Author Archives: jfrankel

No, the US is Not in Recession

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A shorter version of this commentary appeared in Barron’s magazine, June 8, 2022. For a video interview, see BNN/Bloomberg, June 8.

June 9, 2022 — US consumer sentiment, by one measure, is at its lowest level since 2011. More Americans say they hear mostly negative news about the economy than hear positive news, or a balance of positive and negative.  Most remarkably, 57% tell pollsters they believe we are currently in recession versus only 21% who do not.

So, is the US economy already in a recession?  No.  People are unhappy with inflation, which has recently been running 8.3 % [CPI change, from April 2021 to April 2022].  That is the highest since 1982.  But inflation is not recession. Recession is defined as a significant decline in economic activity.  Economic activity is not falling. Quite the contrary: it has been booming.  It is worth spelling out the evidence. read more

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Get Ready for “Reverse Currency Wars”

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May 28, 2022  — The US dollar is up 12 % against the euro over the last year.  Having moved from 1.21 $/€ in May 2021 to 1.07 $/€ today, the exchange rate seems to be approaching one-to-one parity for the first time.  Europeans are not happy about it. If you think that prices for oil and other commodities are high now in terms of dollars, you should see what they look like in terms of euros.  Get ready for “reverse currency wars.”

The regular sort of currency wars featured countries feeling aggrieved that their trading partners were deliberately pursuing policies to weaken their own currencies.  The feared motive would be gaining unfair advantage in international trade.  The original phrase “currency wars” was a colorful description of what international economists had (more informatively) long called “competitive devaluations” or, when exchange rates float, “competitive depreciation.” read more

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Energy Policies Can Be Both Geopolitical & Green

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April 29, 2022 — Russia’s invasion of Ukraine has amplified the importance of national security objectives when Western nations formulate energy policy.  At the same time, they should not take their eye off the ball of reducing environmental damage and, in particular, slowing down greenhouse gas emissions.  Both goals, geopolitical and environmental, are urgent.  The national security and environmental objective should be evaluated together, rather than via separate “stove pipes.”

Some talk as if the two goals are necessarily in conflict — because, for example, fighting back against Moscow by boosting domestic US oil production would contribute to air pollution and global climate change.  But there are plenty of steps that would benefit the environment and simultaneously further the geopolitical objective.  The most obvious steps, especially for the EU, are sanctions that cut demand for imports of fossil fuels from Russia. read more

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