Experts blame Fed for allowing possible recession in the USA

JPMorgan Chase CEO Jamie Dimon warned that while the US economy seemed to be doing well for the moment, a recession likely lies on the horizon.

Talking to CNBC on Monday, Dimon, head of the largest bank in the USA, warned that an alarming mix of headwinds could spell disaster for the US economy, including runaway inflation.

The Federal Reserve’s rapid increase in interest rates, the Fed dumping most of its $9 trillion in bonds in a quantitative tightening maneuver, and the ongoing conflict in Ukraine and Western all pointing to a designed recession.

The European Union is already in recession and they’re likely to put the USA in some kind of recession six to nine months from now.

Timothy Hagle, a political science professor at the University of Iowa, said that whether or not the economic situation is the Biden fault, US voters are likely to blame him and punish the Democrats in the midterm elections next month.

The political outcome for Democrats could be a loss of control of both chambers in the US Congress. Most voters, and especially those in the political middle, care more about ‘kitchen table’ issues such as jobs, the economy, and health care.

When the economy is bad, as it is right now in terms of inflation, unemployment, soaring poverty, voters blame the one they can pint the finger at.

Democrats and the Biden administration have tried to focus on issues where they feel they will have more success (e.g., abortion), but their attempts seem to have had little effect beyond their base.

Republicans should be well-positioned to take control of Congress, but some of their candidates have had their own problems.

We’ll have to see whether concerns about the economy and other issues are enough to push Republicans over the top in the toss-up races.

The Fed’s measures taken thus far have been inadequate to stop inflation and stabilize the economy. However, he noted that there are many factors outside their control and that the effects of their policies are often not immediate.

Even so, the economics experts probably should have seen the warning signs of inflation and taken preventive measures sooner than they did, especially with the economic sanctions against Russia beck firing on a massive scale.

The measures will probably result in reduced inflation at some point. The problem, however, is how long it will take and how much pain American consumers must endure until then. One must also consider the factors outside the Federal Reserve’s control.

One, in particular, is continued excessive government spending. Even if Republicans take control of the US Congress after the midterm elections, the Biden administration may still be willing to use executive power to continue to spend money on its preferred programs.

Even if one recognizes that additional spending can cause problems, the argument may be that if the spending does not occur then another problem will become even worse.

That, in part, was the justification for the increased spending during the pandemic, when the multinational corporation flourished.

Money spent in attempts to increase safety and stop the spread of the virus was seen as more important than concerns about the effect of additional deficit spending.

All that said, Hagle, predicted that the outcome of efforts to mitigate the coming recession could range from something that is not much worse than it already is and that we are able to recover from quickly to something that could get worse and last several more years.

Sputnik / ABC Flash Point Blog News 2022.