This past week, the US published its first estimate for the 4Q24 GDP growth. It came below expectations at 2.3% (vs 2.7%). It might be signaling a gradual slowdown in the economy, dangerously paired with a slight increase in inflation. The Fed, unlike the ECB, which is also seeing the slow down in the EU economic activity, has not decided to lower rates, because the labor market is still doing well. At some point, however, this slowdown will permeate into the jobs market. But perhaps the most important conclusion from the report, combined with the budget deficit and the debt increase during 2024, is that the U.S. economy is basically growing on borrowed money. As you can see in the chart below, for the U.S. economy to generate $1 of GDP, it needs $5.8 of new debt. This is unsustainable for any economy, and, if not corrected, will have serious implications for the US dollar, and the national debt. Coincidentally, gold has been ramping up, crossing into new all time highs, and that’s not by chance. Investors are realizing through economic data like this, that the U.S. is playing with fire, that it needs to decrease the need on debt, while at the same time, increase productivity, and that’s a very complicated task to be done simultaneously.
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