Category Archives: inflation

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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Fighting the Last Inflation War

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February 27, 2022 — When Fed Chairman William McChesney Martin delivered his famous line about central banks, his key point was that it is their job to take away the punch bowl just when the party really gets going, rather than waiting until revelers have turned drunken and raucous. In the aftermath of the 1970s inflation, it became an item of faith that monetary authorities shouldn’t wait until elevated inflation shows its face, before reining in an overheating economy.  They are currently developing a renewed appreciation for the wisdom of this old metaphor. read more

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Inflation is Back, But the 1970s Aren’t

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November 29, 2021 — Are the US and other advanced countries experiencing stagflation?  Stagflation is the unfortunate combination of high inflation with low growth in output and employment that characterized the mid-1970s.  Are we back in that decade?

No.  At least not the US. What it is experiencing now is simply (moderate) inflation, without the stagnation part.  More like the 1960s than the 1970s.

It is true that the US headline CPI inflation rate reached 6.2 % over the 12 months to October, the highest since 1991.  Few are still forecasting an early return to 2 % , the Fed’s long-run target.  Inflation is also the highest in 10 years in the UK (4.2 %) and the EU (4.4 %), though it remains low in Japan.  12-month inflation is 4.1 % in the eurozone, the highest since a peak in July 2008.  (All these regions have lower – but still elevated — inflation rates if one uses the core measure, which takes out fast-rising food and energy prices. US core inflation is 4.6%.) read more

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