The US economy is entering a recession after accumulating two consecutive quarters of decline

A Wall Street sign next to the New York Stock Exchange (USA), March 9, 2020. Photo: Carlo Allegri/Reuters.

The US economy recorded a decline of 0.9% of GDP in the second quarter, A number that adds to the 1.6% contraction in the first three months of the year.

in this way, Technically I entered the recession by accumulating two consecutive quarters in decline. The outlook could be even more disappointing if we add that the Fed once again raised its benchmark interest rate by 75 basis points. This is a similar size to the rise in June. Since the beginning of the 90s, such significant monthly modifications have not been recorded.

At a press conference, Federal Reserve Chairman Jerome Powell repeated a tough message. He said he would not hesitate to apply all the deflationary measures needed to bring inflation back to 2% annually. The latest price data showed a peak of 9.1. In other words: the US economic authorities are ready to generate and withstand all the slack necessary to stop the inflation process.

However, that does not appear to be entirely clear to Papal businessmen, and the reaction of Wall Street in recent weeks shows that. The Dow Jones, S&P and Nasdaq indices all gained 5-10% in July. But Technology and innovation companies in particular that felt the impact of higher interest rates in the first quarter showed an impressive recovery.

One example is the rally in Tesla shares, which accumulated in the first 28 days of July by 25%. east gathering It has allowed him to cut a large part of the fall backlog for this year.

Something similar happened with Amazon. To the rebounds of the first weeks of July was added that she presented her quarterly balance. Earnings were not in line with expectations, but the company’s revenue beat expectations. After knowing the data, in the negotiations taking place in after marketIts shares are up more than 11%.

Analysts are beginning to believe that the Federal Reserve will improve its stance and that monetary policy will adjust less than expected. In this way, the July price adjustments were interpreted. And although there was an increase of 75 basis points, the most pessimistic scenario did not happen for investment funds, which considered the probability of a rise of 100 points.

The background is that the decision to end the cycle of cheap money that began in 2008 with the explosion of mortgages Mortgagethe monetary authorities of the United States forced to face the beginning of this year Crossroads is still so far unresolved.

Raising prices too much creates crisis risks that are difficult to anticipate, due to their cascading effect on various liabilities such as corporate debt. But raising it lower could cause inflation expectations to lose all their underpinning. This is how elite North American advisors and regime critics, such as the Greek Yannis Varoufakis, put it.

Right now, they seem to be celebrating it on Wall Street They have taken the first step to start opening the crossroads and influencing the direction of the Federal Reserve. They consider the monetary adjustment to be halfway through, although it is not clear what will happen to prices and the rest of the macro variables.

See also:

The United States: a war economy against society

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