How Goldilocks Came to the U.S. Economy

 As an important new paper from Mike Konczal of the Roosevelt Institute points out, there are two main stories out there that might explain why U.S. inflation has come down so quickly and painlessly. 

https://rooseveltinstitute.org/publications/supply-side-expansion-has-driven-the-decline-in-inflation/

For what it’s worth, these stories aren’t after-the-fact rationalizations, cobbled together to make sense of events nobody expected. 

On the contrary, several economists, myself included, were telling these stories even during the winter of our inflation discontent, arguing that the kind of soft landing — disinflation without recession — we now seem to be experiencing was indeed possible.

The other optimistic story has, I believe, a better name, although I would say that, since I think I coined it myself: long transitory, a play on long Covid. 

This is the argument that as late as early 2023 inflation was still elevated because of lingering supply disruptions from the pandemic, but that inflation is coming down now because the economy is finally normalizing.

Paul Krugman New York Times 11 September 2023

https://www.nytimes.com/2023/09/11/opinion/inflation-unemployment-phillips-recession.html


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