The past three years have been miserable. And we are coming out of the clouds. The soft landing is getting real. Nothing is guaranteed, but wow, we could pull this off.
Thank you for being the only economist outside of the MMT community who knew inflation was a supply issue, proved it with facts and pushed back against those who wanted to blame it on the spending. This is greatly appreciated.
You got that right. He told Obama to side with the banks and to flip a fish (too-small stimulus package) to the public, prolonging a recession that hurt millions of Americans. It’s galling to watch Jaimie Diamond self-appoint himself as a spokesperson for income inequality. These people have no conscience.
While the initial inflation caused by supply disruption was transitory, the situation was used by many corporations to pad prices beyond inflation in pursuit of windfall profits. Their strategy was largely successful to the detriment of people. Do we have the political will to put in place checks on windfall profit taking in the future? To counter the optimism of a soft-landing, could the middle east situation be brewing into a new supply disruption with global shipping imacts. https://youtu.be/J_YVJ-W-QYE?si=ugNBD-kQ9wGeZ10a
It is looking better, though the continued delay in starting to cut is still a risk. And while giving the Fed credit for what it has done, let's remember, that IS its job: target inflation with high employment.
BTW I think we should refer to success as "cruising speed" :)
Agree with you but everything costs 30 percent more and wage inflation is real . Lack of energy supply could also be an issue in the future . Financing the govt another issue . I’m not ready to say things are back to normal yet
Hi Claudia, I I run a global HR advisory business and virtually every client we talk with is struggling to hire people, and this has been true for 2+ years. The economy has been very robust and its clear to me that the Fed (spurred on by Trump) kept interest rates too low for a VERY LONG TIME.
I understand that Biden wanted to avoid a 2008 meltdown so his focus on pumping the economy during the pandemic made sense. But the inflationary spiral was starting far earlier and the ultra-low interest rate environment started before the pandemic, then leading to supply chain shocks during the pandemic.
Rather than see this as a "soft landing" I simply see the economy as being "non-normal" for more than a decade, over-heated from many political factors, and now finally coming back to some reasonable balance where interest rates are "real" again and companies can make realistic investment decisions. We can now actually balance interest-bearing securities against equities again!
Crypto and other speculative stocks took advantage of the zero-interest rate environment and investors (VCs) got sloppy. I hope we never go back to this ultra-low interest rate environment again, I think it damaged our expectations and now we're back in a more normal environment (ie. companies are focused on making a profit).
To me the big "inflationary" issue is not fiscal policy, it's demographics. All the research shows that the size of the workforce will peak in most developed economies (US is better off) and that will lead to more wage inflation. I think employers see this (my clients do) so they're investing in AI to automate as fast as they can. And it is getting harder and harder to hire, regardless of any economic slowdown. And yes, "labor hoarding" is starting to happen.
PS I was in Hawaii this last week and several of the coffee shops have signs "Help wanted - barista or server - $1000 bonus) - these are $15 an hour jobs!
Thanks for all your work (I love it) and just wanted to get involved in the conversation.
You deserve your victory lap. I don't like the "soft landing" analogy, though -- the economy doesn't stop in the way a plane does when it lands; it keeps on going. It might be better to think of it as "emerges from turbulence."
Love it: "We have not landed the plane softly yet, but we will next year. My definition of a soft landing is 2% inflation (or within spitting distance and unemployment around 4% (preferably below). We can see the runway."
The plane is clearly descending smoothly! One concern I keep having is whether the landing lane (runway) itself is clear, that there are no obstacles to punch holes in the tires. After all Russia-Ukraine, Hamas-Israeli, China-Taiwan issues, and our own persistent gloom and anxiety about the upcoming elections, all of these have not gone away. In addition, are we sure the Fed's rate hikes have no delayed (lagged) effects, i.e., we have seen the total effect of monetary policy? Keeping fingers crossed still.
Investors are buying up homes around the country driving up the price of homes. The Fed is only making the situation worse by increasing interest rates. This had nothing to do with the small checks handed to average middle- and low-income people. It was the large checks handed out to businesses and Wall Street speculation.
