The geopolitical events that are unfolding across the globe are not unprecedented, but we have not seen anything like this in over half a century. There are many factors at play in favor of recession, and I will touch on a few – inflation, oil, geopolitical uncertainty.
Inflation was a problem before this Russia/Ukraine war started. The covid-19 pandemic triggered massive production problems, and these were exacerbated many times over by supply chain issues and labor shortages. At the same time, people were traveling less and spending less, so when the government began sending out stimulus checks before passing the $1.75 trillion spending package, inflation ensued. Personally, I thought we had reached a peak of 7% inflation in December, but when inflation hit 7.5% in January I thought we were in for a recession. This was before Russia entered Ukraine and, as of today, the US banned imports of Russian oil. Oil prices have just hit an all time high, and we haven’t even seen the impact of losing oil imported from Russia. None of this accounts for the fact that the Federal Reserve will likely raise interest rates this month, and may continue to do so this and next year.
Extreme uncertainty, fear, and rapidly rising costs across almost every aspect of American life, have all the makings of the next great recession.
