Forbes: Inflation Will Lead Inexecrably To Recession

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Inflation Will Lead Inexecrably To Recession

FORBES

Recession is in the cards and not because of the recent report of declining real GDP in the first quarter. That was more the product of statistical particulars than anything fundamental. A real recession looms nonetheless some months out because of the tremendous inflationary pressure confronting this economy. Only in the extremely unlikely event that price pressures lift mysteriously of their own accord can the nation avoid this unwelcome prospect. And since inflation’s roots run deep in the economy’s fundamentals, such luck is far from likely.

The recession will have one of two causes. If the Federal Reserve (Fed) decides to exercise sufficient monetary restraint — restrict credit flows and raise interest rates considerably and rapidly — it would likely shock markets and precipitate recessionary conditions, perhaps brief and mild, but a recession, nonetheless. The Fed could, of course, avoid taking aggressive action. That might delay recessionary pressure, but eventually an unchecked inflation itself would produce sufficient economic distortions to bring on a recession anyway, probably more severe and longer lasting than one induced by anti-inflation policies. One way or another, recession looms.

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