Eco-Trends

Economist: Recession And Bear Market Coming Unless Supply Chain Is Revived

Tech-sector holds a silver lining

Economist Tenpao Lee, Ph.D., professor emeritus at Niagara University, is predicting a recession and a bear market as a result of the pandemic and the war in Ukraine, both of which have disrupted the supply chain – unless a robust supply chain can be recovered. He does see a bright side, however, in the information technology sector that will help speed a recovery. “The war between Russia and Ukraine, and China’s zero pandemic lock down policies, will all affect negatively on the supply side of the global economy,” said Dr. Lee. “These negative impacts will appear gradually to further inflation and recession.”

Dr. Lee says historically, only the energy crisis of 1973/74 is comparable to the current “economic doom” we’re experiencing. At that time, he recalls, the stock market declined about 50% in two years and it took about seven years (until 1980 for recovery to occur).

“The economy is dynamic. There are so many factors will shape the economic future and nobody can predict accurately about the future,” said Dr. Lee. “However, the information technology sector will speed up the recovery once the pandemic and the Russian-Ukraine war are over.”

An Historic Perspective

According to Dr. Lee, from economic point of view, civilization began with trade – with supply (sellers) and demand (buyers). Trading has made it possible to have lower prices based on geographic specializations, massive production, and economies of scale. In the last 40, the global economy with tremendous international trades has materialized significant trade benefits reflected in overall GDP measurements. All of this has resulted in a robust economy, particularly for the U.S.

The economy is dynamic. There are so many factors will shape the economic future and nobody can predict accurately about the future...

“To ensure a smoothy economy, the U.S. implemented monetary and fiscal policies, such as quantitative easing (QEs) and stimulus packages to affect aggregate demand and enhance infrastructure, including human capital to affect aggregate supply,” he said. “As a result, both aggregate demand and aggregate supply increased and the economy became bigger and bigger. With fluctuations, we observed lower inflation (around 2%), a lower unemployment rate (around 4%, booming stock markets, and higher GDP growth.

Needed: Higher Trade

Dr. Lee says we need higher trade to generate positive economic outcomes of lower inflation, lower unemployment, economic growth, and bull stock markets. “If a higher trade rate doesn’t resume, we will end up with higher inflation, higher unemployment, recession, and bear stock markets,” Dr. Lee said. “We must end the disruption in the supply chain to stave off lower trade levels and higher prices (inflation), which would lead to recession and bear stock markets.”

Dr. Lee states that the pandemic, beginning in early 2020 has changed everything, including both the supply and demand sides of the economy. Before the pandemic, the supply side grew relatively faster than the demand side. “We had economic growth with limited inflation, even with three rounds of QEs. Moreover, we had lower unemployment and booming stock markets. “However, with the ongoing pandemic, the supply side declined more than that of the demand side, even with Fed’s tapering policies. As a result, the economy is shrinking with higher prices (inflation), i.e., stagflation. Consequently, we are likely to have a recession and bear stock markets soon.”