Inflation and recession: A reality check

Negative mass psychology inducing self-fulfilling behavioural changes threaten measures to deal with both.

For Singapore’s extremely open economy, there is no escape from global inflation and recession, the writer says. PHOTO: ST FILE
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"Inflation" and "recession" dominate world economic headlines today. In the United States, the world's largest and most influential economy, recent surveys show the general public is markedly more pessimistic about both than are professional economists. Consumers' estimate of future inflation is more than double that of economists, while the latest IBD/TIPP Economic Optimism Index shows 53 per cent of Americans believe the economy is in recession, when it is not.

Reality is more mundane, and even reassuring. Economic fundamentals are being re-established. This means that standard policy prescriptions to deal with the current turmoil are likely to work if they are not undermined by negative mass psychology inducing self-fulfilling behavioural changes.

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