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Stiglitz criticizes global rate hikes: “Central banks will create a deeper recession”

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The Nobel Prize in Economics Joseph Stiglitz criticized, last Monday, the increases in interest rates in the US and the Eurozone, considering that they will aggravate the recession and do not affect inflation that is due, according to him, to bottlenecks and problems on the the offer.

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“The way central banks are responding is going to create a deeper recession than necessary, and that is a mistake,” explained the American economist in Vienna, where he participated in a seminar on the economic situation in Europe.

The 2001 Nobel laureate in economics argued that inflation is caused by excess demand following a crisis in supply chains due to COVID-19, a situation exacerbated by the Russian invasion of Ukraine.

“The world may be about to face a big recession and high inflation, and normally these two factors are on opposite sides: if the economy is weak, there is deflation, and if the economy is strong, there is inflation,” he said.

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The response of the Federal Reserve and the European Central Bank will aggravate the recession and compared this policy with the bloodletting that doctors practiced on patients in the Middle Ages, and that not only did not help the patient, but sometimes ended his life .

“Sometimes the cure is worse than the disease,” he said about rate hikes that will aggravate the recession and lower prices, only causing serious damage to economic activity.

Stiglitz: intervene in energy prices in Europe

On the other hand, Stiglitz said that many of the European Union’s energy problems are “self-inflicted”, due to an unregulated energy market that has failed to produce enough energy of its own, particularly in the renewables sector.

He also called for greater intervention in the market so that it is not the consumer who pays the bill for the war in Ukraine.

“My biggest concern is that Europe and the US have not understood that we are at war. In times of war the market still exists, but it must be more firmly regulated. By not understanding or understanding that we are at war, Europe will make people suffer much more,” she maintained.

The American economist also defended a reform of the EU energy market, where the price of electricity is linked to the highest cost of production, which in recent months has been that generated with gas.

With information from EFE

Source: Larepublica

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