The United States faces an impending economic crash, according to Citigroup’s chief US economist, Andrew Hollenhorst, who expressed concerns about the country’s economic fragility during an interview with CNBC.
BRICS Alliance and Economic Shifts
Growth of BRICS Economic Alliance
Over the past year, the BRICS economic alliance—comprising Brazil, Russia, India, China, and South Africa—has experienced substantial growth. The bloc has undertaken its first expansion initiatives since 2001 and adopted policies promoting the use of local currencies, diminishing the international reliance on the US dollar. This geopolitical shift has significant implications for the global economic landscape.
Impact on the US Economy
Hollenhorst suggests that the growing influence of the BRICS alliance may be contributing to the economic vulnerabilities facing the United States. The geopolitical changes and de-dollarization initiatives driven by BRICS are increasing pressure on the US economy, which is already grappling with internal challenges.
Labor Market Concerns
Deteriorating Hiring Sector
Hollenhorst emphasized the declining state of the US labor market. He noted that firms are hiring at a lower rate and having workers work fewer hours, indicating a gradual softening of the labor market. “Firms are hiring at a lower rate. Firms are having workers work less hours,” Hollenhorst told CNBC. “So this gradual softening has already started. That tends to snowball and end up in something that looks more like a hard landing.”
Historical Lows in Hiring Intentions
According to Hollenhorst, small businesses are showing the lowest levels of hiring intentions since 2016, and the hiring rate is at its lowest since 2014. These trends suggest that the labor market is weakening, which could precipitate a hard economic landing and potentially lead to a recession.
Broader Economic Implications
Interest Rates and Inflation
The challenges in the labor market are compounded by ongoing issues with interest rates and persistent inflation. Despite some optimistic reports, Hollenhorst expressed skepticism about the economic outlook, citing the lack of logical optimism given the current economic indicators.
De-Dollarization and Debt Concerns
The shift towards gold and other assets, driven by the BRICS alliance, is contributing to global de-dollarization. This trend, coupled with the United States’ existing debt concerns, exacerbates the economic pressure on the country.
Conclusion
Citigroup’s warning of a potential economic crash highlights the fragility of the US economy in the face of shifting global dynamics. The BRICS alliance’s growth and policy shifts are reshaping the economic landscape, challenging the dominance of the US dollar, and increasing the urgency for the United States to address its economic vulnerabilities.
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