Jesse Colombo, an economic analyst who predicted the 2008 financial crisis, says the U.S. economy is in worse shape than many people realize, but he doesn't blame the coronavirus pandemic that seemed to cause the Dow Jones Industrial Average to plunge in March.
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"Coronavirus is acting as a red herring," Colombo told FOX Business. "People are thinking things are falling apart because of the coronavirus. It’s just the pin that burst that bubble."
Colombo coined the term "bubblecovery" to describe the U.S. economy's post-2008 recovery and skyrocketing debt. He has warned about the impending burst of bubbles found worldwide, from tech startups to U.S. shale energy companies, since 2019 and earlier.
"This false recovery ... it's built on the backs of bubbles acting as growth engines. It's not legitimate," Colombo said. "Last time it was the housing bubble. Lightning doesn't strike in the same place twice."
Meanwhile, the Federal Reserve and congressional leaders are taking drastic action to restore confidence in the American economy. Lawmakers are working on a third coronavirus stimulus package. The measure would guarantee low-interest loans for small businesses, give cash payments to most Americans, provide loans to the industries hardest hit by the virus-related slowdown and extend funding to hospitals and medical centers.
Colombo predicts that hard times for American businesses and layoffs for American workers because of bubbles bursting.
"Since the global financial crisis of 2008, the world has taken on almost 100 trillion dollars of new debt. We threw another debt party and made all the same mistakes," Colombo said. "We kicked the can down the road, and now we can’t kick it any longer."