The recession can be worse than the recession. How to understand today’s economy

The recession is scary. The recession, a mixture of stagnant growth and high inflation, is more terrifying.

During the past two months, President Trump The turbulent tariff agenda He revived fears of this rare and toxic scenario in which prices rise with the slowdown in the economy The labor market is suffering. The recession is invoked The main economic crisis In the seventies of the twentieth century, it is characterized by inflation of two numbers, high -slope interest rates and high unemployment.

After Trump A temporary truce with China In early May, investors breathed a sigh of relief, and the risk of severe economic crisis has decreased significantly.

However, according to JPMorgan & Chase, CEO of Jamie Dimon, the chances of stagnation, “mainly stagnant with inflation”, almost double the market believed. Damon pointed out that the definitions remain “somewhat extreme”, even at their lower levels Monday.

Dimon’s comments follow MOODY on Friday to reduce the American credit rating. MOODY was martyred Bedouins of the enlarged government, which could limit the ability of politicians to maneuver with a potential contraction. The minimum, although it is often symbolic, comes at a time when the Republic of Congress leads to major tax discounts, which is expected to add trillion to the deficit.

The recession is definitely not an excessive conclusion. But an economic diagnosis will be worse than stagnation, and a long -term shock to the regime, especially since the government lacks effective political recipes to control it.

“There may not be an easy way for cash or financial stabilization,” he said. James GalbrithProfessor of Economics at Lindon Johnson College for Public Affairs at the University of Texas in Austin.

At the same time, American families are already Dealing with the high cost of livingThey are preparing for the next. Whether we are heading for stagnation or a period of recession, taking steps to proactive Protect your money It becomes more important.

Are we in a stagnation?

Economic uncertainty and instability, as we see it today, often leads Stagnation conditionsWhen companies and families begin to back down from spending and investment.

Despite the low morale of consumers and the weakness of the labor market, the central bank says, “The economy is still in a strong position.” Since Trump began to back down from some of his most aggressive commercial measures, markets expect less dangerous risk.

However, some economists say stagnation is inevitable. The economy regularly faces periods of mutations and bust, with a slowdown every five to seven years.

“It is scheduled to reset and slow the economy,” he said. Greg ShareThe Managing Director of NFM LENDING. Sher also believes that Unemployment is worse From the title of the title numbers.

During the recession, unemployment rises, and the prices of goods begin to decrease. It is generally difficult to obtain financing, as banks tighten their requirements to reduce the risk of lending to borrowers who may be lagging behind loans.

Some distinctive signs of the total economy, such as gross domestic product and high unemployment, are consistent with all recession. But every American recession is unique, with a different historical operation. The great recession 2007-2009, which started with the sub-mortgage crisis and the collapse of financial institutions was the longest. The Covid-19 epidemiological recession, resulting from the lock and the loss of 24 million jobs, was the shortest stagnation ever.

The families of the working class and the middle class in general face the daily hardships of stagnation before National Office for Economic Research He invites her officially. People on the margin also test a much slower recovery after the recession has ended.

Dependence on difficult data such as gross domestic product and employment Road identification It is defective. Because these numbers with a backward appearance, they tell us where the economy was before, and not necessarily where to go.

However, here are some of the main warning signs that economists are looking for in stagnation:

Decreased GDP (GDP)	A continuous decrease (usually two consecutive quarterly) in the total commodity and services output in the country, the economy is shrinking.
High unemployment	When companies reduce costs, the employment slows down and the demobilization increases for a sustainable period, families get less income and less spending.
Reduced retail sales	When people buy fewer commodities in stores and online, this indicates poor demand, which is a major engine for the economy.
The stock market declined	It often reflects a significant and permanent decrease in stock prices invested about the future of the economy.
The inverted return curve	When interest rates on short -term bonds become higher than long -term rates, it can indicate that investors expect a weaker economy in the future.

What is the recession?

The recession may mean that you have less purchasing power, as prices rise and savings become more difficult. Jobs become more difficult to find, and your investments may take visits and Use rates may rise.

The recession is usually measured by “”The misery index“The total unemployment rate and the rate of inflation, which reflects the level of economic distress that the average person feels.

For decades, experts did not think that the recession was possible because it contradicts the basic principles of supply and demand. Usually, when more people are unemployed, prices decrease because the demand for goods and services is lower.

But the recession raised his head in the seventies. The increasing government debt, which is fueled by military spending on the Vietnam War, sent prices. Soon after, the energy crisis was struck. In 1973, OPEC’s oil ban was shocked in the enormous supply, aggravated inflation and frustrated production.

