A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

US inflation reached a four-decade high in June, with consumer prices soaring by 9.1% compared to the previous year, the US government said. It is the biggest consumer price hike since 1981 and alone is up from an 8.6% price hike in May.

The cost of necessities is rising faster than incomes. Lower income minorities have been hit particularly hard as a larger portion of their income goes to essentials such as food, transportation and housing.

The US economy will likely fall into recession by the end of 2022 as the Federal Reserve raises rates to tame prices, according to economists at Nomura Holdings Inc. 

Nomura warns that financial conditions will tighten further, consumers sentiment is souring, energy and food supply distortions have worsened and the global growth outlook has deteriorated. 

With rapidly slowing growth momentum and a Fed committed to restoring price stability, we believe a mild recession starting in the fourth quarter of 2022 is now more likely than not.

Excess savings and consumer balance sheets will help mitigate the speed of economic contraction, they said, but noted that monetary and fiscal policy will be constrained by high inflation. 

Nomura has lowered its real GDP forecast for this year to 1.8%, compared to 2.5% earlier, while the projection for next year is seen declining 1%, from 1.3% growth earlier.

The analysis comes as Treasury Secretary Janet Yellen said that “unacceptably high” prices are likely to stick with consumers through 2022 and that she expects the US economy to slow down.

Separately, Federal Reserve Bank of Cleveland President Loretta Mester said that the risk of a recession in the US economy is increasing, and that it will take several years to return to the central bank’s 2% inflation goal.

They expect ongoing rate hikes to continue into 2023, but with a slightly lower terminal rate of 3.50-3.75% reached in February, compared to the previous forecast of 3.75-4.00% in March. 

The biggest culprit is US military expenditure. US wants to be the policeman of the world.

Top 10 Countries with the Highest Military Expenditures (2020):

1. The United States — $778 billion

2. China — $252 billion [estimated]

3. India — $72.9 billion

4. Russia — $61.7 billion

5. United Kingdom — $59.2 billion

6. Saudi Arabia — $57.5 billion [estimated]

7. Germany — $52.8 billion

8. France — $52.7 billion

9. Japan — $49.1 billion

10. South Korea - 45.7 billion

US military expenditure is higher than the total military expenditures of the other 9 countries combined. US has 750 military bases around the world. They are spread across 80 nations! After the U.S is the UK, but they only have 145 bases. Russia has about 3 dozen bases, and China just five. This implies that the U.S has three times as many bases as all other countries combined.

What are the biggest internal problems in US?