Ed Yardeni | Jun 06, 2021 11:55PM ET
The current business cycle has been unprecedented. It has been fast and furious so far. Last year’s recession was among the worst in US history, but it lasted just two months. The V-shaped recovery in real GDP has been one of the fastest on record, with real GDP likely to surpass its previous Q4-2019 record high during the current quarter. That means that the full recovery in real GDP lasted five quarters, with the economy now in the expansion phase of the business cycle.
Not surprisingly, this remarkable performance has been reflected in the unprecedented V-shaped recovery in corporate earnings, also to record highs, in recent months. That's propelled stock prices to record highs so far this year.
Meanwhile, policymakers continue to step on their growth accelerators, hoping that inflation and financial stability remain under control. Monetary policymakers are still purchasing $120 billion per month in fixed-income securities. Some of them are starting to talk about talking about tapering these purchases.
Tapering may be months away, and hiking the federal funds rate won't start until at least a few months after tapering is done. The Biden administration is pushing for more spending that will result in trillion dollar annual deficits in coming years even if taxes are raised to cover some of the spending.
Here are some of the most recent fast and furious consequences of all the high-octane fuel provided by the policymakers:
That’s all great until it isn’t—because, as we all know, booms are followed by bananas. Economist Alfred Kahn, an economic adviser to former President Jimmy Carter, warned lawmakers in the ’70s that if they didn’t get inflation under control, the nation was headed for a recession or a depression. To avoid scaring the public during his testimony at the Capitol, instead of saying “recession” or “depression,” he simply said “banana.”
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