The official unemployment reached its climax by 9 % The inflation continued to rise In the end, he exceeded 14 % on an annual basis. The shock of the second oil supplies in 1979 prompted the federal reserve to raise interest rates for highlands, above 20 %. While this approach has reduced inflation, it has pushed a severe stagnation.

While the recession is periodic, the recession is a rare and complex phenomenon resulting from a great supply shock for essential elements such as oil or food. When the supplies are limited, the prices rise At an abnormal rateWhich hurts companies, financing for living families and economic growth.

Do we go to the recession?

Most economists say that the possibility of entering a period of recession is still very low, but some warn of that Trump’s commercial policies It can feed the fire.

If the recession or recession is achieved, then this will be a “self -connecting” injury resulting directly from the US government’s policy. Catherine Ann EdwardsEconomists and independent policy consultant.

Since February, new import taxes have been announced, delayed, declined and lowered in a quick sequence. The markets have been volatile during the past few months due to fears that these policies will increase prices, reduce consumer spending and pay economic shrinkage.

According to Sher, there is a misleading assumption that consumers will be ready to pay the cost of the higher goods caused by the definitions. “Consumers are likely to sit at their hands and stop spending, which will increase the Hyran of the recession,” said Sher.

Specifications, or import taxes on goods from another country paid by the importer can have a similar effect on oil supply shocks, causing widespread disturbances and increased cost along supply chains. Companies transfer these increases to local customers, which leads to more inflation, or they reduce investments and production, which leads to demobilization of workers and weak growth.

Currently, there are some signs of inflation related to tariffs, but the full impact on consumer prices will not be seen for several months. official Inflation sits by 2.3 %The slower annual pace in years.

Meanwhile, the official unemployment rate of the United States is still relatively low, currently 4.2 %, according to Work Statistics Office. Although the more expected economic data has rocked investors, the dollar and public budgets of major financial institutions are strong, unlike the 1970s.

“The prices fall alongside the company, and growth may be cooled from a very large pace, unemployment is still closer to its lowest historical levels,” unemployment said. Keith GammangerVice President at HSH.com News. “We do not stagnate itself, at least yet.”

Why the recession is worse than the recession

At the same time, today’s economy is dangerous, with huge government debts and some tools available to repair problems. “The big definitions at the present time will not increase inflation – they can raise a series of economic interactions that banks and central governments are not ready to deal with,” said Sher.

Al -Tarafi has a play that is in force, if it is incomplete, to reduce its effect. The federal reserve, which is responsible for maintaining prices and increasing labor, usually reduces interest rates to stimulate the economy and buoy workers during the decline.

However, when inflation is high, the Federal Reserve raises interest rates to combat prices and slow the economy by obtaining credit and Borrowing is more expensive For consumers and companies. Currents cannot be taken at the same time.

Gammans said that the recession is more exciting than stagnation. It has a more difficult path because policies that are used to address one problem often worsen the other.

now, Federal Reserve Bank in a link. Low interest rates can enhance the weakest economy, but it can also be inflation. If inflation remains sticky, it is likely that the central bank will continue to cut interest rates.

This type of government paralysis can Pull economic hardshipsEspecially for the most weak and social population. While the average recession lasts about 11 months, the last stagnation in the United States has lasted more than 10 years.

How can you prepare for stagnation or recession?

The recession may feel like a stagnation with additional pain from the high prices, making it difficult to prepare for it and even difficult to move. However, experts say you want to take Some of the same steps I was before the economic shrinkage.

Create your emergency box. The presence of an emergency box It is a good idea in any economy. During the economic contraction, it can make high unemployment it is difficult to return to a strong financial position if you have a sudden expense. If your savings cover at least three to six months of living expenses, you can easily overcome a financial storm without relying on credit cards or retirement savings.

Developed. Focus on payment of debts, especially High -interest credit card debtsSo you do not have to bear a balance when the times are more strict. Postponement of any major purchases that extinguish your budget and that you will regret ensure that its fruits are given within a year or two. Avoid buying panic Things such as laptops, phones, or cars just to advance the expected increases in prices.

See your own Investments. Given the level of economic uncertainty, the stock market expects greater fluctuations. If you often have highly dangerous investments, think about diversification with a variety of low -risk accounts, or the combination of stocks and bonds. Consult an advisor on inflation resistance assets and a more balanced wallet based on individual tolerance of risks, age and financial goals.

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