A deep dive from John Kemp at Reuters, March 8:
Recession in Europe and North America may be the inevitable price for defending freedom, resisting aggression and upholding international law in Ukraine.U.S. and European leaders now face an unpleasant choice as they decide how aggressively to use economic sanctions in response to Russia’s military invasion of Ukraine.The moral imperative is to exert maximum economic pressure rapidly on Russia to end the fighting in Ukraine as quickly as possible and repel Russian forces, which Moscow says are involved in a “special operation” with no plans for occupation.But the economic imperative is to protect businesses and employment at home, minimise the fallout for lower income households and sustain support for sanctions policies.In mid-February, top policymakers appeared to have thought they could reconcile these objectives through a carefully controlled sanctions escalation strategy exempting oil and gas trade.But that plan has broken down as a result of Russia’s slow progress on the battlefield and immense diplomatic and public pressure on U.S. and European leaders to maximise sanctions swiftly.U.S. and European policymakers must choose between imposing maximum pressure on Russia by cutting off oil and gas purchases or a more modest approach that will avert recession.
RECESSION INDICATORS
Even before the invasion, the rapid economic rebound after the pandemic was beginning to decelerate, price increases were accelerating and interest rates were set to rise.
The flattening U.S. Treasury yield curve indicated a heightened probability of a mid-cycle slowdown or end-of-cycle recession in the next year.Russia’s invasion and the sanctions that have followed super-charged these trends, disrupting supply chains, sending energy and food prices soaring and flattening the yield curve further.The financial crisis in 2008/2009 and the pandemic in 2020/2021 were demand-side shocks that could be offset by lowering interest rates, buying bonds, cutting taxes and boosting unemployment insurance.But the invasion and sanctions are a supply-side shocks that have cut the global economy’s production capacity so they cannot be offset in the same way.Boosting demand by more bond buying, cutting taxes or increasing government spending would simply worsen the production-consumption gap and fuel even faster inflation....
....MUCH MORE
Recently:
March 5
Oil Price Increases and Recessions
From Jim Bianco's Bianco Research:
Also from Mr. Bianco, November 8, 2021
Jim Bianco: "Persistent Inflation Is Going to Be More Problematic Than Everybody Thinks"
Not everybody....
"'Energy Shortages Could Threaten Social Cohesion': Germany Warns Against Ban On Energy Imports From Russia"
Fortunately people won't freeze to death but...the recession could be deep and the food supply could be short....
...It was less than three months ago that we were posting "Germany’s Reaction To The Energy Crisis Could Be Catastrophic".
Ditto for the timing of "Germany is not as stable as we think. Just ask its preppers".
But it was only 11 days ago we saw "Bundesbank: "Germany tipped into second recession by virus".
