Despite the White House’s continuous claims that “Bidenomics” is working successfully to benefit the economy, fears remain high that a recession could be right around the corner due to a sharp rise in inflation, interest rates, and market uncertainty.
The Pandemic’s Impact
The strain on the U.S. economy began in 2020 due to a number of factors, especially when the COVID-19 pandemic prompted government lockdowns and mandates.
The U.S. Congress spent trillions of dollars on keeping the economy and stock market afloat.
Unprecedented Money Creation
Additionally, policies set by the Federal Reserve led to money creation at unprecedented levels.
Government Spending and Inflation
Subcommittee Chair Rep. Brad Wenstrup (R-Ohio) claimed that the “massive growth in government spending” — referring to the $4.6 trillion spent on the U.S. Covid-19 response — is ultimately what caused the inflation the U.S. is seeing today.
Low Interest Rates
Meanwhile, the Federal Reserve kept interest rates extremely low during the pandemic, despite economists warning that this, coupled with an increase in government spending, could later trigger a recession.
Efforts to Curb Inflation
In 2022, the Federal Reserve also began raising interest rates again in order to undo the damage caused by the pandemic and to tame inflation.
In terms of monetary policy, inflation reached a 40-year-high in mid-2022. As of September 2023, it remains above the Federal Reserve’s target of 2%.
Inflation Impact on Consumer Goods
The inflation rate has now dropped, but not enough to “deflate” prices. Consumer goods, gas, rent, and housing prices remain much higher than before the pandemic.
Falling Money Supply
Additionally, the U.S. money supply has fallen at an unprecedented rate, which is another potential issue for curbing inflation.
Impact on American Families
The lower money supply prompted by the Fed’s policies and the Biden Administration’s spending has significantly strained American families.
More Americans are reportedly dipping into their savings and depending on credit cards to cover basic living expenses, leading to consumer debt reaching new heights.
Government Spending Dilemma
Meanwhile, Congress and the Biden Administration are attempting to reach a deal on government spending.
An agreement will need to be reached soon for there to be any improvement in prices and inflation. Otherwise, the U.S. could be headed for another massive economic crisis.
Reasons for Recession
A recession is still likely—and coming soon. Fortune laid out six reasons why.
When everyone expects a soft landing, brace for impact. That’s the lesson of recent economic history — and it’s an uncomfortable one for the U.S. right now.
Fed’s Role and Interest Rates
One reason is simply the way forecasting works. It typically assumes that what happens next in the economy will be some kind of extension of what’s already happened — a linear process, in the jargon.
But recessions are non-linear events. The human mind isn’t good at thinking about them.
The U.S. economy faces numerous challenges, from unwinding pandemic savings to soaring interest rates and oil prices.
These factors, combined with the uncertainty surrounding government spending and other global economic issues, paint a worrying picture.
While a soft landing remains possible, history and data suggest that a recession might lurk just around the corner, and the nation should prepare accordingly.
Bracing for It
Many Americans have been taking action in an effort to ‘brace themselves’ for a recession that could be worse than the Great Depression.
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