Kelly added that the rise in international trade can often compensate for a slowdown in domestic demand because the Internet allows businesses to find customers around the world. And he concluded that growth in the services sector has “made the economy more stable and, importantly, less sensitive to interest rates.”
Across the economics profession, many are not so reassured.
Thomas Herndon, an economics professor at John Jay College of the City University of New York, doesn't think the sophistication of large companies will provide long-term comfort when considering recession risks. He said there were “so many causes” for the economic downturn, some of which were not directly related to financial instability.
Herndon cited the work of 20th century Polish economist Michal Kalecki, who argued that business leaders felt “undermined” by maintaining full employment. Kalecki argues that with their significant influence over policy, they can help introduce restrictive economic policies that end the period of economic expansion and reset the economy with a more flexible and more acceptable workforce. did.
And Herndon said he thinks the old-fashioned “bubble” mania and “credit cycle” are still dangerous.
James Knightley, chief international economist at the World Bank ING, said breaking the long-standing business cycle will be the “holy grail of central banks.” Starting in 2020, the Fed's “willingness to use innovative tools,” such as the immediate creation of lending facilities to keep credit flowing on Main Street and repair bank balance sheets, has led to the Fed's decision to prevent a “financial crisis.” There are more tools available to reduce the likelihood of this happening.” It’s an economic downturn,” Knightley said.
