US is been really good at recessions, don't see why they will escape another one.I'm still not sold on the US being recession-proof. Just because their economy is diversified doesn't mean they're not susceptible to recession. And the manufacturing that you mentioned isn't coming online until years down the track, so it's redundant when considering what's happening in the near term.
Exactly. its all they have in the toolbox, so they will bring em down as fast as they took em up.As Einsten said,. Why can't we go back to ZIRP?
Boe hikes 25View attachment 160498
Current debate in the U.K is 25 vs 50, there's not even a thought of a pause.
Boe hikes 25
For now, yes....and still neg real rates.
I'm still not sold on the US being recession-proof. Just because their economy is diversified doesn't mean they're not susceptible to recession. And the manufacturing that you mentioned isn't coming online until years down the track, so it's redundant when considering what's happening in the near term.
RE: rates, not sure where exactly CBers are going to go from here.
I take your point about the long end of the curve now playing catch up with the short end, but my gut still tells me that something will eventually break and force CBers to cut. That's based on a historical record that demonstrates rapid hikes are followed by a pause and eventually rapid cuts.
Besides, it's the only explanation IMO for why CBers are "pausing to determine the effects of hikes" - why pause if you don't think you're harming the economy? I thought the inflation dragon had to be slayed for economic and political purposes?
I suspect that CBers are privy to other data/discussions that the public aren't, hence the general anxiety with, and rhetoric for, further hikes (except for BoE and RBNZ) despite "sticky inflation".
Are you asking me in a literal/economic sense or in a political sense?A world with 5.x% interest rate after a decade of ZIRP is going to be a huge shock to growth for the world, particularly ex-US, as most companies with huge amounts of cash on hand to fund operations are American based. Why can't we go back to ZIRP?
of course they are 'recession-proof ' the government will tell the ( social ) media to shadow-ban recession references , and they will trot out corrupted economists and mathematicians with new definitions and the new government 'disinformation team will go into action as wellWell it's not about being recession proof so much as it is how much the rate rises pummel inflation vs pummel the economy. Rate rises obviously cannot contract inflation without also contracting growth but how balanced those contractions are depends on the economy. The yanks have the best balance referece rate rises pummeling inflation without the economy going to hell in a handbasket as well. Other countries are overwhelmingly tipped in the other direction. If rate rises have a much higher proportionate effect on inflation vs economic growth for the americans than other countries then this makes the U.S economy far better able to weather said rate rises (pummel inflation) without tipping into recession.
The other thing to keep in mind is the demand vs supply side of the equation. Pumping rates overwhelmingly hits the demand side. But what do you do if your demand side is already going anyway? Or if it's a supply side problem?
Comparing USA vs europe is an easy one to show with this because europe imposed a whole mountain of sanctions (cut off their supply of) russian oil that the yanks just didn't on account of the U.S not really being supplied with russian oil in the first place.
This gives europe a supply side restriction of the equation that must be balanced by restricting the demand side as well. The U.S does not have this problem - the equation is not unbalanced by russian oil sanctions because they were never being supplied with russian oil to begin with.
This is just one of many factors that enable the U.S economy to weather rate rises far better than, say, europe. There's a whole stack of others (demographics and labour supply being a huge one) but I probably don't need to write everyone a novel for them to get the point.
Neither. They're soon going to be stuck between a rock and a very hard place. Immigration is the *only* thing keeping quite a lot of economies growing/going now.
Aus is a very easy example of this - if this country depends so much on china, and china's going to hell in a handbasket, a substitute must be found or a new economic model must be adopted. Those are the only two options.
With you on this too, but what's going to give? Are we going to hit nasty recession(s) and they just let inflation run rampant in response?
There is no easy way out here.
Depends who's in power and which way the political winds are blowing. Fact is that central bank governors are appointed by politicians.
See I think it's the opposite of this bottle - jerome powell seems to be the only one really really pushing the "we're going to pummel inflation no matter what" narrative.
With the exception of NZ, all the others seem extremely hesitant to give their economies the exact painful medicine they need.
