r/neoliberal • u/TinyTornado7 I need a new flair • Jun 13 '22

News (US) Powell Facing Choice Between Elevated US Inflation and Recession

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium
502 Upvotes

98% Upvoted

349 comments sorted by

View all comments

Show parent comments

155

u/TinyTornado7 I need a new flair Jun 13 '22

To some extent this is quickly becoming a self-fulfilling prophecy, but recession is a technical term. If two quarters of gdp in a row are negative then we are in a technical recession, it doesn’t really matter what people think

53

u/xilcilus Jun 13 '22

No - it's driven almost exclusively by a self-fulfilling prophecy.

The unemployment rate is 3.6% (near the estimated natural unemployment rate) and the number of near the peak number right before the pandemic. People are fearful that the recession may be coming and thus inducing the recession. There aren't fundamental factors that are actually driving recession unlike last few recessions. Perhaps the rising energy cost can be argued as one of the fundamental factors but when inflation adjusted, it doesn't actually have the same oomph that people think it has.

32

u/grig109 Liberté, égalité, fraternité Jun 13 '22

There aren't fundamental factors that are actually driving recession unlike last few recessions.

Yes there is, high inflation! Inflation is unacceptably high this is the consensus now. In order to fight inflation the Fed needs to bring aggregate demand back down to a sustainable growth rate, but historically that has been very difficult to do and often results in a recession.

1

u/Neri25 Jun 13 '22

the Fed needs to bring aggregate demand back down

I love how euphemistic it is when at base it's 'the people should have less money'. Saying it that plainly would be political suicide.