No Soft Landings


“Back into Deflation”

Fiscal Takeover

Dallas and Visitors

“There’s no soft landing when you’re this far out of equilibrium.”

—Tom Hoenig

My last four letters featured highlights from the Strategic Investment Conference. I told you they would build toward a conclusion that might not be obvious. Today we’ll lift that final curtain.

Some of it is good news. Innovation will continue, technology will evolve, living standards will improve in many ways as the 2020s unfold. We had several sessions focused on technology and the future, which I have not written about. Positive things will happen in the background but our attention will be on a less pleasant foreground. News media rarely headline the amazing new technologies that will improve our lives. They focus on the negatives and crisis because that is what we humans read and they get paid by the number of clicks. Sad but true.

In the final panel we talked about what’s coming. No surprise, much depends on what the Federal Reserve and other central banks do. Trying to control the inflation that arose from their own past choices, they will try to tighten policy without going too far. Their history of making such “soft landings” is not impressive.

But the challenge is more than monetary. Fiscal authorities (legislatures and governmental authorities) had a hand in creating all this, too, and they must be part of any solution. Their history isn’t reassuring, either.

I have written before that we’ve reached a point where all the options are bad, but some are worse than others. People talk about the Fed scoring an economic “soft landing,” tightening just enough to control inflation, but not setting off a deep recession.

That would be nice. The chance that all the necessary pieces will line up that way? Somewhere between slim and none, and as my dad used to say, “Slim left town.” And while my memory isn’t perfect, I don’t believe any speaker at the conference believed in the possibility of a soft landing. And even if we get one, we have serious problems that predate this inflation. They haven’t gone anywhere.

But I’m getting ahead of myself. Let’s see what the SIC experts predict.