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World trade will slow sharply next year

Golly:

World trade in goods is set to slow sharply next year, possibly easing high inflation but raising the risk of a global recession, a new forecast shows. Surging energy costs and rising interest rates are weakening household demand across the globe, a dynamic that could cause exports and imports to increase by just 1% in 2023, the World Trade Organization said Wednesday. That is down from a previous forecast of 3.4%.

Jerome Powell is going to go down in history as the second worst Fed chair ever.

14 thoughts on “World trade will slow sharply next year

  1. joey5slice

    "Jerome Powell is going to go down in history as the second worst Fed chair ever."

    This is a mighty strong statement. Care to elaborate? How do you rank Fed chairs? By whether they ever caused a recession? Or only if they cause recessions *unnecessarily*, because you can see the future in the multiverse and know with precision how things would have played out if Fed chairs had made different decisions?

    You've staked out a very fine position for yourself by claiming that inflation is going to resolve all on its own - the Fed has made it clear that they will do what it takes to get inflation under control, so there's basically no way for you to be proven wrong. As long as inflation comes down, you can say "see? that would have happened no matter what!" And if it stays high, I'm sure you'll be able to point to some exogenous unanticipated event.

    Managing the post-COVID economy was a lot harder than anything Alan Greenspan, Janet Yellen, or Bill Martin had to face. Are you really so confident that everything is going to resolve on its own? You really think you can predict the future that soundly?

  2. Altoid

    Au contraire, Kevin-- he's been expeditiously jacking rates high enough that the committee can make really dramatic cuts next year and jump-start the entire world economy. Sheer genius, of the kind that isn't often appreciated in its own time.
    /sarcasm (in case it isn't obvious)

    1. Ken Rhodes

      Amplifying on your point, Altoid (understanding the point behind the sarcasm), I have this problem on a very small scale at home.

      My wife feels chilly, so she cranks the thermostat up about 4 or 5 degrees. No matter how many times she gets tired of hearing me say "make adjustments gradually, one click at a time," she can't help herself. "One click," I say. "But I'm COLD," she replies. And so, the scenario is repeated.

      I suspect part of the problem is that the Fed only controls monetary policy, while inflation is largely driven by fiscal policy. Since their only tool is a hammer, they just have to pound as hard as they can on the nails they can hit.

      1. Altoid

        I know the pattern with the thermostat-- the furnace will only put out heat at a given rate and all that happens with a higher temp is that it puts out at the same rate over a longer time. But it's more satisfying at a visceral level to feel like a more emphatic input will affect the output, like mashing the accelerator.

        Actually I'm only partly sarcastic on the first point, about getting rates high enough to have room to reduce them. That seems to have been a pretty serious concern of theirs through this whole period of easing.

        But I also think they're kind of desperate about making sure everybody understands that they'll bend heaven and earth and impoverish half the world to forestall an inflationary spiral. They want to be sure everybody understands this before we go back to putting out new price sheets every three weeks and sealing 15% year-on-year raises like in the 70s.

        Krugman had a clever term for this, maybe when Yellen was chair, something self-contradictory like "credibly irresponsible," something in that direction. The idea was that the Fed needs to make everybody understand that they absolutely mean exactly what they say in order to get policy traction. Their tone has seemed almost panicked the past couple of meetings and this strikes me as a plausible reason why.

  3. rick_jones

    Growth of only one percent! The horror!

    Seriously though, from a more macro than economic standpoint is that actually a bad thing? Just how long can growth be sustained? And how are we (collectively) doing on that pesky global warming thing while Kevin waits for his magical technological silver bullet?

  4. different_name

    "Jerome Powell is going to go down in history as the second worst Fed chair ever."

    He's getting exactly what he and his minders wanted.

    Those nice summer homes in the south of France help take the sting out of playing the heel in pop media.

  5. Honeyboy Wilson

    Biden should be publicly attacking the Fed chair, just as Trump did. That way, if things don't change and we have a bad recession Biden will be on record opposing the Fed's actions.

    1. Ken Rhodes

      Powell was originally appointed to the Fed Board of Governors by President Obama. He was elevated to Chairman by President Trump, but he was nominated for his current term by President Biden. He was highly respected by the members of both parties when he joined the Fed, and for the job he did during the Covid [financial] crisis as Chairman.

      I doubt we can blame Trump for our current concerns in this area.

    1. Master Slacker

      Alan Greenspan is to the Fed what Kissinger was to the State Department, total tool with no redeeming virtues other than the ability to cost this country much blood and treasure.

      Powell is doing what he thinks will bring the house down on the base so they will elevate the upper quintile.

  6. firefa11

    Incorrect, Kevin, grievously so. World Trade isn't expected to slow ... the INCREASE in World Trade is expected to diminish, there will still be more stuff traded than the year before. That's ... substantially different

  7. Pingback: A further look at declining international trade – Kevin Drum

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