There is no recession, and yet the US and Mexico entered a recession

There is no recession, and yet the US and Mexico entered a recession

Inflation took two of the most important strategists of the US economy by surprise: the Nobel Prize winner Paul Krugman and the Secretary of the Treasury and head of the Federal Reserve 2014-2018 Janet Yellen had predicted that the multi-trillion dollar injection of money from the Biden administration to face the productive slowdown of the pandemic, it was going to reactivate the economy without affecting prices.

In the last two weeks, a true political and bureaucratic war has been established between the White House and the persistent programs with artificial money and the Federal Reserve system with the management of interest rates on the rise to reduce pressure on prices. The downside of this battle is that both sides are in conflict to deny/recognize inflation and no one seems to care about rethinking the technical discourse of the recession.

The front page of the New York Post newspaper on Friday was a slap in the face to the White House: the word re-ce-sion appears on a white background and in four lines it reproduces the dictionary definition of the word recession: “a period of economic decline period during which trade and industrial activity are reduced, generally identified by a fall in the gross national product in two successive four-month periods.” “The country is in the depths of recession.”

Even with the data of the rise in interest rates on Thursday and the information of two quarters of negative growth, the White House continued to insist on denying the recession. The argument of the Biden Government is almost traced to that of the Mexican Government: “ undocumented and homeless children (who receive government subsidies in cash) are not in a recession”, since they have the resources to spend, although inflation responds to this unproductive surplus of currency.

In the scenario of the new rise in interest rates last Thursday, inflation in the United States stood at 9.1% and in Mexico at 8.1%, with messages from the economy itself that another quarter of rising prices will come to break the two-digit barrier (10%), and gradually a process of deceleration could come, stimulated by two other foreseeable increases in interest rates that the FED would be preparing in the face of the deafness of the White House to reduce the increase in spending without productive support and just putting the bill machine to work.

The Mexican economy will be tied to the ups and downs of inflation and interest rates, and the Bank of Mexico has hinted that it will increase local interest rates at almost the same rate, in order not to establish unfair competition with US revenues that could attract speculative Mexican capital, but with much more serious internal bank interest rate ranges for investors and service users, especially those who continue to be tied to non-fixed interest rates and the millions of credit card users whose interest rates Before the hikes, it would be around 70% on average.

The Mexican economy has entered a rate of slowdown similar to that of the United States. Far, far away is the presidential commitment of an annual average of 4% of GDP, with the first two years of the administration at 2% and the last two years at 6%; the expected figures for economic growth by 2023 will be an annual average of 0% and the range of reactivation that Banco de México foresees as of 2024 barely reaches 2%.

The Mexican argument is based on the fact that the Government’s flagship works continue to work and generate jobs and salaries, social programs continue to be spread directly to a population with incomes in the poverty range, and the public budget is financed with an aggressive tax collection policy. However, the latest Mexican GDP figures for the first half released on Friday reveal a slowdown in agricultural and industrial activities and barely maintaining the activity of the service sectors that are still reactivating with many difficulties since the stumble of -8.1% of the GDP of 2020 due to the productive slowdown and mandatory confinement.

Accepting the old theory of the imposed recession, the new one that responds to governments that handle “other data”, in any case, the expectations of economic growth for the United States and Mexico will be around 1% in 2022 and 2023, with possibilities even to record negative figures. and the numbers do not hide the fact that there is a recession in both economies.

Politics for dummies: Politics hides behind the words.

The content of this column is the sole responsibility of the columnist and not the newspaper that publishes it.

Source: Debate

Disclaimer: If you need to update/edit/remove this news or article then please contact our support team Learn more

Leave a Reply

Your email address will not be published.