The sustainability resource of the system is limited and was set to expire at the beginning of Q4 2023, which could trigger destructive macroeconomic processes in the US.
Impact on Low and Middle-Income Households
A low savings rate, coupled with an acceleration in interest expenses on debt servicing, inevitably impacts the low and middle-income segments of households, reducing the potential for consumer spending.
Given that this group constitutes a significant portion (up to 60 - 70%) of the U.S. population, economies of scale come into play, and the squeeze on consumer spending will affect corporate earnings, leading to a slowdown in investment and hiring.
Accumulated Savings as a Safeguard
The system was safeguarded from collapse by accumulated savings, which, by the calculations, exceeded $2 trillion relative to pre-modern norms.
Starting in 2022, accumulated savings began to decline for two reasons:
Unfunded household consumption, inflated by the 2020 - 2021 fiscal stimulus, became unsustainable in the face of the 2022 economic contraction, and private sector income growth proved insufficient.
Soaring interest costs consumed the entire available buffer of disposable income to meet obligations to creditors.
As a result, only half of the excess savings have been used (over $1 trillion remains), and the rate of contraction is less severe than in the old data. Consequently, the resilience resource is higher, and the point of system failure has been pushed back from Q4 2023 to Q2 2024.
Conclusion
In assessing the macroeconomic resilience of the U.S. economy, it is evident that the limited resource of resilience has a significant impact on economic stability. The combination of low savings rates, rising interest costs, and the impact on the majority of the population underscores the delicate balance of economic forces at work.