The increase in international trade, Mr. Kelly added, can often offset slowing domestic demand as companies can find customers around the world thanks to the Internet. And the growth of the services sector, he concluded, “has made the economy more stable and, more importantly, less vulnerable to interest rates.”
Many economists don’t feel so confident.
Thomas Herndon, an economics professor at John Jay College of the City University of New York, doesn’t find much comfort in the increasing complexity of large companies when weighing recession risks in the long run. There are, he said, “many, many, many causes” of downturns – some of which are not directly related to financial instability.
Mr. Herndon pointed to the work of 20th-century Polish economist Michal Kalecki, who argued that business leaders feel “undermined” by maintaining full employment. By using their significant influence in politics, Kalecki argued, they can help usher in restrictive economic policies that end periods of economic boom and leave them with a softer, more bearable workforce.
And Mr. Herndon said he believes old-fashioned “bubble” manias and “credit cycles” also remain a danger.
Eliminating the long-running business cycle would be “the holy grail of central banking,” said James Knightley, chief international affairs economist at the World Bank ING. “The Fed’s willingness to use innovative tools” — like spontaneously creating credit facilities to keep credit flowing on Main Street and repairing bank balance sheets since 2020 — gives it “more leverage to move to reduce the likelihood of a… “Downturn,” said Mr. Knightley.
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2024-04-11 09:02:54
www.nytimes.com
