Stimulus driven US economy grows a 38-year-peak 5.7% in 2021 as deficit soars

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Stimulus driven US economy grows a 38-year-peak 5.7% in 2021 as deficit soars

In what could effortlessly mislead as a maverick upswing in US economy that had contracted 3.4 per cent in 2020 with a recession in first quarter as well, the US economy grew 5.7 per cent in 2021, the highest in 38 years, as the Government of an incumbent Biden Administration had poured trillions of dollars in pandemic aids with budget deficits hovering handsomely at record levels.

In factuality, the Biden Administration had injected a whopping $6 trillion in form of pandemic-related aids last year that followed a near-bankruptcy of the US Treasury Department twice, suggesting that a robust US economic growth in 2021 was entirely based on Government debts which might have to be paid off by the Americans’ hard-earned money over a period that could span nearly a generation, said the analysts while raising a blazing question whether the pandemic-relief related growth could be contemplated as an indicator to real Gross Domestic Product (GDP).

US Federal Reserve stated at a November, 2021, report that it had about $252.43 billion worth of reserves as of end-October apart from an $8.3 trillion worth of assets held in mortgages and Treasury Yields, painting a perilous picture while raising frets on how long the US Federal Reserve would be able to raise its debt-ceiling capacity for the Biden Administration, suggested the analysts.

Nonetheless, according to US Commerce Department data released on Thursday, the US economy grew by 5.7 per cent last year as beforementioned, while the Q4, 2021 GDP growth soared 6.9 per cent, as pandemic aids had helped offset the setbacks of a lingering supply chain crisis alongside inflation-surge.

Besides, other economic data released on Thursday had revealed that the US weekly initial jobless claims fell 30,000 to a seasonally adjusted 260,000 applications last week, as pandemic worries appear to be easing.

US economy grows faster than Chinese economy for first time in two decades

Meanwhile, as the US economy had scored the strongest growth in nearly 38 years, painting a modest economic outlook over a near term, a senior economist at BMO Capital Markets in Toronto, Sal Guatieri said, “While Omicron will lead to weaker growth in the first quarter, activity is expected to rebound nicely once the latest pandemic wave abates and supply-chain glitches ease.

Although, the US economic growth in 2021 was prodded by an injection of trillions of dollars in Government debts, it has been the first time the US economy grows faster than China in twenty years, the world’s second-largest economy which is expected to gross a GDP above the United States as early as by 2025.