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US economy in recession, US President Biden in denial

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
People walk outside a Costco on July 28, 2022, in Arlington, Virginia. The US economy contracted for a second straight quarter between April and June, government data showed July 28, adding fuel to recession fears in a headache for President Joe Biden ahead of midterm elections. (Photo by OLIVIER DOULIERY / AFP)

When an economy contracts for two consecutive quarters one has a recession. Recession fears for the US have been ongoing for some time, and it is here, despite denial by President Joe Biden.

One of the factors which have speeded up the decline of the economy has been increasing energy prices, which have affected the prices of all goods, from food to basic supplies, leading to inflation.

The US is currently experiencing over 9% inflation something it has not experienced in over four decades.

The American economy has been bashed from pillar to post right now by a whole range of factors.

But certainly it's going into a recession because there's severe headwinds being caused by, first of all, the government cutting back on its spending, in a ridiculous attempt to balance its budget, which it should not be trying to do in the first place.

And then high interest rates compared to what they had been in the recent past, even though they are below the rate of inflation and meaning that households and everyone borrowing and in fact, they're probably trying to bring their level of debt down.

Steve Keen, Distinguished Research Fellow, University College London

The US president has been trying to portray this as a temporary phase which the US economy will overcome.

We're not in any recession in my view, we, the unemployment rate is still one of the lowest we've had in history. It's in the 3.6 area. We still find ourselves with people investing; my hope is we go from this rapid growth to steady growth.

US President, Joe Biden

 

As things are going, especially the war in Ukraine, this is anything but temporary. The mayor of New York has painted an even bleaker picture. He has said that “We are in a financial crisis like you can never imagine. Wall Street is collapsing. We are in a recession”.

The US economy is typical of many economies around the world, especially the ones in Europe. One of the telltale signs is the price of energy, which has affected Europe so badly that economies in countries like Germany, the UK, France, and Italy, are all experiencing either GDP contractions or slow economic growth.

 

The Ukraine conflict is definitely one factor weighing down those economies; however, it would be wrong to blame the negative economic performance just on the war itself.

No, I don't think the government has done a good job because all last year this began and they did nothing because they thought it was temporary.

And you know, during that pandemic, everybody got cash out money, Including stores and all of that and so it's like, too much money floating around.

They were very late to the game. And I don't think the administration's really put it as a very high priority.

US Consumer

Consumers are being bashed by inflation running about 5% per year higher than wage rises. Now in that situation, consumers are likely to be trying to do everything they can not to spend.

Steve Keen, Distinguished Research Fellow, University College London

The US like Germany has a trade deficit, which is when companies import more and export less, a dynamic that weighs down on the GDP; the future looks bleak.

As economists are still facing the COVID pandemic, with supply chains not yet fully recovered, the US is pursuing an aggressive policy towards China, which involves a trade war.

Europe is bound to follow the US lead, which can only make matters worse for their economies.

 


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