Yale Economist Says US Economy “Accident Waiting to Happen”

The inflation-adjusted U.S. savings rate could soon go to zero, creating a long-term concern for the health of the economy, a Yale economist said.

“Given this deficit spending, our savings rate is going to go to zero adjusted for inflation, and that’s going to push us into a realm of wider current account and trade deficits,” Stephen Roach, Yale University senior fellow, said Tuesday on CNBC’s “Squawk Alley.”

“The way I look at the fundamentals is they’re extremely fragile, and we’re kidding ourselves every time there’s a correction to say, well the economy is sound,” Roach said. “It is not sound at all when seen through the lens of low savings.”

PresidentDonald Trump signed a $320 billion spending deal Friday, and his administration released a budget plan Monday that would result in accumulating deficits of $7.2 trillion over the coming decade.

“Through no fault of the Trump administration’s they inherited a U.S. economy with a very, very low savings rate. The mistake they’re making is embracing deficit spending in a way that will take that savings rate even lower,” said Roach, formerly chairman of Morgan Stanley Asia and the firm’s chief economist for the bulk of his 30-year career at the financial giant.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza