Do longer expansions store up trouble for the future?
By Scott Sumner
A recent FT article criticizes the view that we should try to eliminate the business cycle: All this begs the question of whether longer really is better when it comes to business cycles. Recessions are a natural and normal part of capitalism, not something to be avoided at all costs. Indeed, the Deutsche Bank economists argue that productivity would be higher and American entrepreneurial zeal stronger if the US business cycle had not been artificially prolonged by monetary policy. ....
In a previous post, I argued that public opinion was a slippery concept, not well measured by opinion polls. One of my examples was kidney markets: Rather than being a stable parameter, public opinion is very fragile. Polls might show that most people believe X,...
Is leverage a problem for the US economy, compared to 2010? It really doesn't look like it.
The US economy is (very) slightly less leveraged now than in 2010.
Basically, households and financial corporations deleveraged, while nonfinancial corporations and the government increased their leverage. These effects almost perfectly balance out.
Also, the nonfinancial corporation leveraging was partly done to finance dividends and share buybacks without repatriating profits from tax heavens. It seems that they have reversed course in the past year, probably because of tax incentives to repatriate these profits, as well as interest rate increases.