Oddly I am back here posting. Even more oddly I am posting on the topic I am paid to address. I start by noting two things. About one year ago, many macroeconomic forecasters predicted that a recession would have started by now in the USA. I forget who placed the probability at 100%. In spite of sltightly disappointing 0.4% (1.6% if annualized) real GDP growth in the first quarter of 2024, we are not in a recesion. What went right ?
The presumed cause of a recession was the sharp shift to contractionary monetary policy in a effort to fight inflation.
In this post, I will focus mostly on domestic demand. Briefly, high interest rates can cause a recession by causing an appreciation of the national currency which causes a sharp decline in net
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