The US is on the road to ruin as attempts to control inflation plunge the economy into recession, says an economist.
Media have speculated that Federal Reserve interest rate hikes will finally come to an end, after figures for October showed the first fall in retail sales in seven months, especially in the motor and hobby sectors.
Economist Dr Jack Rasmus told Sputnik that that slump was worse than it appeared.
“The numbers they report aren’t adjusted for inflation,” Rasmus noted. “They’re called nominal prices as opposed to real prices. Even the nominal prices contracted very slightly. But in real terms, if you adjusted that by the CPI, Consumer Price Index [of inflation], you would find a big decline in retail sales, maybe four to five percent.”
“That number in retail sales really punctures a hole in that whole argument,” Rasmus stressed. “The economy and retail sales is is about one fourth of all consumer spending. And consumer spending is like two thirds of the economy.”
The doom and gloom did not stop there, the economist said.
“So you got like a fifth of the economy contracting, that’s in consumption. At the same time, you’ve got housing, which is not in the consumer price index or retail sales. Housing is taking another leg down because of the high interest rates,” Rasmus said.
“Small business spending and borrowing is falling off a cliff because the interest rates are too too high. Investing on business equipment in general turned negative here last month.”
Combined with contractions in the manufacturing and housing sectors, the economy was in recession, the economist argued.
“Fiscal policy is taxing and spending,” Rasmus pointed out. “We get all these big tax cuts to the rich and corporations for years now, $15 trillion. We spend $8 trillion on wars. So we have this $34-trillion deficit.”
“To finance the deficit, the Fed’s got to sell the bonds,” he explained, but “when the Fed sells the bonds it exacerbates the monetary, the financial side of the policy. But what’s driving it is the fiscal crisis.
You see, fiscal crisis and the contradiction of massive deficits is driving the monetary crisis, and we’re dumping too much treasuries on the market.”
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