Straight from supply crunch to recession.
All of COVID seems like a case of impatience.
The fact that the pandemic would last years was kind of obvious by late spring 2020 -- when in the history of humanity have humans ever experienced a pandemic that didn't last for years/decades? (I'm not here to debate masks or whatever public health measures; that's entirely tangential to the point that pandemics don't just go away after a few months.) Pandemics do end. Just not in a few financial quarters.
The same thing is happening with "Transitory Inflation" now. The supply shock IS transitory and things WILL normalize, but only in the same sense that pandemics do eventually end. Shit takes years, not quarters.
I think by 2024-2025 we'll be in this weird state where supply is back to normal but where there have been years of policy aimed at crushing demand.
I'd argue the opposite. We print absolutely insane amounts of money, which is an indirect tax via inflation (and a regressive one at that, since the rich own more inflation-resistant asset classes than the poor, who don't really own any assets). Higher taxes and less money printing would make that hidden tax less hidden, which is good, but the core problem is spending/printing too much, not taxing insufficiently.
Basically manufacturing is at an all time low, and rebooting post-pandemic will be harder with higher wages given how strong the U.S. dollar is. Of course, wage stagnation is finally being corrected so there may be little to control that.
> And so what we need to do is we need to get demand down, give supply a chance to recover and get those to align. So how might we do that? Right now, in the labor market, there are two job openings for every unemployed person. It’s historically high-level. So in principle, and I’m not saying this will be easy to do, in principle, you could moderate demand, reduce demand to the point where job openings move down substantially, and the labor market gets much closer to being in balance. And that would affect … wages would still be moving up at healthy levels. They wouldn’t have to go down, but ultimately they would be at levels that would be consistent with 2% inflation.
I'm curious your thoughts on the intentional efforts are to crush demand, can you elaborate?
Vaccines weren't available until summer 2021, which was unexpectedly early, and still aren't widely available in some parts of the world. No reasonable "definition" puts the end of a pandemic at summer 2020, but "short and temporary" was certainly the messaging in March 2020.
What I'm saying is that in March 2020 (or perhaps April) it was was obvious that the world would not be out of the pandemic for years in the best case scenario, but many people believed things would be back to normal in weeks or perhaps months. Which... just doesn't have any historical precedent and was clearly wishful thinking. I remember expressing this on the phone to family and friends -- that covid would last years -- and no one believed me.
> I'm curious your thoughts on the intentional efforts are to crush demand, can you elaborate?
Central banks change interest rates in order to shift aggregate demand curves. "Curbing inflation" sounds less negative than "destroying demand", but the central tenant of central bank interest rate policy is that the two are causally related to one another.