Former White House economic advisor and Goldman Sachs executive Gary Cohn said that the U.S. economy is in a full blown recession. [CNBC] His analysis uses predictions that the U.S. unemployment rate will skyrocket more than 10%.
Unemployment hit an all-time low in December, with rates plummeting to 3.5%. However, with layoffs exploding during the crisis, that number will undoubtedly rise. As jobs are lost, and consumers are on lockdown, a recession seems a foregone conclusion to Cohn.
The answer from the U.S. government has been massive bailout suggestions. Cohn suggests that the cost of what is currently being discussed totals in the “trillions,” and those funds will need to be borrowed.
The benefit, however, may not be enough to rally the markets. The government continues printing money, and inflation will undoubtedly skyrocket over time.
Nevertheless, Cohn suggests that the American worker needs the money in the near term. He said:
“We need to bail out American workers right now. They want to work, want to go to work if they could, are unable to, are being told to stay home and are being told not to work.”
Additionally, Cohn made it clear that the implosion of the credit market has left the economy in shambles. Any recovery, he says, will require addressing those deeper foundational weaknesses.
The problem of overspending by the government is only being exacerbated by the crisis and will have long-lasting damage. A true market recovery must address these deeper weaknesses in U.S. Treasury policy.
The problems that Satoshi Nakamoto first addressed while founding Bitcoin seem to be having their day. New bailouts are needed in nearly every sector, including state governments. Satoshi saw the need for a decentralized currency as an answer to such systems.
As the loose credit policies of the past decade continue to unwind, Cohn’s concerns mirror Satoshi’s. Deep-seated miscalculations must be addressed for long-term sustainability. Nevertheless, Cohn makes it clear that his answer now would be bailouts.