These are all good points. At the end of the day, the Federal Reserve has very blunt tools, and I would be shocked if they somehow defy all odds and navigate a soft landing. I recently visited London with my family and dropped by the Bank of England museum. They had an exhibit in which visitors had to balance a steel ball on a marker that depicted a 2% inflation rate in a tube. Visitors would then push a button that would create an “economic shock“ and the tube would move. The visitor would then struggle to return the ball to the 2% inflation marker. Inevitably, they would overshoot several times before they could get back to the 2% level. This is affectively what’s happening right now. I think it is highly unlikely that the Fed returns to 2% inflation without triggering a recession and brief period of deflation first. That’s just the way it works.
These are all good points. At the end of the day, the Federal Reserve has very blunt tools, and I would be shocked if they somehow defy all odds and navigate a soft landing. I recently visited London with my family and dropped by the Bank of England museum. They had an exhibit in which visitors had to balance a steel ball on a marker that depicted a 2% inflation rate in a tube. Visitors would then push a button that would create an “economic shock“ and the tube would move. The visitor would then struggle to return the ball to the 2% inflation marker. Inevitably, they would overshoot several times before they could get back to the 2% level. This is affectively what’s happening right now. I think it is highly unlikely that the Fed returns to 2% inflation without triggering a recession and brief period of deflation first. That’s just the way it works.