U.S. Economy Faces Major Risks, 2025 Could Be a Turning Point: Richard Roberts Sounds the Alarm

（原标题：U.S. Economy Faces Major Risks, 2025 Could Be a Turning Point: Richard Roberts Sounds the Alarm）

With a new administration in place, the U.S. economy reaches a critical crossroads. After a post-pandemic recovery fueled by policy-driven growth, policymakers，investors and the public alike are asking a pressing question: How much longer can this economic boom last? Or is a looming crisis hidden beneath the surface of prosperity?

In this context, Wall Street Frontline interviewed former Federal Reserve Credit Risk Director Richard Roberts, who stated bluntly: "We are at a pivotal juncture. The bubble of artificial growth that has persisted for years is now impossible to ignore. 2025 could be the year of reckoning." Roberts highlighted the challenges posed by massive fiscal deficits, overvalued asset markets, and the uncertainties surrounding the incoming administration’s policies.

From shifts in the labor market and inflationary risks to the potential impact of President Donald Trump’s new policies and escalating geopolitical tensions, Roberts dissected these interconnected factors and delivered warnings that starkly contrast with mainstream optimism. He questioned the sustainability of the current economic growth and described it as "policy-driven prosperity that cannot endure." 

Roberts also criticized the Federal Reserve’s 2024 rate cuts as "premature and misguided" and predicted a shift in focus for 2025 toward inflation control and addressing overvalued financial markets. The full interview follows below.

Wall Street Frontline: The first question is about New Year’s economic outlook. What is your view on the 2025 U.S. economic outlook? And what are the risks that you think would likely to happen in 2025?

Richard Roberts: As we look ahead to 2025, I believe that the U.S. economy is at a critical juncture. We've been living in a bubble of artificial growth, and the underlying vulnerabilities are frankly becoming impossible to ignore. For years, we've relied on stimulus-driven growth, massive fiscal deficits, now, in my judgment, frothy or inflated asset markets. And 2025 could be the year that reckoning begins.

Wall Street Frontline: What data are you depending on? And what is the weakest, most vulnerable part in the stock market?

Richard Roberts: So, you know, we're facing a perfect storm of risks. Let's say it that way. We have unsustainable budget deficits. We have a labor market that's gradually loosening, but still shows some pockets of tightness. And we have asset markets, as you mentioned, the stock market, for example, that are becoming dangerously disconnected from fundamentals. And then, of course, on top of that, we have a new president and his policies that are near certain to be implemented, given that his party controls Congress, the Republicans. And we have a meaningful set of geopolitical tensions out there. So we have, you know, a lot of things, a lot of risks out there on the horizon that could lead to trouble for the U.S. economy.

Wall Street Frontline: You just mentioned that the labor market is gradually loosening, but also there are pockets of tightness. So can you just elaborate a little bit more on this? And what does this mean for the whole U.S. economy?

Richard Roberts: Yeah. So, you know, while the labor market has cooled from its post-pandemic high, the unemployment rate has risen to 4.3 percent, and job openings have fell a bit to, I think, just below 9 million. Wage growth remains elevated above 4 percent. I think most recently it came in at 4.1 percent, if I'm not mistaken. And this suggests that residual tightness in key sectors like health care, construction, et cetera, continue to fuel inflationary pressures. And I'd say, you know, add to those pressures the potential for, and this relates to President Trump's upcoming policies that will likely be implemented. If we add to that picture the potential for restrictive immigration policies, which could worsen labor shortages in industries that rely on immigrant labor, farming, the hotel industries, for example, and the risk of wage-driven inflation become even more pronounced.

Wall Street Frontline: So it sounds like because of the immigration restrictions and also Trump's 2.0 new policies, these added together may pose a risk on inflation. So how significant is the risk of inflation picking up again?

Richard Roberts: I agree. I mean, remember, we have this general set of problems that I mentioned up front, these risks,  and they're concerning in and of themselves. But on top of that, as you correctly point out, we have President Trump's policies forthcoming, and they could exasperate an already fragile situation. We have the risk of aggressive tariffs that could ignite trade wars, disrupting global supply chains and pushing prices higher. We have, as I mentioned earlier, restrictive immigration policies could worsen labor shortages, driving up wages and inflation. And importantly, and this doesn't get mentioned often, but remember, Donald Trump is all about sweeping in regulatory changes to remove some of the oversight and burden that he says regulatory agencies pose to Americans and American businesses. So we don't know what that's all about. And this uncertainty in the market creates stifles investment and long-term growth. If you're not sure what the changes are going to be, you kind of sit still. So all this stuff together, those initial problems I mentioned, plus Trump's policies on tariffs and immigration, plus the unknown about the loosening up on the regulatory front, really make for a set of issues that amplify the risk of a potential financial problem in the U.S. economy.

Wall Street Frontline: Some financial institutions such as Goldman Sachs, have predicted that U.S. GDP growth in 2025 will be 2.5 percent, which is above the 1.9 percent consensus. And they have also noted that the fears for recession or financial crisis are actually diminished. But as you just pointed out, you kind of fear that a financial crisis is actually approaching, right? What has caused this divergence or different opinions on the market?

