Global recession the way Adam Tooze says it

Central banks around the world are trying to tame rising inflation by raising interest rates and tightening monetary policy.

On Wednesday, the US Federal Reserve raised its key lending rate at 75 basis points for the third time in a row, as it continues to battle against higher prices.

The Bank of England followed the Fed’s moves on Thursdayraising interest by 50 basis points, and the European Union signaling that it is likely to follow a global wave of aggressive inflation policy action.

The Fed’s aggressive rate hikes have fueled fears of a US recession But Columbia University economics professor and “the leading historian of money and internet disaster,” Adam Tooze, believes that a similar and “simultaneous” rise of central banks around the world could trigger a global economic downturn.

There is a “very serious” risk of a global recession,” Tooze said The Guardian in a interviews on Thursday.

The economist did a name of himself during the pandemic through his widely read newsletter, Chartbook, and his data-driven predictions of the future of the global economy, always accompanied by a historical perspective of what could be. an economic disaster in the future.

In his interview with The GuardianTooze warned that the current wave of rate hikes could play a role in fueling that catastrophe, saying hundreds of millions of lives around the world could be upended by a global economy.

“It will mark people’s lives for the rest of their lives,” he said.

Failures of technocrats

Despite their best efforts, the world’s economic authorities seem to be increasingly resigned to the fact that inflation cannot be prevented without causing recession.

Last month, Federal Reserve chairman Jerome Powell warned that the central bank was ready to “bring pain” in the economy to lower inflation. And after Wednesday’s rate hike, he admitted that the chances of avoiding a recession are “will likely decrease,” and an increase in unemployment is likely on the way.

“We need to get inflation behind us,” he said. “I wish there was a painless way to do that. Nothing.”

But the monetary tightening action taken by Powell and other central bank leaders today may not be remembered in a positive light, according to Tooze, who says future economic textbooks will record this period of economic policy as a “classic instance of failed technocracy.”

This is not the first time Tooze has discussed his concerns about where the world economy is headed. In a Interview in Julyhe describes the wave of monetary policy tightening around the world as part of a coming global “polycrisis,” in which several crises combine to create a unique and unprecedented threat to global economy.

“The whole is more dangerous than the sum of the parts,” he warned.

Inflation that forces central banks to curb demand is compounded by other challenges – including climate change, extreme weather, economic aftershocks of the pandemic, and a higher probability of explosions. war – to create a larger and interconnected crisis consisting of many self-reinforcing parts, he said.

But with successive interest rate hikes, the risks of a global recession may be the more imminent threat.

Tooze’s concern over the relentless rise in charges from every corner of the world is shared by investors and bankers.

The Fed’s latest rate hike may be “unnecessary” and a “policy mistake,” Jay Hatfield, CEO of investment firm Infrastructure Capital Management, said. told luckby Will Daniel this weekadding that the Fed’s stance “will increase the risk to the economy.”

Wall Street also did not take the Fed’s policy measures well, which has all three major stock indexes fell after the latest hike.

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