strain1_ STEFANI REYNOLDSAFP via Getty Images_empty restaurant economic slowdown

¿La inflación causará una recesión en EE. UU.?

May 18, 2022 Michael R. Strain

Washington D. C. – La veloz inflación en Estados Unidos oculta señales de una desaceleración económica que podría amenazar la longevidad del crecimiento actual. Aunque el gasto personal de consumo nominal creció el 3,4 % entre octubre de 2021 y marzo de 2022 (el último mes para el que contamos con información), teniendo en cuenta la suba de precios, el gasto personal de consumo no varió en términos agregados. Y las ventas minoristas ajustadas por inflación pintan aún peor: siguen igual desde marzo de 2021.

Esta desaceleración también se percibe en los datos sobre las opiniones de la gente. Una encuesta del mes pasado llevada a cabo por CNBC-Momentive halló que la mitad de los estadounidenses comieron menos afuera y más de un tercio de ellos usaron menos sus automóviles o cancelaron una suscripción mensual. La gravedad de esas reducciones del gasto puede aumentar: el 40 % de los encuestados dijo que, de mantenerse los altos precios, consideran cancelar sus vacaciones; y el 76 % expresó su preocupación porque la suba de precios los obligará a reconsiderar sus decisiones financieras.

El índice de la Universidad de Michigan sobre el ánimo de los consumidores refuerza estos hallazgos: cayó a su punto más bajo en una década (es menor incluso que en la primavera de 2020, cuando la pandemia de COVID-19 causó un salto abrupto del desempleo y una grave contracción económica).

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0 Comments on this paragraph, 8 Comments on this article

Danny Leipziger May 25, 2022

I believe Strain meant to underestimating not overestimating the difficulty of taming inflation, 5 paras from the bottom. Might wish to change if indeed it's a mis-statement.
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vic lai May 20, 2022

The US's economic recessionary tendency has less to do with domestic inflation but much more to do with the ugly aftermath of the eventual popping of some long-lasting asset bubbles prevailing in the country's virtual economy.
Today, it seems the US is coming close to another near bursting of her everything (house-stock-bond-crypto) bubble after the last Great Recession in late 2000s.
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One important origin of the US's perennial boom-bust economic cycles has already been pointed out by a book by Warren Mosler more than a decade ago, which is the widely held mistaken belief that "we need savings to provide the funds for investment."
This follows from the mistaken but popular Loanable Fund Theory widely taught in the economics textbooks.
The fact is, investment adds to savings.
This innocent fraud undermines the entire US economy, as it diverts real resources away from the real sectors to the financial sector, transforming the US from an industrialized to a financialized economy during the past decades of fast globalization.
Many of the US Congress people and political leaders have been extremely clever lawyers, but when they come to basic macroeconomic analyses, they seem to have lost all their common sense whatsoever.
So, the country's leaders always think they need more savings so that there will be more money for investment.
To accomplish this, the Congress uses the tax structure to create tax-advantaged savings incentives, such as pension funds, IRA's and all sorts of tax-advantaged institutions that accumulate reserves on a tax deferred basis.
Predictably, all that these incentives do is remove aggregate demand (spending power) in the real economy.
They function to keep the American people from spending their money to buy their output, which slows the economy and introduces the need for private sector credit expansion and public sector deficit spending, just to get them back to even.
Adding insult to injury, the massive pools of savings funds also need to be managed for the purpose of compounding for the beneficiaries of the future, and the trillions and trillions of dollars compounding in those funds are the support base of the dreaded financial sector, which is employing thousands of pension fund managers whipping around vast sums of money all the time.
Today, when the Ponzi-scheme-like game of buying back their own shares by many US listed companies financed by extremely-low-interest-cost borrowing both in the formal and in the shadow banking sectors can no longer be played, the coming eventual bursting of the everything bubble, together with the accompanying negative wealth effect, will, like the late 2000s, once again plunge the whole US economy into a prolonged balance sheet repairing recession.
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vic lai May 19, 2022

