A widely predicted recession never showed up. Now, economists are assessing what the unexpected resilience tells us about the future.
The recession America was expecting never showed up.
Many economists spent early 2023 predicting a painful downturn, a view so widely held that some commentators started to treat it as a given. Inflation had spiked to the highest level in decades, and a range of forecasters thought that it would take a drop in demand and a prolonged jump in unemployment to wrestle it down.
Instead, the economy grew 3.1 percent last year, up from less than 1 percent in 2022 and faster than the average for the five years leading up to the pandemic. Inflation has retreated substantially. Unemployment remains at historic lows, and consumers continue to spend even with Federal Reserve interest rates at a 22-year high.
The divide between doomsday predictions and the heyday reality is forcing a reckoning on Wall Street and in academia. Why did economists get so much wrong, and what can policymakers learn from those mistakes as they try to anticipate what might come next?
You’ve got to have the euphoria stage first. “Soft landing achieved”, “the naysayers are wrong”, and “things are amazing now” are the kinds of things you hear at such times. The idea is to allay people’s fears so that they keep or increase the amount of money they have in the market. After that, you crash hard and fast so that people who can’t afford to ride it out, have to withdraw money at market lows. This maximizes return for the rich who can swoop in and buy on the cheap. Then the narrative will be “the signs were all there”, “any idiot could have seen it coming”, and “it’s the people’s fault for being irrationally exuberant and irresponsible with their money”.
This guy gets it
Hear ye, hear ye