Seemingly everything is a double-edged sword these days from a macro perspective. More to the point: Many outcomes we'd normally describe as "good" have the potential to stoke inflation or, at the least, to keep inflation elevated, which in turn raises the specter of tighter money in perpetuity as central banks attempt to reclaim lost credibility. Of course, a prolonged period of relatively tight money may not be the worst thing in the world. Ostensibly, tight money will help restore price dis
2 thoughts on “Double-Edged Swords”
If corporate profits get squeezed layoffs could start or hiring could fall off at the very least. The knock on effects would be an erosion of wage growth. That’s assuming labor hoarding goes away.
I don’t believe economists/banks have correctly measured the dynamic of prime age consumers that have over extended on recurring housing cost verse their income using “excess savings” to fill the gap. Now that their savings is running out credit balances are raising rapidly while they try to maintain their consumption lifestyle. Their credit will eventually tap out, then consumption crashes, then a relatively large number of consumers can’t afford their over priced mortgage/rent.
The present dynamic of income vs life affordability is way out of whack and small real income gains won’t save the day. The idea of a soft landing is and always was a fairytale.