Are they perhaps all too aware of what it will mean (reference recession) if they do?
Are you asking me in a literal/economic sense or in a political sense?
Why we can/can't do something economically is a very different question than why we can/can't do it politically.
Recessions can be deflationary though. It's why the PPI has been falling in Germany and China (although the latter isn't yet officially in recession). It's why commodities have been slammed for the past year.With you on this too, but what's going to give? Are we going to hit nasty recession(s) and they just let inflation run rampant in response?
There is no easy way out here.
True, but everyone has a vested interest in maintaining political and societal stability. It was only last year that we had several labour unions striking due to wages not keeping up with inflation. That was mild compared to the events overseas where inflation was truly out of control e.g. Sri Lanka.Depends who's in power and which way the political winds are blowing. Fact is that central bank governors are appointed by politicians.
I personally think they know a recession is the only way to truly "reset" this - i.e. get the world off of ZIRP. Force a recession with higher rates, then cut back to some sort of mid level and restart QE + government spending for the "new green economy". The US already has a bunch of infrastructure spending ear-marked.See I think it's the opposite of this bottle - jerome powell seems to be the only one really really pushing the "we're going to pummel inflation no matter what" narrative.
With the exception of NZ, all the others seem extremely hesitant to give their economies the exact painful medicine they need.
Are they perhaps all too aware of what it will mean (reference recession) if they do?
Are you asking me in a literal/economic sense or in a political sense?
Why we can/can't do something economically is a very different question than why we can/can't do it politically.
I tend to often differ with you but kudos, and great postWell it's not about being recession proof so much as it is how much the rate rises pummel inflation vs pummel the economy. Rate rises obviously cannot contract inflation without also contracting growth but how balanced those contractions are depends on the economy. The yanks have the best balance referece rate rises pummeling inflation without the economy going to hell in a handbasket as well. Other countries are overwhelmingly tipped in the other direction. If rate rises have a much higher proportionate effect on inflation vs economic growth for the americans than other countries then this makes the U.S economy far better able to weather said rate rises (pummel inflation) without tipping into recession.
The other thing to keep in mind is the demand vs supply side of the equation. Pumping rates overwhelmingly hits the demand side. But what do you do if your demand side is already going anyway? Or if it's a supply side problem?
Comparing USA vs europe is an easy one to show with this because europe imposed a whole mountain of sanctions (cut off their supply of) russian oil that the yanks just didn't on account of the U.S not really being supplied with russian oil in the first place.
This gives europe a supply side restriction of the equation that must be balanced by restricting the demand side as well. The U.S does not have this problem - the equation is not unbalanced by russian oil sanctions because they were never being supplied with russian oil to begin with.
This is just one of many factors that enable the U.S economy to weather rate rises far better than, say, europe. There's a whole stack of others (demographics and labour supply being a huge one) but I probably don't need to write everyone a novel for them to get the point.
Neither. They're soon going to be stuck between a rock and a very hard place. Immigration is the *only* thing keeping quite a lot of economies growing/going now.
Aus is a very easy example of this - if this country depends so much on china, and china's going to hell in a handbasket, a substitute must be found or a new economic model must be adopted. Those are the only two options.
With you on this too, but what's going to give? Are we going to hit nasty recession(s) and they just let inflation run rampant in response?
There is no easy way out here.
Depends who's in power and which way the political winds are blowing. Fact is that central bank governors are appointed by politicians.
See I think it's the opposite of this bottle - jerome powell seems to be the only one really really pushing the "we're going to pummel inflation no matter what" narrative.
With the exception of NZ, all the others seem extremely hesitant to give their economies the exact painful medicine they need.
Are they perhaps all too aware of what it will mean (reference recession) if they do?
Are you asking me in a literal/economic sense or in a political sense?
Why we can/can't do something economically is a very different question than why we can/can't do it politically.
Bit hard to read that small writing, can you post the link to the original article?
It's a post on redditBit hard to read that small writing, can you post the link to the original article?
Mick
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?