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From Inflation to Recession – What are the signs, how do we prepare and why is this happening?

From Inflation to Recession – What are the signs, how do we prepare and why is this happening?
July 13
14:44 2022

Vidya Sethuraman
India Post News Service

More and more economists are predicting we are heading into a recession. Experts discussed in the July 8 briefing, how and why inflation can turn into a recession, what people can do to prepare for it, how strong the safety net is and why is this happening at a time when corporations report record margins of profit.

A recession is a serious economic downturn that lasts for more than a few months. Generally, an economic downturn isn’t considered a recession until the economy has seen negative growth for at least two quarters.

In an extended downturn, almost every household feels the pinch of a tighter budget. Financial security can be lost in the wake of unemployment spikes and plummeting retirement savings. But the reality is that recessions are part of the business cycle. Instead of hoping one never comes, preparing for a recession is better.

Chad Stone, Chief Economist of the Center for Budget and Policy Priorities said that some economists define a recession as a slowdown across the economy for several months. But in fact many times people don’t realize it until after the recession. The post-pandemic recession, however, is a sharply constrained supply. He believes that not only is inflation serious, but the unemployment rate is still as high as 6.6%, which increases the possibility of a recession in the United States. He said a lot of people pretend there are a lot of policies to make people think the economy is doing well, but he doesn’t think there are good enough economic policies to keep inflation in check right now. He believes that although the time for a real recession has not yet arrived, the risk of recession exists and is rising.

Alix Gould-Werth, director of family economic security policy research at the Center for Equitable Growth in Washington, believes that the recession will hit the vulnerable the hardest, with the outbreak affecting the service sector for the first time. The general pattern is that when a recession hits, workers of color and low education will be the first to experience unemployment and reduced income.

Dr. Rakeen Mabud, Chief Economist and Director of Policy and Research at Groundwork Collaborative, said that the current U.S. economy is experiencing a strange phenomenon, with supply chains being disrupted, inflation rate for decades, and corporate profit margins hitting 70-year highs. The epidemic has had a serious impact on small businesses, and they cannot substantially raise prices to pass the cost on to consumers. Consumers know that costs will increase and prices will rise, but they do not know how much of the sharp rise in prices is due to increased costs and how much is the expansion of profits for companies. Large companies take advantage of the dominant market to take advantage of the opportunity to raise prices.



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