Richard Roberts: Of course, economists don't agree on much. In terms of rapid growth projections by others, certainly we've been growing strongly for a long time. My point is, and this may continue for a bit, right? But this growth is artificial growth. It's driven in this bubble of uncertainty. The underlying vulnerabilities are becoming impossible to ignore. The things that I mentioned earlier, certainly the massive fiscal deficits we've been running, driven partially by the post-COVID excessive fiscal policy, the easing in monetary policy in general over many years, although the Fed tightened eventually to fight inflation there. But these have all created this bubble, in my judgment, of growth, of artificial growth. And we shouldn't forget about that, that what's driving these growth estimates importantly are these artificial factors. And at some point, there's a risk that these factors, combined with some new things folding in, geopolitical tensions, the new Trump policies, including taxes, immigration issues, as well as regulation, they could all mix together to cause a potential pretty big problem in the U.S. economy. And I think we should start thinking about it and be prepared to be nimble as policymakers, nimble to react to it quickly should such a crisis, if you will, develop.

Wall Street Frontline: The Federal Reserve cut the rates three times in 2024, a total of 100 BPS. In our previous conversation, you've criticized the Federal Reserve's recent rate cuts. Why do you think these were a misstep?

Richard Roberts: Those decisions to cut rates in a relatively strong economic environment with a buoyant labor market was a mistake. They jumped the gun too early. And then in my opinion, instead of realizing the initial cut was a mistake, the labor market data were not as bad as they suggested they might be. They continued with additional cuts, maybe fearing that they would look wrong in the marketplace instead of making the correct decision to just pause. But they added a couple additional cuts to it. And I suspect now that given the strong economic growth projections, you mentioned many economists see the economy growing above trend next year. Actually, I do, too, unless all these issues that I mentioned today go together in that pot of trouble that we're talking about and create some sort of a major downturn in the economy and the domestic and global financial markets.

Wall Street Frontline: So based on your work experience inside of the Federal Reserve system, what is your prediction for the Federal Reserve's next move? And also, what do you think they're going to do in 2025?

Richard Roberts: Yeah, I'd be very surprised if we see additional rate cuts from the Federal Reserve early in 2025. I think we're in a holding pattern for now. I believe the Federal Reserve is becoming increasingly concerned about the inflationary pressures, the frothy, if you will, said differently, overvalued equity indices. And I think we will just sit tight. On the frothy stock market note, I'll mention that Lisa Cook  recently gave a set of remarks that pointed to her concern about the elevated levels of the stock market. And she's a major voice in marketplace. And I suspect that those comments were approved by Chairman Powell before she went out and made them. So this tells me that the Fed is increasingly concerned about the frothy markets and related inflationary pressures.

Wall Street Frontline:  So you've also drawn some parallels between the current situation and the past financial crisis. So how is the current situation similar or different from the history? And what lesson did you learn from past history?

Richard Roberts: Yeah, that's a great question. Of course, I was around during the dot-com bubble, the 2008 financial crisis, as you know. And what's different today is the scale and interconnectedness of the risk. We're dealing with unsustainable deficits, overvalued asset markets, geopolitical instability, new major changes in national policies coming in on the coattails of President Trump. We're dealing with all these issues at the same time. And it really makes for a risky set of challenges that we face today. And they're uniquely complex. The global implications are profound. Any U.S. downturn or volatility, heightened volatility in the financial markets would certainly ripple across the world, affecting trade partners, emerging markets, and other financial systems globally.

Wall Street Frontline: What would a U.S. financial crisis mean for the rest of the world？ How should countries—particularly China, prepare for the potential U.S. economic fallout?

Richard Roberts: Yeah, the U.S. financial crisis would have far-reaching implications, consequences for the global economy, certainly. For China, the impact would be significant. Escalating trade tensions with the U.S., related possibly to tariffs, could disrupt supply chains, reduce export demand, weigh on China's growth. And at the same time, higher U.S. interest rates, should they occur, could lead to a stronger U.S. dollar, creating stress for emerging markets with dollar-denominated debt.

So China would need to, and I'm sure they're on top of this as a major world economy, would need to navigate these challenges carefully, focusing on stabilizing domestic demand, strengthening its resilience to external shocks. Certainly China has a critical role to play in stabilizing the global economy. But China should, as I mentioned, focus on strengthening domestic demand and enhancing their overall financial resilience.

Wall Street Frontline: I would like to go back to the Federal Reserve system. The Federal Reserve’s dual mandate is to achieve maximum employment and keep prices stable. So right now, which one do you think is going to be the priority for the Federal Reserve?

Richard Roberts: Good question. I think we're going to shift to, we temporarily and incorrectly, in my judgment, had moved our focus from inflation to the labor market. I think certainly the Federal Reserve is sending signals that, if anything, they're more balanced now. And frankly, behind the scenes, I'm fairly confident they have a special eye on inflation, which shows some signs of stabilizing at levels above the 2% average, long run average target rate.