Not everyone agrees with the “New Normal” theory of a slow economic recovery.
In fact, it seems like every day, more and more are buying into the “V.”
JPMorgan says robust growth from pent-up consumer demand will lead to a “V”-shaped bounce-back, contradicting the view popularised by Mohamed El-Erian that high unemployment and wealth destruction will cause stagflation — “muted growth,” as he puts it, at 2% or less for years.
Bloomberg: The worst recession since the 1930s has created a reservoir of demand that will buoy the economy, say a growing number of economists led by James Glassman at JPMorgan Chase & Co., former Federal Reserve Governor Laurence Meyer and Stephen Stanley at RBS Securities Inc.
“Whenever we have plunged off a cliff and fallen into a deep hole in the past, for a while the economy has a tendency to bounce back very quickly,” said Glassman, a senior economist at JPMorgan in New York. Glassman and his colleagues this month said forecasts of 3 per cent to 4 per cent growth in coming quarters may be too low given “pent-up” consumer demand.
This changing view of the recovery puts Washington in a tough spot — as Bloomberg notes, “The divergence highlights the dilemma for policy makers, who must decide whether to maintain record fiscal and monetary stimulus or begin to pull back and prevent a surge in inflation should growth accelerate.”
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