Amazon founder Jeff Bezos warns the US economy may slump into a recession - and says people should brace for a painful downturn

    Jeff Bezos has warned the US economy may be headed for a recession and recommended American brace for a painful downturn. Recession fears have grown in recent months, partly because the Federal Reserve is actively trying to cool the US economy. The Fed has hiked interest rates from basically 0 percent to a range of 3 to 3.25 percent today. There are even signals that rates could approach 5 percent next year. Higher rates encourage consumers to save rather than spend or invest and make borrowing more expensive, so they typically reduce demand and relieve upward pressure on prices.

    Bezos is admirable to comment about the US economy, given Amazon is one of the country's biggest employers that generated $470 billion in net sales last year, making it a key player in the stock market and the economy. Others have also sounded the alarm on a potential global recession due to risks from huge amounts of public and private depth to Russia's invasion of Ukraine. Andy Jassy who replaced Bezos as Amazon's CEO appears to share the same concerns. Amazon has been cutting costs, slowing spending, and freezing hiring for certain roles in recent months, suggesting it's expecting a tougher economic backdrop.

Article Link: Amazon Founder Jeff Bezos Warns US Economy May Slump Into Recession (businessinsider.com)

American Economy Takes Three Simultaneous Hits in Mid October.

     The American Economy struggles this October as railway unions question work conditions, rental rates rise dramatically, and Social Security payments change for older Americans. 

   On October 13th, 2022 the CPI data showed an 8.2% increase in CPI from this time last year. At this time housing is taking the biggest hit from inflation data because shelter makes up 1/3 of the CPI measurement taken, and is by far the largest portion of CPI. Rental prices will continue to grow according to this data as more people move into new rental agreements in the next year following an also significant increase in interest rates for house mortgages. 

   Railroad Unions are against a bill proposed by President Biden that would effectively increase wages for their positions. However, the hesitancy from the union comes from poor working conditions in the U. S railway systems that did not change on account of the recent governmental bill. Consumers and government alike hope that the decisions of one influential union based on gov response to demands don't change the compliance with the proposed government bill and spark change in thoughts of other unions in different occupations. Congress and President Biden will need to grasp a hold of the situation at hand and settle the issue if the railway union does not subside. 

    Finally, Social Security payments are up 8.7% coming into the new year. Only 10% of people over 65 in the U. S don't receive social security and more than half of the other 90% that receive money depend on social security for more than half their income. With the rising inflation in our economy, the monthly payment expected by the beneficiaries has increased to keep up with the cost of living. It is not yet known whether higher payments will add to the increased inflation in our economy. 

    Americans should expect an ever-changing economic environment coming into the next few months, and the new year. 

- Denis Harkin

Sources:

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Truss, in Reversal, Drops Plan to Cut U.K. Tax Rate on High Earners

Reducing taxes OR increasing Government spending as we talked about in class recently has a practical effect on a small & large open economy such as the UK. On October 3rd, A post in the New York Times showed Liz Truss decided to reverse and drop the plan to abolish the top income tax rate of 45 percent on high earners. Liz Truss thought before that by reducing the taxes on the high earners, people would save and invest more in their currency and in the long run, move more industries to the U.K. because of the low taxes on high earners. But instead, caused the real exchange of the Pound Sterling in relation to the U.S. Dollar to reduce, meaning that the high earner used the saved money on international trade and not to improve the U.K. economy. 

As we learnt in class, a reduction in taxes caused a reduction in Government Deficits, which will then cause an increase in saving, which then would cause an increase in Net Capital Outflow, which then cause Net Export to increase. The movement of the Net Capital Outflow & the Net Exports causes the real exchanges rate to decrease, which causes depreciation (The currency would worth less). I believe in order to increase growth in the economy and also increase the real exchange rate, The U.K. Prime minister needs to spend on providing more subsidies for people to make more goods (Government Spending & Exports Increases).

SOURCE: https://www.nytimes.com/2022/10/03/world/europe/uk-tax-rate-cut.html