Recessionary Pressures Mount Across the Nation
Nearly half of the United States is now in or nearing a recession, according to data compiled by Kobeissi Letter and supported by figures from Moody Analytics. Twenty-three states are currently experiencing economic contraction or face a high risk of entering such territory. These states collectively contribute approximately one-third of the nation's economic output, indicating a significant deterioration that has advanced since September, when the count stood at twenty-two jurisdictions. Michigan was recently added to the list of states facing contraction.
Regions across the Midwest, Northeast, and Northwest are experiencing heavier economic pressure. States such as Washington, Oregon, Montana, Wyoming, South Dakota, Minnesota, Iowa, Michigan, Illinois, Virginia, Connecticut, and Maine are highlighted in red on the economic map cited by Kobeissi Letter, signifying contraction. In contrast, states like Texas, Florida, Louisiana, Arizona, North Carolina, and Georgia are demonstrating moderate economic expansion. Large economies such as California and New York are advancing without the momentum seen earlier, and economist Mark Zandi has warned that a worsening of conditions in these states could potentially pull the entire country toward a deeper recession.
America’s reality: Asset owners are living in the best economy of their lives. Everyone else feels like we are in a recession. There are 2 economies in the US: Asset owners versus everyone else.
Moody Analytics has recorded a sharp concentration of wealth, with the top 10% of the population controlling nearly two-thirds of the nation's net worth, while the lower half of the population holds less than 3% of national wealth.
Wealthy Households Strengthen Portfolios As Lower-Income Families Depend On Credit
Households that possess investment portfolios, benefit from rising real-estate values, or have business equity are gaining from the upward movement in financial markets. Conversely, families with modest earnings, who dedicate most of their spending to essential expenses like rent, insurance, utilities, and food, are facing an environment where prices are not declining and wages are not providing relief. Ted Rossman from Bankrate has described an economy with visible progress for higher earners and a more challenging setting for households primarily focused on basic consumption.
U.S. household debt has reached $18.59 trillion this year, with a significant reliance on loans for cars, education, housing, and other essential expenses. Experian estimated total household obligations at $17.57 trillion during the third quarter of 2024, marking a 2.4% annual increase. The average amount owed per consumer exceeds $105,000. Millennials held the highest average balance at $371,864, largely due to mortgages, while Generation X led in non-housing debt with an average of $68,038.
Recession, Inequality, And The Dual Outlook For Crypto Assets
The current economic landscape, characterized by nearly half of U.S. states being in recession, extreme wealth concentration where the top 10% holds two-thirds of national wealth, and record household debt exceeding $18.5 trillion, presents a complex macroeconomic backdrop with mixed implications for crypto investors. In the short term, the erosion of purchasing power among middle- and lower-income households, coupled with rising unemployment claims and widespread layoffs, is dampening demand for risk assets like cryptocurrencies.
Furthermore, the Federal Reserve's cautious approach to cutting interest rates, driven by persistent inflation, is strengthening the U.S. dollar and reducing the appeal of non-yielding assets such as Bitcoin, thereby exerting downward price pressure on the cryptocurrency. However, this same economic environment can fuel distrust in traditional financial systems, potentially driving increased interest in decentralized alternatives.
Investors who possess liquidity and maintain a long-term investment horizon may find opportunities to accumulate positions at lower prices. Additionally, practical cryptocurrency applications, such as stablecoins for payments or DeFi protocols for savings, could gain traction in recession-affected regions.
Should the economic slowdown deepen and significantly impact major economies like New York or California, leading to sharper contractions, the Federal Reserve might be compelled to pivot its monetary policy sooner than anticipated. Such a pivot could involve injecting liquidity into the market, which would likely benefit crypto markets considerably. Therefore, while near-term risks are prominent, structural shifts and potential policy reversals could foster favorable conditions for digital assets in the medium term.
The information presented in this article is for informational purposes only and should not be interpreted as investment advice. The cryptocurrency market is highly volatile and may involve significant risks. We recommend conducting your own analysis.