For much of modern history, even the richest nations have been subject to big perennial upswings and crashes in commercial activity almost as fixed as the four seasons.
Periods of economic growth get overstretched by increased risk-taking. Hiring and investment crest and fall into a contraction as consumer confidence wanes and spending craters. Sales fall, bankruptcies and unemployment rise. Then, in the depths of a recession, debts are settled, panic abates, green shoots appear, and banks begin lending more easily again — fueling a recovery that enables a new upswing.
But a brigade of academic economists and prominent voices on Wall Street are asking if the unruly business cycle they learned in school, and witnessed in practice, has fundamentally morphed into a tamer beast.
Rick Rieder, who manages about $3 trillion in assets at the investment firm BlackRock, is one of them.
“There is a lot of ink spilled on what type of landing we will see for the U.S. economy,” he wrote in a note to clients last summer — employing the common metaphor for whether the U.S. economy will crash or achieve a “soft landing” of lower inflation, slower growth and mild unemployment.
“But one point to keep in mind,” Mr. Rieder continued, “is that satellites don’t land and maybe that is a better analogy for a modern advanced economy” like the United States. In other words, dips in momentum will now happen within a steadier orbit.
