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Global recession the way Adam Tooze said

Central banks around the world are trying to curb rising inflation by raising interest rates and tightening monetary policy.

On Wednesday, the US Federal Reserve increase its prime lending rate up 75 basis points for the third time in a row, as it continues to wage war on higher prices.

Bank of England follow in the footsteps of the Fed on Thursdayraise rates by 50 basis points, and European Union has signaled that it is likely to continue the wave of positive policy action globally on inflation.

The Fed’s aggressive rate hikes have raised recession fears in the U.S. But Columbia University economics professor and “”The internet’s leading historian of money and disasterAdam Tooze, believes that similar and “simultaneous” price increases by central banks around the world could spark a global recession.

Tooze said there was an “extremely severe” risk of a global recession. Guardians in one interview on Thursday.

Economists have made a named himself during the pandemic through his widely read newsletter, Chartbook and data-driven predictions about the future of the global economy, often combined with a historical view of what could constitute an economic disaster Future.

In his interview with GuardiansTooze warned that the current wave of interest rate hikes could contribute to that disaster, and suggested that hundreds of millions of lives around the world could be altered by the global recession.

“This will mark the lives of those people for the rest of their lives,” he said.

Technocrats’ failures

Despite their best efforts, the world economic authorities seem increasingly resigned to the fact that inflation cannot be contained without triggering a recession.

Last month, Federal Reserve Chairman Jerome Powell warned that the central bank is ready to “bring some pain“For the economy to reduce inflation. And after the rate hike on Wednesday, he conceded that the chance to avoid a recession is “has the ability to reduce“And the unemployment rate may be on the rise.

“We have to push inflation backwards,” he said. “I wish there was a painless way to do it. Not available. “

But the monetary tightening action by Powell and other central bank leaders right now may not be remembered in a positive way, according to Tooze, who says future economics textbooks will. recalls the era of economic policy as a “classic moment of failed technocracy. ”

This is not the first time Tooze has discussed his concerns about the position of the global economy. In one Interview in Julyhe described the wave of monetary tightening around the world as one component of an upcoming global “diversity crisis”, in which several crises are combining to pose a threat. unique and unprecedented for the global economy.

“The whole is even more dangerous than the sum of the parts,” he warned.

Inflation forcing central banks to rein in demand is compounding other challenges — including climate change, extreme weather, the economic aftershocks of the pandemic, and a greater likelihood of war. — to create a larger and interconnected crisis made up of several self-reinforcing parts, he said.

But with interest rates rising, the risk of a global recession could be more of an imminent threat.

Tooze’s anxiety at the relentless rate hikes from all over the world is shared by investors as well as bankers.

The Fed’s latest rate hike could be “unnecessary” and a “policy mistake,” said Jay Hatfield, CEO of investment firm Capital Management Infrastructure. told LuckWill Daniel this weekadded that the Fed’s stance “dramatically increases the risk of a recession”.

Wall Street also did not perform well on Fed policy measures, with all three major stock indexes fell after the latest increase.

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