I waited for the shoes to fall in price, which happened. People have no time for new shoes, ”said Societe Generale strategist, and added:“ Soon this will turn out to be an unpleasant surprise for investors.
Edwards warns in all seriousness: the US economy faced the threat of «Japaneseization» and it urgently needs to be rescued. Moreover, as the Financial Times, well-informed in US government affairs, writes, the Fed «is considering introducing a new rule that will allow inflation to exceed its target of 2%.