22.09.202009:51 Forex Analysis & Reviews: US is recovering to pre-crisis levels

The United States is on its way back to pre-coronavirus crisis levels, thanks to the recovering stock market, as well as massive federal aid that have returned the net worth of US households to its previous levels. According to reports, both savings accounts and stock portfolios have risen sharply in the second quarter.

The latest survey of the US Federal Reserve indicated that the rapid mobilization by the central bank and US authorities created a temporary safety net for much of the economy.

The Fed said that by the end of the second quarter in June, household net worth - the value of homes, investments in stocks and other assets minus the amount of mortgages and other loans outstanding - had reached $ 118.9 trillion, up by $ 7.6 trillion than in the previous quarter. Compared to the last quarter of 2019, it has risen by more than $ 118.5 trillion.

Wealth was also boosted by about $ 700 billion in terms of household and non-financial enterprise savings, many of which benefited from increases in unemployment benefits.

The flow of aid also helped control household debt levels, which rose just 0.5% year-over-year, the smallest increase since 2012.

Non-financial business debt also rose rapidly in the second quarter, after the launch of the Small Business Loan Wage Protection Program. As a result, total corporate debt rose annually by 14%, from $ 16.96 trillion to $ 17.56 trillion. Nonetheless, non-mortgage bank loans to businesses fell sharply.

At the same time, outstanding corporate bonds also rose approximately $ 425 billion, amounting to nearly $ 6.4 trillion.

Although the data does not tell exactly what will happen in the future, many economists are worried about the expiration of the lending program, as well as additional unemployment insurance payments mandated by the coronavirus aid. They believe that losing these programs will damage the recovering economy.

Meanwhile, the Congressional Budget Office says that the high government spending has increased the US budget deficit, thus, debt will almost double by 2050, accounting for approximately 195% of the country's output, from approximately 98% at the end of 2020 and 79% in 2019.

Annual deficit is projected to be 16% of US GDP in 2020, and its share will decline for several years, but will start to rise sharply again by 2028.

By 2050, the annual deficit is projected to be 17.5% of GDP, as a result of higher spending on health and welfare programs.