Powell Says "Day of Reckoning" Far Off

-edited

At the semi-annual Congressional economic testimony, Fed Chair Jerome Powell was singing the praises of the US economy.

Despite serious economic headwinds and unsustainable US spending, Powell Says he Doesn’t See a ‘Day of Reckoning’ Coming for the US Anytime Soon.

“If you look at today’s economy, there’s nothing that’s really booming now that would want to bust,” Powell said in testimony before the House Budget Committee. “In other words, it’s a pretty sustainable picture.”

He added that the dollar’s status as the global reserve currency is helping forestall any trouble from the nation’s growing debt load, which just surpassed $23 trillion.

We are the strongest country, we have the best institutions, we have the best labor force,” he said. “We have such strengths, and I think possibly the day of reckoning could be quite far off.”

Powell said the nature of expansions now is to last longer than they have in the past.

“We think that really is because we are no longer facing high and volatile inflation,” he said. “What we’ve seen is three of the four longest business cycles in U.S. recorded history have been quite recent.”

He did issue warnings about several dangers such as a manufacturing slowdown and trade headwinds, and he again called the path of government debt unsustainable. The national debt is expanding at a faster pace than economic growth.

“I think by definition that makes it unsustainable,” Powell said of the debt.

Questions of the Day

  1. Did the US have the strongest economy, best labor force, and best institutions in 1929, in 2000, and in 2007?
  2. Did that stop the Great Depression, the Dot-Com bust, or the Great Recession?

1A: Yes, Yes, Yes

1B: No, No, No

Solving the problem, will require the economy growing faster than the debt, “and you have to do that for 10 or 20 years,” said Powell.

Apparently, that's the plan.

Besides, “There’s no sign that things are overheating or anything like that,” Powell said.

Good luck with that.

Also note: Good Reason to Expect Recession: Greenspan Doesn't

Mike "Mish" Shedlock

Comments (24)
No. 1-18
Sechel
Sechel

Day of reckoning far off should be the ultimate contrarian signal

Bam_Man
Bam_Man

This may well have been his "Sub-prime is contained" moment.

Stuki
Stuki

1: Yes, No, No.

But, as Powell mentioned, that Yes for 1929, as well as for the 150 preceding and 40 following years, did build up quite the seedcorn pile for Powell et al to redistribute to dunces and burn through.

On account of that pile, Powell is likely right that a Corralito style "day of reckoning" is still a decent ways off. While the easy leechings may be over, there are still some wealth and productivity left for the Fed enabled useless leeching classes to steal, before the so called 99%ers are robbed quite as barren as their Argentinian and Venezuelan colleagues.

Roger_Ramjet
Roger_Ramjet

Well, at least he is admitting that there is in fact a day of reckoning. I guess the first step in the rehab process is admitting that you in fact have a problem.

Webej
Webej

We have the biggest military, the biggest institutions, the biggest government, the biggest people, and the biggest lies.

Of course we have the biggest bubbles and the biggest self-esteem.

Carl_R
Carl_R

He is most likely right. My personal guess for the day of reckoning is in the 2036-2040 time range, when social security runs out of money, and by when the government is far too bankrupt to do anything about it.

Ted R
Ted R

Powell the economic genius.

Onni4me
Onni4me

Wondering if there is any difference between Powells praise of economy compared to how Kim Jong-un is praised in North Korea...

thimk
thimk

come'on give the guy some credit. i believe he is the first chairman to admit government has unsustainable debt AND ,yes there's more, no more rate decreases. -lets see if he raises rates if the labor market heats up.

Tengen
Tengen

He's probably correct, unfortunately. Unless the central banks turn on each other, they can collude to prop this Potemkin village up for a while longer.

The "day of reckoning" comes most likely not when the bankers lose control, but when these imbalances finally make people rise up in anger. There are varying degrees of unrest occurring around the world, but the torches and pitchforks won't come out here in the Land of the Free™ until people stop thinking they have too much to lose. We're still fat, dumb, and comfortable for the most part.

Realist
Realist

Have to agree with Tengen, Carl_R and Powell. Slow growth should continue. Low inflation should continue. Slogflation for the foreseeable future.

The debt will continue to increase faster than the growth rate so there is a time of reckoning coming. However, rather than a depression, I see growth simply slowing to zero, while living standards for the vast majority continue to contract.

Please note that this is not my hope or preference. It is merely the reality I see coming.

Jackula
Jackula

Most likely a huge contrarian signal, but with lots of infrastructure to maintain and a desire among our ruling class to keep this debtberg afloat to keep their ownership share of assets I would not be surprised to see a Japanese style fiscal policy emerge.

AshH
AshH

"and I think possibly the day of reckoning could be quite far off.”

Does anyone else think that is a bizarre statement coming from the Fed chair? Why should there be a day of reckoning at all?!?

AshH
AshH

"and I think possibly the day of reckoning could be quite far off.”

Does anyone else think that is a bizarre statement coming from the Fed chair? Why should there be a day of reckoning at all?!?

TheLege
TheLege

I enjoy your optimism

TheLege
TheLege

Oh. Okay. Thanks.

JavaJunkie
JavaJunkie

Essentially we've been stagflation since 2010, since QE 1. Standard of living for middle class has substantially deteriorated. We are well pass The Day of Reckoning. Thanks FED.

oldereb
oldereb

"The day of reckoning is far off." as muttered by every Ponzi operator as they head for the bathroom.