The tidal wave of new money should trump the adoption of what is (at 5%) an historically normal interest rate.
This money supply explosion should have resulted in inflation. And it did. But it also should have resulted in boom-time economic activity.
Coming out of the pandemic recession, the economy should be in the midst of multi-year double-digit nominal growth (before the effects of inflation), and well above trend in real growth (after stripping out the effects of inflation). Instead growth has been petering out.
The good news: The pandemic emergency policies and all of the subsidies and moratoriums that came with it, are over (or coming to an end). This should normalize the labor supply (which has been in a shortage). And we need higher wages (a reset in wages to offset the reset in prices) — to restore the standard of living.
That being the case, we could be looking at a boom in economic growth, just as people have been looking for recession.
On a related note, I want to revisit some of my analysis of the long-term path of the stock market.