Thank you for being the only economist outside of the MMT community who knew inflation was a supply issue, proved it with facts and pushed back against those who wanted to blame it on the spending. This is greatly appreciated.
You got that right. He told Obama to side with the banks and to flip a fish (too-small stimulus package) to the public, prolonging a recession that hurt millions of Americans. It’s galling to watch Jaimie Diamond self-appoint himself as a spokesperson for income inequality. These people have no conscience.
While the initial inflation caused by supply disruption was transitory, the situation was used by many corporations to pad prices beyond inflation in pursuit of windfall profits. Their strategy was largely successful to the detriment of people. Do we have the political will to put in place checks on windfall profit taking in the future? To counter the optimism of a soft-landing, could the middle east situation be brewing into a new supply disruption with global shipping imacts. https://youtu.be/J_YVJ-W-QYE?si=ugNBD-kQ9wGeZ10a
Why Does Anyone Listen to Larry Summers Redux
Perhaps Summers serves as a foil for the applied/policy economists who’ve been right the past 20 years?
Fed is causing pain for housing and autos. When will they wake up and cut rates.
Should the Fed of raised rates at all?
It is looking better, though the continued delay in starting to cut is still a risk. And while giving the Fed credit for what it has done, let's remember, that IS its job: target inflation with high employment.
BTW I think we should refer to success as "cruising speed" :)
Agree with you but everything costs 30 percent more and wage inflation is real . Lack of energy supply could also be an issue in the future . Financing the govt another issue . I’m not ready to say things are back to normal yet
Hi Claudia, I I run a global HR advisory business and virtually every client we talk with is struggling to hire people, and this has been true for 2+ years. The economy has been very robust and its clear to me that the Fed (spurred on by Trump) kept interest rates too low for a VERY LONG TIME.
I understand that Biden wanted to avoid a 2008 meltdown so his focus on pumping the economy during the pandemic made sense. But the inflationary spiral was starting far earlier and the ultra-low interest rate environment started before the pandemic, then leading to supply chain shocks during the pandemic.
Rather than see this as a "soft landing" I simply see the economy as being "non-normal" for more than a decade, over-heated from many political factors, and now finally coming back to some reasonable balance where interest rates are "real" again and companies can make realistic investment decisions. We can now actually balance interest-bearing securities against equities again!
Crypto and other speculative stocks took advantage of the zero-interest rate environment and investors (VCs) got sloppy. I hope we never go back to this ultra-low interest rate environment again, I think it damaged our expectations and now we're back in a more normal environment (ie. companies are focused on making a profit).
To me the big "inflationary" issue is not fiscal policy, it's demographics. All the research shows that the size of the workforce will peak in most developed economies (US is better off) and that will lead to more wage inflation. I think employers see this (my clients do) so they're investing in AI to automate as fast as they can. And it is getting harder and harder to hire, regardless of any economic slowdown. And yes, "labor hoarding" is starting to happen.
PS I was in Hawaii this last week and several of the coffee shops have signs "Help wanted - barista or server - $1000 bonus) - these are $15 an hour jobs!
Thanks for all your work (I love it) and just wanted to get involved in the conversation.
You deserve your victory lap. I don't like the "soft landing" analogy, though -- the economy doesn't stop in the way a plane does when it lands; it keeps on going. It might be better to think of it as "emerges from turbulence."
Love it: "We have not landed the plane softly yet, but we will next year. My definition of a soft landing is 2% inflation (or within spitting distance and unemployment around 4% (preferably below). We can see the runway."
The plane is clearly descending smoothly! One concern I keep having is whether the landing lane (runway) itself is clear, that there are no obstacles to punch holes in the tires. After all Russia-Ukraine, Hamas-Israeli, China-Taiwan issues, and our own persistent gloom and anxiety about the upcoming elections, all of these have not gone away. In addition, are we sure the Fed's rate hikes have no delayed (lagged) effects, i.e., we have seen the total effect of monetary policy? Keeping fingers crossed still.
Investors are buying up homes around the country driving up the price of homes. The Fed is only making the situation worse by increasing interest rates. This had nothing to do with the small checks handed to average middle- and low-income people. It was the large checks handed out to businesses and Wall Street speculation.