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Weighing in on the Economic Outlook

Here is a link to my published comment on today's NY Times column by one of my favourite economists, Paul Krugman. Ironically, I think the growing spectre of recession will result in buoyant stock and bond prices as the sluggish economy brings inflation and interest rates down.

Layth | Victoria, BC What ever happened to the 12 to 18 months lag in monetary policy effects thesis? An inverted yield curve is a sign of collective pessimism, and M2 is shrinking to match! I haven't been watching the Fed's balance sheet as much as I should, but only in the last eight months of 2022 did the Bank of Canada start raising interest rates with a vengeance. Also, unemployment is a lagging indicator and has historically spiked quickly after it reaches the bottom. I'm a recession believer. I think an uptick in US unemployment to 4.6% by year-end is still a very real possibility. It'll be this time next year before the full impact of this historically large and fast-tightening cycle will be felt. Then, of course, it will be a US election year, muddying things up!

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