Bridgewater Associates examines why the US economy remained resilient despite aggressive monetary tightening, focusing on income, borrowing, and savings. Private borrowing collapsed and household dissaving faded, yet accelerating income growth kept spending firm, suggesting higher rates alone had not been enough to break the expansion.
Breaking Down the Sources of US Economic Resilience
Bridgewater
Shane Murphy, Karen Karniol-Tambour
Article
1 Pages
Key Takeaways
Income Sustains Spending: Households represent about three quarters of the economy, and accelerating incomes kept demand consistent with a healthy expansion despite tighter financial conditions.
Credit Support Reverses: Borrowing and dissaving shifted from a peak 10% contribution to nominal growth to roughly a 2% drag as monetary tightening took hold.
Treasury Supply Pressure: T bills were approaching the Treasury’s recommended 15% to 20% range of marketable debt, potentially shifting future financing toward longer duration issuance.
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