Treasury Secretary Janet Yellen, 75, told the House Financial Services Committee today that the Ukraine War could have “enormous economic repercussions in Ukraine and beyond,” talking about the 7% inflation rate happen in the U.S. and European Union [EU]. Central banks, led by the U.S. Federal Reserved Board, Yellen’s old job, started aggressively hiking interest rates to keep 7% inflation from spiraling into double digits. When it comes to pump prices, inflation is far greater than 7%, could be as much as 50%, with energy companies gouging consumers, making billions in corporate profits. Crippling U.S. and EU sanctions against the Russian Federation has cut into the world’s petroleum and wheat production, leaving consumers with the highest energy prices in years. Putin warned U.S. and EU officials that all the economic sanctions against Moscow could create global food shortages.
Yellen knows well about the Federal Reserve Board, serving as chairwoman under former President Barack Obama from 2014 to 2019. Yellen inherited the Fed chair from Ben S. Bernake who, in the 2008 financial collapse, slashed interest rates to zero to prevent the economy from lapsing into depression. Yellen presided over a period of zero interest rates, until she passed the baton to today’s Fed Chairman, Jerome Powell Feb. 5, 2018. Powell was the first to start hiking rates in 2018, earning the wrath of former President Donald Trump who felt he killed U.S. GDP growth. Powell was forced to reverse course in 2019, once again dropping the Federal Funds rate to zero. Now Powell, once against, started to hike rates March 17, anticipating at least three more rate hikes in 2022. Powell may be forced to reverse course again later in the year if Wall Street starts to head south.
Today’s internal report on the U.S. economy by Deutsche Bank indicates that the yield curve inverted, a reliable sign that the economy is heading into recession in 2023. While Wall Street expects a sideways market for the next six months, Deutsche Bank forecasts an 20% to30% decline in equities for 2022-2023, taking the U.S. economy into recession. YellEn admitted that all the economic sanctions against Russia are hurting the U.S. economy and consumers, suffering with inflated energy prices, something the White House can’t really control. White House energy policy takes a dim look at fossil fuels, scaling back U.S. energy production at a time when the Biden White House seeks to ban all Russian oil imports. Biden asked Saudi Arabia to make up the slack due to the loss of Russian oil, something Crown Prince Mohmammed bin Salam refused to do, in part because of his bad relations with Biden.
Yellen acknowledge the effect of the Ukraine War and lingering effect of Covid-19 on the world economy. “Globally, spillovers from the crisis are heightening economic vulnerabilities in many countries that are already facing higher debt burdens and limited policy options as the recover from Covid-19,” Yellen said, realizing that there are too many moving parts affecting growth in the world economy. Yellen admitted that U.S. sanctions are hurting the U.S. and global economy, all for a worthy cause of punishing Russian President Vladimir Putin. “The sanctions we’ve placed on Russia are pushing up the price of energy. It’s a price that’s important to pay to punish Russia for what’s it’s doing in Ukraine,” warning about the effect of geopolitical events on the U.S. and global economy. Polling shows at least today that the American public agrees that applying crippling sanctions to Russia is necessary.
Fed Chairman Powell hopes for a soft landing to avoid a recession in 2023 but the more he hikes the Federal Funds Rate, the more consumers are punished with higher credit card debt, already spiraling mortages rates by over two percent. Deutsche Bank’s forecasts for recession in 2023 are more than vague predictions but a consequences of hiking the Federal Funds four times in 2022. American consumers have felt the brunt of rate hikes yet, only skyrocketing pump prices. As mortgage defaults, foreclosures and bankruptcies start to rise, then the American consumer could have second thought about Biden’s crippling economic sanctions, currently having a boomerang effect on the U.S. economy. Yellen at the Treasury Department can only do so much to keep the economy from lapsing into recession. She knows it’s more in the Fed’s hands than hers when it comes to stimulating the economy.
U.S. economic conditions are deteriorating under the Ukraine War, something run out of the White House. When Biden announced he wanted Putin removed from office, or at least out of office, he exposed for the world to see his military mission in Ukraine. Ukraine has had numerous opportunities to sit down with Russia in Istanbul and come up with a meaningful compromise to end the conflict. Instanbul showed that Ukraine wants to continue fighting, now armed with unlimited U.S. weapons in cash. Zelensky isn’t concerned about the amount of destruction all over Ukraine, only about collecting $15 billion from the U.S. Treasury. Zelensky harps on Biden daily to commit U.S. troops to Ukraine, something that could happen any day. Recent talk about ethnic cleansing indicates that Biden looks for any excuse to escalate the conflict. Putin is content to keep wreaking havoc on Ukraine.
About the Author
John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.
