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General News

Prof. Nicholas Economides Gives U.S. Economy an A Minus

NEW YORK – Nicholas Economides, Professor of Economics at the Leonard N. Stern School of Business at New York University, discussed the solid U.S. retail sales in December and the economic outlook with China Global Television Network (CGTN) America’s Phillip Yin on January 19.

In the CGTN report, Yin noted that “we were supposed to have lower sales, but the sales came in I guess better than expected is the headline, but they were solid, so there’s nothing to cry about there, what happened to the forecasting?”

Professor Economides told CGTN: “I think that what has happened is that the consumers are running out of savings, the savings that they accumulated over COVID and then later on with a handout from the Trump Administration and the second handout from the Biden Administration, they’re running out of those savings, but at the same time what we observe and we have evidence is that they’re piling on debt, so not only they’re making more credit transactions but they’re keeping the debt for longer before paying it off so I would interpret the present strength of retail sales in that context and that means that in the longer run this is not going to… persist that eventually the consumers are going to feel the pinch of the high interest rates in credit card debt and are going to reduce their consumption.”

When asked what grade he would give the U.S. economy from A to F, Prof. Economides told CGTN: “Well, I would give it an A minus, I mean the economy is doing very well, it might have deficiencies a few months from now, a lot will depend on what the Fed does, I still hope that the Fed will cut interest rates in March, but we’ll see, okay, I’ll give it a very good grade.”

Yin then said: “Professor if you’re giving it such a good grade, why would the Fed cut rates if the economy is doing well and they’re meeting all the targets they’re trying to meet? We’ve got inflation that’s come down, they seem to be happy about that, the jobless rate seems to be healthy, they’re happy about that, you don’t cut rates if the economy is doing good, do you?”

Prof. Economides responded: “Yes, you do, I mean if you have achieved the target for inflation or you’re very close to achieving the target for inflation there is no reason to keep the interest rate so high, I mean the main reason the interest rates are so high was to cut inflation once you have achieved that, what’s the point? There’s no point to slow down the economy.”

Economides told CGTN that “we are very close to the 2% target and let’s be truthful among us, I mean even though the target is 2% the Fed can live with two and a half, so if we’re very close to that number there is no real reason to keep the interest rates very high.”

Of the U.S. fiscal balance sheet and the strength of the economy, Economides told CGTN: “It’s a very strong economy, but at the same time, it requires fiscal discipline what has happened in this administration and in the previous one is that there was no discipline, there was money spent as if there was no tomorrow, and because of that… we had inflation and the Fed had to intervene now, it was very painful… the consequence of the Fed actions were very painful, so I hope that Congress and the president will restrain themselves and spend less this year, of course, this is very hard especially this being an election year so it’s difficult but I still hope that Congress will.”

The full discussion is available on YouTube: https://shorturl.at/vwN35.

Economides also discussed the U.S. economy on ERT radio in Greek. The discussion is available here: https://shorturl.at/fijpA.

 

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