Lyn Alden always gives very good arguments. I would recommend reading it complete if possible.
This one is the first I have read that has made me think a recession could be extremely mild and much later on than expected. But more importantly inflationary pressures in the economy will not disappear either as everyone is expecting, and hence higher rates. I am trying to think of counterarguments, but I have found it difficult
Her argument:
Higher rates don’t help much or have a limit in fighting fiscal-driven inflation. When debt is above 100% GDP, increasing fiscal deficits are inflationary and stimulative. Higher rates will only increase the interest expenses that get to the economy and ironically could increase inflation.
“In 2023 there are signs that the interest rate portion of the Federal Reserve’s tighter monetary policy may have gone full circle, and that its ongoing inflationary affects on the fiscal side are starting to compete with those disinflationary affects on the private sector. Homeowners and large corporations are locked in with fixed rates, and further rate hikes end up pouring more and more fiscal deficits into the economy by raising the Treasury’s average interest expense, which is ironically stimulatory to a certain degree.
If we summarize the moving parts together for the United States, what we potentially get is a longer and grindier type of inflation, and an economy that remains at stall-speed or enters a mild recession rather than experiencing a boom or a bust just yet. The 2022 spike in consumer prices came after massive 2020/2021 money supply growth. Now, we have a less impactful but more persistent type of large deficit spending, so we shouldn’t expect 9% inflation but we also have to be careful about predicting massive deflation.”
Interview explaining her argument: https://www.youtube.com/watch?v=O-Ns8CrkunI