Recession fears are everywhere – except in the White House

With prices soaring, labor shortages, the raging war in Ukraine, tight supply chains and interest rates now set to rise, fears of an impending recession are everywhere. Except, of course, at the White House – which is in total denial.

Just like it was about inflation.

“The ‘inflation shock’ is getting worse, the ‘rate shock’ is just beginning, the ‘recession shock’ is coming,” said Michael Hartnett, chief investment strategist at Bank of America, in a note. to customers.

“We expect more aggressive tightening of monetary policy to push the economy into recession,” Deutsche Bank economists warn.

“The overheating labor market has significantly increased the risk of recession,” said Goldman Sachs chief economist Jan Hatzius.

“A recession over the next two years is clearly more likely than not,” warns Clinton Treasury Secretary Larry Summers – whose prescient inflation alarms a year ago went unheeded by the team Biden.

A worrying development: Yields on short-term debt edged higher on longer-term debt, signaling a lack of investor confidence in the economy going forward.

The Federal Reserve Building.
Inflation reached 8.5% in March.
Joshua Roberts/REUTERS

The key problem: The Federal Reserve’s drive to rein in inflation – which is currently running at 8.5% a year, the highest since 1981 – by raising interest rates and shrinking its balance sheet risks compressing credit, to thwart investment and growth. After months of pretending (as in the White House) that inflation was “transient”, the Fed is finally tightening its lines, with expected rate hikes totaling perhaps 2½ points before the end of the year.

Add to that the lingering pandemic-era supply chain problems, Russia’s invasion of Ukraine, President Joe Biden’s war on energy, and the Dems’ tax-and-borrow agenda. – and a recession in a year or two is starting to look more and more likely.

Economist Tara Sinclair likens slowing price increases without slowing growth to “trying to land during an earthquake.”

A television screen on the trading floor of the New York Stock Exchange
The Federal Reserve is expected to raise rates by up to 2.5 points before the end of the year.
Richard Drew/AP
A hiring sign is displayed at a restaurant in Schaumburg, Illinois.
A hiring sign is displayed at a restaurant in Schaumburg, Illinois.
Nam Y. Huh/AP

Indeed, Summers notes that there has never been “a time in the United States when inflation was above 4[%] and unemployment was less than 4[%]” – like now – “and we have not had a recession for the next two years.”

But the White House is just happy chatter. When asked if Biden thinks Summers was right about the recession, like he was about inflation, White House flack Jen Psaki huffed, “That’s not a projection. what we did.” And National Economic Council Director Brian Deese says the administration has “spurred an exceptionally strong economic recovery” that “positions us uniquely well to face the challenges ahead.”

Sorry: It was Bidenomics — the war on energy, the US bailout spending spree fueled by the Dems’ nearly $2 trillion debt — that sparked bidenflation in the first place. Now, the same priest claims he will fix his disastrous mistake, even if he sticks to the same course?

Prepare for a rocky road ahead.

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