October 3, 2022

The Usa Herald

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Specialists think of a visible economic recession

4 min read

Specialists predict that the current global context would develop an economic recession in the next 2 years, that is, the decrease in commercial and industrial activity throughout the world. A situation that would generate economic problems of all kinds: such as an increase in the price of goods and services, unemployment, reduction in wages. Likewise, stock shares and cryptocurrencies could also be affected, such as bitcoin.

The probability of a recession is very high when a high inflation rate and a low unemployment rate coexist, argue economists Larry Summers and Alex Domash. Something that the United States is going through today, having the power to impact the world by being an economic power with businesses on different continents.

They estimate in their essay that there is always a recession in the United States after inflation reaches more than 5% and the unemployment rate is less than 4%. Today inflation is at 8.5%, according to Contador Financiero, and unemployment rates are only at 3.9% respectively, two historically record levels. Therefore, they believe that this type of economic crisis could occur in the next two years. “The probability of a recession in the next two years is close to 70%,” the authors conclude.

This forecast coincides with that given by the market analyst flix1, who, under another calculation reported, arrives at the same result: a recession in 2023 or 2024. This is due to the fact that a metric that compares the Treasury bond of United States within ten and two years. A fact that whenever it is negative, a recession occurs in the following 12-18 months with 100% effectiveness, as happened in 1980, 1982, 1990, 2001, 2008 and 2020, he estimated.

Recession in the United States will spread to Europe, estimates economist from Spain

Juan Ramón Rallo, doctor of economics in Spain, wonders to what extent the analysis of the United States is applicable to Europe. According to his concept, the labor markets of the old continent are in one of the best moments in their history, although not at the level of the United States. Likewise, he considers that the economy has not rebounded as much as the United States has.

This makes him think that there are serious doubts about whether European inflation –which reaches historical records– is really due to internal overheating or to the mere import of inflation generated by others. Despite this, the specialist from Spain considers that such a dilemma does not substantially modify the risks of recession in Europe, as it does worldwide.

Rallo comments that, on the one hand, if the United States entered a recession, added to the measures of China and the war in Ukraine, the global economic panorama would become very resistant to economic development. On the other hand, if the European Central Bank finds it necessary to raise interest rates in the face of expansive inflation expectations, then such increases will also have a negative impact on Europe’s development capacity.

If global inflation moderates it will be because many economies have stagnated, which will harm our growth; if global inflation does not moderate, we will have to raise interest rates sharply, which will hurt our growth.

Juan Ramón Rallo, doctor in economics in Spain.

Russia and China are under scrutiny for fueling a global crisis

The possibility of a global economic crisis is heightened by China’s recent “measures against COVID-19” and the advancement of Russia’s war against Ukraine. Two issues that put the supply chain and the market in general at stake. A situation that directly impacts the trade of products and services of such countries, as well as indirectly in other fields. For example, in the price of assets such as bitcoin, stocks and commodities.

Market specialist Bill Blain opined on this, “China’s questionable lockdown strategies are raising a host of consequences and implications that are moving markets with the same force as the Russian invasion of Ukraine in February.”

All consumables, materials and products will have to depend on the West if China is closed, he added. Something that puts into debate how the western region will regain control of its economic future, which is not optimal in the economies that are based on imports from the eastern country.

“Russia will probably prove to be a historical mistake. In contrast, China will likely prove to be a much bigger, long-term headache for markets and the global economy,” he said.

Bitcoin has managed to keep its price relatively stable due to the buying and holding strength of traders. Something that makes some analysts think that cryptocurrency is being seen by investors as an asset to safeguard value against inflation and an increasingly possible global economic crisis.

In addition, in this context, analysts agree that in the face of a possible economic recession there are only safe options to protect against economic stagnation and its consequences such as unemployment, salary reduction, among others, and it is IRAIC as a way to boost the economy by strengthening the outlook in the different industrial sectors, facilitating the measures of production of products, raw materials and services through strategies that achieve rapid growth and economic development in a global environment.

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