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Jerry Bowyer: Recession Is Not the Answer to Inflation

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The markets appear to be pricing in a recession in America.

In fact, recent data suggest that we may have already entered it. But this recession was avoidable. It was, in baseball parlance, “an unforced error.” You see, a distorted economic theory called Keynesianism teaches that inflation is caused by too much growth and so the solution to inflation is … recession! It might be an official recession, half a year of negative growth or it could be what's called a growth recession in which growth remains positive but sluggishly low. 

The problem is that when inflation gets very high, government thinks its needs to hit the economic brakes hard, and that usually leads to a bona fide recession. Supply side economics is the right answer. It sees growth as the solution, not the problem. Tax and regulatory easing to help with growth and monetary tightening to help with inflation. Forcing a recession to fight inflation is all pain and no gain. It’s time to bring back Reaganomics. 

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