Tag: economy

Tough times are ahead in Biden’s economy. Here’s your recession checklist

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July 11, Michael L. Davis, economics professor at the Cox School of Business at SMU Dallas, for an op-ed recommending a checklist of strategies to navigate a recession predicted later this year. Published in Fox News Business under the heading Tough times are ahead in Biden’s economy. Here’s your recession checklist: https://fxn.ws/3o7N9NT

​If you haven’t been paying much attention to the small army of economists droning on about the threat of a recession, that’s OK. It’s summer. It’s hot. Nobody, not even me, one of those economists, wants to dig through the mountain of boring economic data detailing things like consumer confidence and retail inventories. But the warning signs are there. Nobody can know for sure but it seems very likely that sometime before the end of the year the economy is going to get worse. Maybe much worse.

And of course, there’s nothing you can do to prevent a recession. Why worry about things you can’t change?

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Is the economy making the Fed an offer it can’t refuse?

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April 20, Michael Davis, economics professor at the Cox School of Business, SMU Dallas, for a commentary that points out the perilous path of attempting to reduce inflation without bringing on a recession. Published in the Austin American-Statesman under the heading: Is the economy making the Fed an offer it can’t refuse?: https://bit.ly/3EtLjOE 

Since this is the 50th anniversary of the movie The Godfather, it’s worth remembering that great scene where a gang war is about to break out and the Don’s trusted capo, Clemenza, explains to the young Michael Corleone, “These things gotta happen every five years or so…It helps get rid of the bad blood.”

Any similarities between Federal Reserve Chairman Jerome Powell and Michael Corleone are purely coincidental. Still, I wish Powell had Clemenza whispering in his ear.

The Federal Reserve has two problems. First, it has to figure out how to reduce the highest inflation rates we’ve seen since the early 1980’s. Anyone who buys gas or groceries understands that problem. And anyone who knows much of anything about economics and finance understands that the Fed has to raise interest rates and tighten monetary policy in order to deal with that problem.  It’s already started. After the last meeting the Fed raised their target interest rate by ¼ percent and promised more increases to come.

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Unexpected inflation is the broken promise of a generation

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Oct. 8, Michael Davis, economics professor at the Cox School of Business, SMU Dallas, for a commentary warning new and older generations about the specter of inflation. Published in the Orange County Register under the heading Unexpected inflation is the broken promise of a generation: https://bit.ly/3Aqa62e 

Prices are the words we use to make promises. Earlier today my plumber promised to fix a broken pipe and I promised to fill up his trucks with gas. Of course, he doesn’t expect me to meet him at the gas station every time a tank is empty. He expects me to give him $300 when he’s done with the work.

But the promise of plumbing for the promise of gas is what matters to both of us. And without the language of prices, it’s very hard to make such promises. Barter is a terrible way to do business. Prices make it easy to promise to give someone what they really want.

And that’s why we should worry more about inflation.

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