US economic system Illustration: Chen Xia/World Occasions

Regardless of the rising pessimism in regards to the US economic system and fears of a possible recession, US President Joe Biden seems to be ignoring severe issues for the US economic system, together with his personal insurance policies, and solely specializing in sure optimistic elements of the US economic system forward of the US midterm elections.

Throughout a speech in San Diego on Friday, Biden signaled he hopes to talk with oil trade executives about power costs, whereas touting the newest jobs report back to show that the US economic system is rising, The Wall Avenue Journal reported on Friday.

Whereas the US president has been attempting to emphasise financial indicators which can be favorable to his document to enhance his pitch to voters within the ultimate throes of the marketing campaign, he can’t defy the truth that People are nonetheless deeply pessimistic in regards to the economic system. And their worries should not unfounded. The chance of the US economic system slipping right into a recession within the subsequent 12 months has hit one hundred pc, in keeping with the Bloomberg Economics mannequin projections launched in mid-October.

There are a lot of causes behind the potential US recession, of which the foremost one is the inflation and the Federal Reserve’s aggressive rate of interest hikes. Final week, the Fed raised rates of interest by 75 foundation factors for the fourth consecutive time. Nevertheless, latest inflation information instructed that client costs within the US stay at excessive ranges, which is principally attributed to the Biden administration’s irresponsible money-printing coverage. The scenario additionally poses a dilemma for US policymakers. The Fed wants the speed will increase to curb inflationary stress, whereas aggressive rate of interest hikes have raised the borrowing prices and are threatening to trigger job losses, rising the chance of the US economic system slipping right into a recession.

On the floor, the US economic system appears to be comparatively sturdy. The US economic system grew at an annual charge of two.6 % within the third quarter, marking its first improve in 2022 and a pointy turnaround after six months of contraction. But, a disaster could also be simply across the nook. Certainly, unemployment is mostly anticipated to surge subsequent yr on account of the speed hikes, which is a part of the explanation why forecasts for the US economic system have gotten more and more gloomy.

From the angle of the exterior surroundings, the Fed’s aggressive charge hikes have truly allowed the US to export its personal disaster to different nations, particularly these in Europe. Many European economies don’t have any selection however to observe the US in elevating rates of interest to alleviate capital flight stress, making it onerous for themselves to undertake insurance policies primarily based on their very own wants. 

In the meantime, the sturdy greenback has additionally exerted nice unfavourable impression on many creating nations, with some even dealing with insolvency disaster. By profiting from the hegemony of the US greenback, the US tried to defuse its extreme inflation and drive the world pay for its abuse of financial easing. But when the world economic system plunges into a brand new spherical of disaster, how can the US economic system be immune from these exterior shocks?

Whereas plainly Washington has been attempting to protect its place because the world’s superpower, the irony is that it has been doing precisely what could undermine its personal energy that helps its dominant energy. As an example, the credibility that the US greenback has as a world forex has been continuously undermined by its financial insurance policies. And the identical is true of the “decoupling” push towards China.

At a time when US inflation has hit a four-decade excessive, financial coordination and cooperation between the US and China would have been particularly wanted, given the truth that the Chinese language manufacturing sector has an enormous manufacturing scale and basis and that there are sturdy complementarities between the 2 economies.

However now the Biden administration has imposed varied sorts of commerce and know-how curbs on China to weaken its ties with the Chinese language economic system, which is able to in the end strike a heavy blow to the US economic system.

As an example, after the US authorities introduced a broad set of chip-related know-how export controls in October, US semiconductor corporations have reportedly bore the brunt of their authorities’s laws. Intel, one of many main US chip corporations, has reportedly deliberate its largest spherical of layoffs since 2016, whereas US chipmaking know-how provider Utilized Supplies Inc stated export restrictions to China would end in a $250 million to $550 million loss in web gross sales within the quarter ending October 30.

The US’ financial coverage has been hijacked by politics for too lengthy. With out making any significant coverage adjustments, the US economic system wouldn’t be improved essentially, which will probably be an more and more extreme problem for the Biden administration. Biden can tout his financial insurance policies all he desires, however the fact is that his deviation from legislation of economics is unsustainable. 

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