Despite recent positive economic indicators, investor and macroeconomics expert George Gammon foresees a hard landing for the U.S. economy. In an interview with Michelle Makori of Kitco News, Gammon pointed to several warning signs in the banking sector and the broader financial landscape.
Macroeconomics Expert Predicts Hard Landing for US Economy
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Banks See Economic Storm Clouds Ahead: George Gammon’s Warning
Gammon explains that while GDP growth and inflation rates appear favorable, the actions of banks suggest underlying issues. He notes that banks are not lending as expected, choosing instead to buy long-term treasuries. During his latest interview, Gammon told Makori:
The reason they’re not lending is that the risk-reward doesn’t make sense because when they look out at the real economy, they see storm clouds.
This behavior indicates a high level of risk aversion, as banks anticipate economic turmoil. Gammon highlights the inverted yield curve, a reliable recession indicator, which has been inverted for well over two years. He believes the banking sector’s current strategies reflect significant concerns about future economic stability.
Further elaborating, Gammon points out the substantial unrealized losses banks are facing, comparable to levels seen during the Great Depression. He argues that the systemic risk in the banking system has only increased since the global financial crisis, due to more extensive financial engineering and interconnectedness among global banks.
According to Gammon, these factors make it difficult for the Federal Reserve to engineer a soft landing, as it has never successfully done so in the past. Gammon stated:
Going back to 1950, Michelle, they never have [engineered a soft landing], not even once.
Gammon also highlighted that since 2022, the M1 and M2 money supplies in the U.S. have seen a significant decline. “The last time that happened with M2 money supply, we were in the great depression of the 1930s,” the macroeconomics expert remarked.
In conclusion, Gammon stresses that despite the Federal Reserve’s efforts, the probability of a hard economic landing remains high. He advises paying attention to the actions of banks and the bond market as indicators of future economic conditions, rather than relying solely on optimistic GDP and inflation figures.
What do you think about Gammon’s warning? Share your thoughts and opinions about this subject in the comments section below.
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