UK, Eurozone, and US Economies Face Recession and Deflation Risks as Money Supply Growth Collapses

Britain’s money-supply economists, who gained prominence during the pandemic by accurately predicting the surge in inflation, are now raising concerns over the collapsing money supply growth in the UK, Eurozone, and the US, signaling potential risks of recession and deflation [1][2]. These economists argue that central banks may have raised interest rates too far, resulting in detrimental effects on the economy.

The UK economy has been facing numerous challenges, including supply chain disruptions, inflationary pressures, and potential interest rate hikes [4]. Official data reveals that economic growth between July and September has slowed, with supply chain issues hindering the recovery [5]. The budget deficit is projected to reach £177 billion by the end of March 2023, a significant increase from the previous year [3].

COVID-19 has impacted economic activity through various channels, including increased uncertainty, reduced consumer confidence, and tightened financial and credit conditions [8]. Households have increased their savings as a precaution, while some firms have laid off employees and sold capital equipment.

To counter the pandemic’s economic fallout, central banks in America, Britain, the Eurozone, and Japan have purchased more than $9 trillion in assets [9]. However, the recent collapse in money supply growth has raised concerns that these measures may no longer suffice to prevent a recession or deflation.

In light of these alarming developments, policymakers will need to consider the potential repercussions of their actions on the economy and adopt appropriate measures to mitigate the risks of recession and deflation. The current scenario underscores the importance of monitoring economic indicators and taking decisive steps to ensure the stability and growth of the global economy.

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