Another recession is on its way and I don’t know how anyone could be bullish at this point. Supply shocks from the war in Ukraine have sent U.S. gas prices reeling from sanctions against Russia. Gas is almost at a whopping $6/gal in California and has broken a record average of $4.31/gal across the states. Additionally, famines and food shoratges will be happening worldwide due to the war. Even worse, Putin has shown no signs of stopping the war as evident from his speech today. Even if he wanted to make a peace treaty with Ukraine, it isn’t in his or Russia’s best interest politically. Putin wants to project a strongman image for himself and Russia. I believe he has invested himself too deep into Ukraine to withdraw now and make himself and his regime look weak.
This is all happening while many developed nations are experiencing unsustainable economic growth. From an American perspective (before COVID-19), the U.S. economy was experiencing enormous economic growth and a dangerously low unemployment rate as a result of the Trump administration’s tax cuts and deregulation (<4%). This low unemployment rate is an indicator of demand pull inflation, an unhealthy phenomenon that can lead to a potential recession. Furthermore, when COVID-19 hit the states, it exacerbated this problem when the fed started to print money, sending inflation through the roof. And now a hawkish fed is hiking interest rates at unprecedented levels to finally start tackling this problem. I believe that this was too late and wasn’t enough to reign in inflation. I foresee higher interest rate hikes in the future as Americans really start to hurt from inflation and the war. Additionally, Biden’s fiscal policy and foreign aid to Ukraine certainly doesn’t help with this economic crisis.
The U.S. isn’t the only ones experiencing this phenomenon. Worldwide, states are hiking interest rates to control inflation. It’s only a matter of time before this delicate house of cards we call the world economy comes crashing down.
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