I have a new piece the mountainDiscussing the possibility of a soft landing:

A useful definition of a soft landing would be a period of at least three years of economic growth with low inflation even after the labor market has fully recovered from the recession. Surprisingly, there is no evidence that the US ever achieved a soft landing, at least as far as we have economic data. . . .

Oddly, this is not the case in other countries, where soft landings are not particularly uncommon. Japan has extended periods of very low unemployment and low inflation. A notable example of a soft landing occurred in Britain in 2001–08, when unemployment hovered between 4.7 percent and 5.5 percent for seven years and inflation was relatively low. Australia had no official recession between 1991 and 2020.

Note that the US has never even achieved a soft landing when conditions were favorable, such as a period when inflation and NGDP growth were relatively moderate and so a tight monetary policy was not needed. Today, we have much higher inflation and NGDP growth, making it more difficult to achieve a soft landing. It’s like trying to land a 747 on an aircraft carrier in the middle of a typhoon.

If three years from now the US has roughly 3.5% unemployment and roughly 2% inflation, we can say that the Fed has achieved a soft landing. Unfortunately, that doesn’t seem very likely.

Rest assured. Without Covid, I think we could have achieved a soft landing in the early 2020s. But we will never know.

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