Mr. Kelly emphasized the importance of international trade in offsetting slowing domestic demand, as businesses can now reach customers worldwide thanks to the internet. He also highlighted the growth of the service sector, which has made the economy more stable and less sensitive to interest rates.
However, not everyone in the economics profession shares the same level of confidence.
Thomas Herndon, a professor of economics at John Jay College of the City University of New York, remains cautious when considering recession risks. He believes that the sophistication of big businesses may not provide long-term reassurance, as there are multiple causes for downturns that are not necessarily related to financial instability.
Herndon referenced the work of economist Michal Kalecki, who argued that business leaders may feel threatened by full employment and use their influence to implement restrictive economic policies that can end periods of economic expansion.
Furthermore, Herndon warned about the continued danger of “bubble” manias and “credit cycles”.
James Knightley, chief international economist at ING, described eliminating the traditional economic cycle as the “holy grail of central banking”. He praised the Federal Reserve for its use of innovative tools, such as the creation of lending facilities, to support credit flow and stabilize bank balance sheets since 2020.