Perhaps it's now time for the US Treasury, not the US Fed, to steal the limelight of the US economic stage.
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If
(i) the US consumers' willingness and ability to spend declines too quickly,
(ii) their (real) savings also fall quickly long after the tapering of the government's free-money distribution in early 2020 (or their debts keep rising quickly),
(iii) the consumers' real wages are also falling due to accelerating inflation,
(iv) the US corporations invest less in the real economy,
(v) the US current account runs into deeper and deeper deficits as a result of the persistent strengthening of the US dollar against most other currencies,
then the country's central and local governments, the public sector, should and can deficit-spend more in response, to replenish the falling and deficient aggregate demand of the country's private sector, to help prevent the quick decline of the country's total aggregate demand, and so prevent potential recession from being realizing in the country in the foreseeable future.
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Considering the still-high inflation rates prevailing in the country, the US government should issue new bills and treasuries to absorb the extra private savings, and spend the raised funds productively in the real economy, like propping up the country's rather outdated infrastructure system, or broadening R&D spending.
This time, the Fed should stay behind the curtain, and should no longer accommodate the Treasury's increased deficit spending through new QEs (aka new money printing), so as not to exacerbate the problem of inflation in the country.
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- vic lai May 19, 2022
  
  Another reason the US Fed should take a minor role in this new Hollywood film is that, the current flight-to-safety capital from the other countries that are now being repatriated back into the US, as shown by the increasing strength of the US DXY, will also help finance the US Treasury's new deficit spending, and so there's no need for the Fed to keep monetizing the Treasury's deficit spending (indirectly through QEs) in a inflationary-prone manner.
  - vic lai May 19, 2022
    
    But this time may be different, thanks to the US's freezing or confiscating of Russia's private and public US$-denominated assets as a result of the Ukraine War, which violates the traditional belief of the sanctity of international private property rights in doing so, inducing less and less foreign capital to flow to the US during the current global US-dollar repatriation cycle.
    Also, some expected European capital outflow into the US, again as a result of the Ukraine War, has been diverted to China, partly in the form of China's FDIs.
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    A larger part of the incoming foreign capital in America has got wiser as time goes by, and refuses to support the country's bubbling stock and bond markets, and prefers to stay simply in the US's commercial banks earning simple interests instead, thereby causing the several rounds of rather large market corrections in the country's stock markets even before the US Fed has finished hiking the interest rates.
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    - vic lai May 19, 2022
      
      Recently, Steve Hanke's argument on the internet that the current inflationary storm that's been hurting the US, was mainly manufactured by the Biden Administration in Washington DC in early 2020, and that the storm has also been strengthened both by the supply bottlenecks and by the energy and food shortage coming from the US's sanctions imposed against Russia due to the Ukraine War, reminds me of similar arguments put forward by Milton Friedman many decades ago, when he argued correctly that the persistent inflation problem then was mainly manufactured by the US central government (say, both by President Johnson's big welfare program and by the financing of the Vietnam War).
      A person who are old enough always feels that there's nothing really new under the sun.
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      The more things change, the more they remain the same.
      Today, half a century after the 1970s, we still observe the same cause of inflation in the US --- too fast increase in the money supply, measured by M2, as a result of the Biden Administration's well-intentioned over-reaction to the painful aftermath of the pandemic which broke out in the country in early 2020.
      The "independent" Fed then had helped finance around 90% of the government's increased free-money-distributing deficit spending at that time, and this unfortunate major MMT experiment in recent times (monetization of the government's deficit spending) was the root cause of the 12-to-24-month time-lagged inflation storm in the US.
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      Tax increases, as always suggested by MMT, can obviously much weaken the inflation storm, but is obviously politically incorrect for the incumbent Administration to use this medication.
      The appreciation of the US dollar can also reduce the inflationary pressure (or increase the deflationary pressure) in the domestic economy.
      Another way out is for the US Treasury to issue new bills and bonds to absorb the overflowing money supply in the economic bathtub, and store the extra water in another bathtub, like the Treasury's savings account in the Fed's balance sheet (the Treasury General Account, TGA), to be used wisely by the federal government to finance her own increased deficit spending when the recessionary monster, if any, starts to rear its ugly head in the US in the future.
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      - Tad Furtado May 20, 2022
        
        Great theory but Biden wasn’t sworn in till 2021.
        
        vic lai May 21, 2022
        
        I'm sorry, both Trump and Biden administrations responded to the COVID-19 crisis with over $5 trillion of relief spending.
        This benevolent overreaction to the country's fall of both GDP and wage income then shows once again that the road to hell is paved with sincerity.
        
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