Jeremy Siegel's 5 Economic Predictions Amid Russia-Ukraine War
3. Worse crises could follow.
The Russia-Ukraine crisis raises additional “hyper” uncertainties, including the “possibility” that it could “incentivize [President Xi Jinping of China] to move onto Taiwan,” Siegel said.
From a standpoint of U.S. economic impact, such a move would be “far more serious” than the Ukraine attack, he told viewers, adding “Russia is not an economic giant.” But it’s too soon for Xi to make any moves based on what’s happening in Ukraine, Siegel predicted.
Putin attacking a NATO country would be a black swan event, but, despite his throwing around a warning about nuclear weapons, most experts seem to think he won’t wage war on a NATO country, Siegel said. But if he does, the U.S. would be pulled into another war, he said.
4. The Fed may use the war as an excuse to not tighten monetary policy.
“The Fed is far more important than Ukraine,” Siegel said, apparently meaning when it comes to U.S. economic impact.
“I am concerned that problems in Ukraine will be used by the Fed as an excuse not to tighten as much as I believe they must tighten to control inflation,” he said. “The Fed is so far behind the curve that not moving rapidly will be the third greatest policy mistake in the 110-year history of the Federal Reserve.”
The first big mistake was the Fed not acting during the Great Depression and “letting the banking system fail,” he said.
The second was using the Organization of Arab Petroleum Exporting Countries’ (OPEC) embargo of the 1970s, which raised oil prices, as an excuse “not to tighten and, in fact, they let the money supply increase to try to offset the contractionary forces of the embargo,” he said.
Similarly, the Fed should not get scared about tightening now due to rising energy prices, he added.
Fed Chair Jerome Powell may be signaling what his plans are next week, when he testifies before Congress, Siegel said.
5. Inflation will continue for the foreseeable future.
Siegel predicted that inflation will likely continue through 2023, adding he hoped it would ease up by 2024. The Fed has been moving much too slowly to significantly ease inflation this year, he added.
(Pictured: Jeremy Siegel)
