Expert Declares Looming US Recession Was Completely Avoidable

Even as the Federal Reserve careens from one interest rate hike to another, a leading economist told “Face the Nation” Sunday that the coming recession was “totally avoidable.”

Mohamed El-Erian, chief economic adviser for Allianz, said that the U.S. faces a “very high probability” of a strong recession that could have been averted but for two tragic mistakes.

The first was the infamous mischaracterization by the Biden administration last year of soaring inflation as “transitory.” In the summer of 2021, White House officials insisted that inflation was a temporary state and, as El-Erian declared, refused to “act in a meaningful way.”

Since that point, there have been 13 straight months of skyrocketing expenses for U.S. consumers.

The failure to act led the Federal Reserve first taking no action and then playing catchup, which is mistake number two. The central bank has gone from inaction to furiously raising interest rates in a desperate attempt to stymie inflation.

As El-Erian noted, even Chair Jerome Powell has diverted from talk of a soft or “soft-ish” economic landing to speaking of pain.

That, he said, is the consequence of not seeing the reality of the economic landscape quickly enough and having to scramble. Not only is the Fed having to fight inflation, but simultaneously “it has to restore its credibility.”

Even as experts warn of a looming downturn and the pain that will surely come with it, the United Nations is sending out the alarm for a global recession.

This comes as bankers in the primary economies, particularly the U.S. and Europe, are attempting to rein in soaring prices. The U.N. is clear that this is the incorrect course of action.

The world agency said that efforts by the Federal Reserve and others to jack up interest rates and slow economies will fail. It called on the bodies to reverse course “and avoid the temptation to try to bring down prices by relying on ever-higher interest rates.”

The median estimate by the Fed is for interest rates to hit 4.6% in 2023, and the U.N. now says that the lower inflation goals are not worth the damage to be wrought by continuing to raise rates higher.