Ken Fisher: Does High Inflation Signal Recession?
Ken Fisher argues that high inflation is not a reliable predictor of recession, as economic indicators like inflation and job numbers are backward-looking. He contends that current inflation levels are not historically high, and only aggressive central bank tightening in response to worsening inflation could potentially cause a recession.
Summary
In this short clip, Ken Fisher directly addresses the question of whether high inflation and a worsening job market signal an impending recession. His central argument is that both inflation data and job market numbers are lagging, backward-looking indicators, meaning they reflect what has already happened rather than what will happen. As such, he dismisses them as reliable predictors of future economic downturns.
Fisher does, however, identify a specific scenario where inflation-related factors could contribute to a recession: if inflation were to worsen significantly and central banks around the world responded by tightening monetary policy aggressively, that policy response — not the inflation itself — could be the catalyst for a recession.
He also pushes back strongly on the characterization of current inflation as 'high,' arguing that from a historical perspective, present inflation levels are actually below the averages seen over much of the past 50 years. He points out that the world sustained periods of 5% annual inflation for extended stretches without falling into recession, suggesting that the current inflation environment is neither unprecedented nor inherently dangerous.
Key Insights
- Fisher argues that inflation and job market data are backward-looking indicators and therefore are not reliable predictors of future recessions.
- Fisher claims it is not high inflation itself, but rather a combination of worsening inflation followed by aggressive central bank tightening, that could actually cause a recession.
- Fisher strongly dismisses the notion that current global inflation qualifies as 'high,' using pointed language ('you're smoking the funny stuff') to emphasize his disagreement.
- Fisher contends that current inflation levels are actually below the historical averages seen over much of the past 50 years, framing present concerns as historically misinformed.
- Fisher points out that the world sustained roughly 5% annual inflation for long periods without experiencing recession, using this as evidence that elevated inflation alone does not doom an economy.
Topics
Transcript
[0:00] Isn't high inflation and a worsening job market an indicator for a recession? No. And the fact of the matter is whether it's inflation looking backward or job numbers looking backward, they aren't necessarily at all consistent with the future. Therefore, they're not predicted. Now, if you put a number on what high inflation means, it's really not high inflation that is predictor of recession. It's if you had much worsening in uh inflation and then the [0:31] central banks of the world were to tighten hard to try to fight that that might cause recession. But if you think high inflation is the inflation that's going on around the world now, you're smoking the funny stuff because if…
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