DANIEL VAUGHAN: White House lies while Bank of England speaks hard truths

Across the pond, the Bank of England made a stark statement to everyone in the United Kingdom. They said the country was in a recession with no end. The Bank raised interest rates to “tame surging inflation but which, by the bank’s own estimates, will help drive the UK economy into a recession lasting over a year.” If this story sounds familiar, a similar approach is transpiring in the United States.

Everyone is raising rates and dealing with a recession.

For the UK, talk of recession isn’t clouded by politics or dating periods; it’s a right now phenomenon. The Bank of England told the country, “the UK economy likely entered a recession in the three months through September … and said it expected a lengthy economic contraction, the duration and depth of which depended on how high the bank raises rates to corral prices.”

Inflation is running hot, and the Bank of England is tasked with fixing that problem. They have a similar mandate to the US Federal Reserve. The difference is that the Bank of England is more transparent about the impact of its actions to wrangle inflation. Recession is not some vague option in the future; it’s reality, and they’re not ignoring it. They’re telling everyone that the recession will be long and deep because the Bank cannot stop raising interest rates.

While that’s a shocking statement from a government, it’s also refreshing because it’s a government telling everyone the truth. There are no attempts at obfuscation or selling people a unicorn. Recession is a reality everyone will have to face across the United Kingdom, and no one is hiding from that fact.

Contrast that to the United States, where everything but the “r” word is used to describe the current situation. In his most recent press conference, Fed Chairman Jerome Powell used metaphors to describe the economy. When asked about a “soft landing,” Powell talked in vagaries.

Fed speaks in vague riddles.

A reporter asked Powell whether it was still possible for the US to have a “soft landing.” Depending on how you define that, it either means ending inflation with no recession or a “mild” recession.

Powell said of the path for a soft landing: “Has it narrowed? Yes. Is it still possible? Yes. We’ve always said it was going to be difficult. I think to the extent rates have to go higher and stay higher for longer, it becomes harder to see the path. It’s narrowed. I would say the path has narrowed over the course of the last year. It’s hard to say.”

It’s okay to say that you don’t know what will happen. That’s at least an honest statement. This is a mushy kind of word salad that tells people nothing. The Fed may think it’s clever by holding its cards close to its chest. The problem with this strategy is that the Fed has repeatedly revealed it doesn’t know what will happen at any moment.

First, inflation wasn’t a concern at all. Then, everyone pivoted to calling inflation a transitory event, and there was no need to worry. After ignoring the problem for a year, the Federal Reserve finally started raising rates in March 2022, a tacit admission they’d gotten the entire post-pandemic inflation issue wrong.

We’re heading into 2023 with two years of inflation eating away at every part of the economy. And the best the Federal Reserve can muster up is old talk of soft or hard landings. In the UK, they’re clear: that country is in a recession that will deepen over the next year due to policy decisions by the central bank.

A recession is here whether the White House admits it or not.

Compare that rhetoric to a recent interview with White House Chief of Staff Ron Klain. Appearing on an MSNBC morning show, Klain said, “We are not in a recession. I want to be really, really clear on that.” He added, “Bringing down prices of everyday things that really hit people hard – that’s the number one problem right now … It’s inflation and that’s the problem we’re focused on.”

The White House is straight lying at this point. Layoff stories permeate the pages of business outlets everywhere. And if it’s not a layoff, hiring freezes are everywhere. Corporations and everyday people are preparing for a recession because that’s reality. There’s no avoiding that pressing reality.

One of the latest private banks to make a similar prediction is Barclays. They slashed growth estimates for China and forecasted a recession in Europe and the United States. As I wrote a few weeks ago, this is the most obvious policy-induced recession in history. There’s no avoiding it.

The Bank of England is telling the truth. The White House and Federal Reserve are not. That’s one of many issues people will take to the voting booth next Tuesday.