Skip to main content
feldstein101_Spencer Platt_Getty Images Spencer Platt/Getty Images

What Could Go Wrong in America?

Although the US economy is in good shape, a world of uncertainty makes it worthwhile to consider what could go wrong in the year ahead. The main risk is a sharp correction in asset prices, which are running well above their historical average levels.

CAMBRIDGE – Although the United States economy is in good shape – with essentially full employment and an inflation rate close to 2% – a world of uncertainty makes it worthwhile to consider what could go wrong in the year ahead. After all, if the US economy runs into serious trouble, there will be adverse consequences for Europe, Japan, and many other countries.

Economic problems could of course originate from international political events. Russia has been acting dangerously in Eastern and Central Europe. China’s pursuit of territorial claims in the East and South China Seas, and its policies in East Asia more generally, is fueling regional uncertainty. Events in Italy could precipitate a crisis in the eurozone.

But within the US, the greatest risk is a sharp decline in asset prices, which would squeeze households and firms, leading to a collapse of aggregate demand. I am not predicting that this will happen. But conditions are becoming more dangerous as asset prices rise further and further from historic norms.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/FCrQirw;
  1. haass103_GettyImages_redeastasiamapdotslines Getty Images

    Asia’s Scary Movie

    Richard N. Haass

    A snapshot of Asia would show a region at peace, with stable societies, growing economies, and robust alliances. But, if we view history as a moving picture, we may well come to look back on this moment as the time in which the most economically successful part of the world began to come apart.

  2. roubini130_GettyImages_iphonehandstealingpiggybank Getty Images

    The Great Crypto Heist

    Nouriel Roubini

    Cryptocurrencies have given rise to an entire new criminal industry, comprising unregulated offshore exchanges, paid propagandists, and an army of scammers looking to fleece retail investors. Yet, despite the overwhelming evidence of rampant fraud and abuse, financial regulators and law-enforcement agencies remain asleep at the wheel.

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.