Economy & Business

America Braces for “A Recession Like No Other”

The U.S. economy is already deteriorating because of humongous fiscal and monetary cliffs. These cliffs are now being compounded by the war in Eastern Europe and near-record-high inflation. And the Fed’s “Put” is much lower and smaller in size than Wall Street believes.

The war in Ukraine will exacerbate the negative supply shocks that are already in place due to COVID-19. Worsening bottlenecks will combine with rising inflation to produce a contraction in global growth. Russia produces 12 percent of the world’s oil supply and exports 18 percent of the world’s wheat consumption, while Ukraine accounts for 25 percent of global wheat production. Sanctions and war will serve to slow the economy further and send prices for these vital commodities even higher.

But the upcoming recession will be extraordinarily unique. Not only will it occur while inflation is at a multi-decade high, it will be the first U.S. economic contraction to take place while the Federal Reserve had its target interest rate at or near zero percent. For comparison, look at how much room the Fed had to reduce borrowing costs during previous economic contractions. Read more…

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