Inferring the most generic type in the presence of polymorphic recursion is not decidable. It's not that HM has a problem with it, it's just plain not possible.

Inferring the most generic type in the presence of polymorphic recursion is not decidable. It's not that HM has a problem with it, it's just plain not possible. OCaml and Haskell support it by requiring type annotations. In general, polymorphic recursion is occasionally useful for some specific data structures (see Okasaki's purely functional datastructures for some examples) and when playing with GADTs.