There’s a famous Sanskrit verse, “Vinaash kaale viprit buddhi” meaning ‘as one’s doom approaches, his intelligence gets killed.’ And this perfectly applies to demented Biden. The American President Joe Biden has taken it upon himself to destroy the American economy.
His policies will leave 11 million Americans jobless. Yes, 11 freaking million.
Biden-made recession
In the first quarter of 2022, the US GDP shrank by 1.6% on an annualized basis and then shrank by 0.9% in the second quarter. The standard approach to determine a recession is two consecutive quarters of economic contraction or dropping real GDP levels.
Since the end of World War II, every US recession has been characterised by a decline in the GDP and an increase in unemployment. But this time is completely different.
This recession is Biden-made.
Biden took the helm on his first day in office and made a sharp left turn. He so made the economy blow in the wind.
Biden has appeased his far-left supporters while leaving the rest of America holding the bag by cancelled pipelines, threatening the extinction of American energy companies, blocking drilling leases, and creating a hostile atmosphere for businesses.
Federal Reserve has aided Biden in his dirty deeds.l
In May, the inflation in the US hit 8.6%, one of the highest rates in the world. Numerous factors that contributed to inflation last year, including supply disruptions brought on by Covid and increased food costs as a result of harsh storms and drought that hampered harvests.
Federal Reserve in order to counter the inflation raised interest rates. The Fed has raised benchmark interest rates four times this year, with the fed funds rate now set in a range between 2.25%-2.50%.
However, the monetary tool to reduce the interest rates is deeply flawed as the inflation that US faces is driven by supply-side constraints and not demand factors. Complicated, huh?
The basics
Well, when the aggregate demand exceeds that of aggregate supply, the inflation caused is demand-side inflation and the opposite is supply-side inflation. When the economy is facing demand-side inflation, then the monetary tools like reducing the interest rates work, but when the economy faces supply-side constraints as the US does, it doesn’t respond to rate cuts.
Rather, the rate cuts make things worse in a demand-side caused inflation. Fed Reserve has aimed to reduce the inflation to 2%. However, it’d result in millions of mass layoffs and increased unemployment.
12 million jobs to be exact!
Also Read: US awaits a recession. A prolonged and painful one
Federal Reserve Chair Jerome Powell said, “What we hope to achieve is a period of growth below trend which will cause the labor market to get back into better balance and that will bring wages back down to levels that are more consistent with 2% inflation over time.”
However, the assumption by Fed Reserve is profoundly fallacious.
In a paper published by the Brookings Papers on Economic Activity by macroeconomist Larry Ball of Johns Hopkins with co-authors Daniel Leigh and Prachi Mishra of the International Monetary Fund, the conclusion is scary. It concludes, “To bring price increases down to 2%, we may need to tolerate unemployment of 6.5% for two years.”
Yes, that’s how Biden plans to deal with the high inflation. By making people jobless! i.e, by destroying demand.
The unemployment rate stands at the moment: 3.7% and 6 million workers are unemployed right now. In the US, a 6.5% unemployment rate in 2024 would result in no almost 10.8 million jobless employees, i.e, an increase of 80% from the 6 million there are today, assuming a decent increase in the labour force.
So, Biden’s partnership with Fed Reserve is only going to make things worse for America and its people. Homelessness, joblessness, and uncontrolled inflation will make the lives of American citizens hell in the next two years. All in all, Biden is clearly not the solution to this economic travesty fallen on the US.
