Nevertheless, beyond the serious uncertainties regarding world trade, the slowdown in the American domestic demand is inevitable. The 2018 budget provided a budgetary stimulus approximating 1.2% of GDP according to the OECD, which largely explains the acceleration in growth from 2.2% in 2017 to almost 3% in 2018. Yet the miracles of fiscal multipliers, which so many grandstanding politicians dream of, are short-lived. Once the money is spent, growth returns to its trend, which doesn’t exceed 2% in the case of the United States, or even goes below it. We should thus not expect America to drive global growth in 2019. From this point of view, the OECD forecasts (2.7%) are very optimistic.
Yet there is a thin line between slowdown and recession. Economists sometimes refer to the aeronautical concept of stall speed: below a certain growth rate, the economy would be so vulnerable to any unexpected shock that it would easily slip into recession. However, comparisons do not always involve necessary truths, and I have too often heard that the American economy was dangerously close to this hypothetical critical speed. The arguments in favor of recessive risk have stronger foundations. For instance, Carmen Reinhart emphasizes the strong growth in debt issued by risky companies (in both directions) since 2013, and particularly leveraged loans and their derivatives (CLOs). Others point out that fewer buyers are willing to purchase riskier, below investment grade bonds, and that the latter’s price is falling dangerously, or, if you will, that the associated borrowing rates are rising just as dangerously