Joseph Stiglitz Thinks Central Banks Have Paved Way Toward Recession: 'Their Friends On Wall Street' Won't Bear The Brunt

Nobel laureate and prominent economist Joseph E. Stiglitz said in a tweet that central banks have deliberately set themselves on a path to cause a recession in the name of taming inflation.

In his article that appeared on Project Syndicate, Stiglitz highlighted the fact that the monetary-policy tightening in the current times will leave long-lasting scars, whereas more carefully considered responses would work better and yield long-term benefits.

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“Moreover, they openly acknowledge the pain their policies will cause, even if they don’t emphasize that it is the poor and marginalized, not their friends on Wall Street, who will bear the brunt of it. And in the United States, this pain will disproportionately befall people of color,” he stated.

The U.S. market closed in the red on Friday following the release of a higher-than-expected producers' price index reading. Investors are now turning their attention toward the consumer price inflation set to be released on Tuesday and the crucial Federal Reserve meeting on Wednesday where the central bank is expected to hike its policy rates by 50 basis points.

The SPDR S&P 500 ETF Trust SPY closed 0.75% lower on Friday while the Vanguard Total Bond Market Index Fund ETF BND ended 0.58% lower.

Stiglitz noted that inflation may be moderating more slowly than optimists hoped a year ago – before Russia’s war in Ukraine – but it is moderating nonetheless. “For example, high auto prices, caused by a shortage of computer chips, would come down as the bottlenecks were resolved. That has been happening, and car inventories have indeed been rising,” he said.

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Photo by UNIDO on Flickr