Economists at Bloomberg have determined in their probability models, that the chance of recession in the next year is 100%. This comes as the hawkish Federal Reserve is hiking rates at unprecedented levels to tame historically high inflation.
Although, many people feel as if we are already in the midst of a recession since we have already experienced two consecutive quarters of negative economic growth, which historically has indicated a recession. Alongside this, the economy is in a terrible position despite Joe Biden bragging about “positive” jobs reports. In recent months, the supposed “transitory” inflation everybody insisted has spiraled out of control into 40 year highs making basic necessities unaffordable for American consumers.
The fact that the labor market is still strong is not a good sign for the economy at this point in time. Federal Reserver Chairman Jerome Powell has said the labor market is “overheated” since they are still adding jobs and increasing wages well above the Fed’s target inflation rate of 2%. Wages are an integral component to inflation. If prices in the economy are rising, as they have been, employees will demand higher wages to compensate for this increase in cost of living. The company will make up for this increased wage expense by raising the prices on their products and passing the cost onto consumers in what is known as a wage-price spiral.
So, no Biden. It’s not good that you’re adding 10 million new jobs. It’s also not good that this administration has been fiscally spending like there’s no tomorrow to pursue their social agenda. In reference to inflationary government spending, Biden shouted at his audience like a demented nursing home patient, “I don’t wanna hear any more of these lies. About reckless spending. We’re changing people’s lives!” Again, anybody who has taken an intro-level economics class understands the relationship between government spending and inflation; fiscal stimulus expands economic activity and raises prices.
So, when Biden took office in 2021 he spent $6.82 trillion adding to our near $32 trillion dollar deficit. His administration and all the “experts” insisted that the inflation we began to see was merely transitory and would come back down as soon as the global economy began to reopen and supply chains would recover. Well, that didn’t happen. If we’ve learned anything over the past couple of years, it’s that when they say to “trust the experts” they tend to be wrong.
When inflation started to spiral this past summer, the Biden administration decided to fight fire with fire and create more inflationary spending with the “Inflation Reduction Act”. A better title would be the “Inflation Explosion Act”.
Furthermore, Biden’s disastrous energy policies have exacerbated inflation through curbing domestic oil production. The subsequent increase in gas prices started nearly as soon as Biden took office, before the war in Ukraine. So don’t let Biden fool you when he tries to entirely blame Putin for this. The conflict in Ukraine has severely disrupted global oil markets, but we would be better insulated and gas prices would be much lower if our domestic production matched that under Trump.
Now we are left with a Federal Reserve that is hiking interest rates at an unprecedented pace, that is unsuccessfully bringing down this out-of-control inflation. They are going to have to continue this aggressive path until something gives, and as forecasts are predicting, it will entail a recession.
-Macro Conservative
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