Odd Lots David Woo on What the Economists Got Wrong About the Stimulus
Aug 19, 2021
David Woo, an independent economist and former strategist at Bank of America, offers bold insights into the economy. He critiques mainstream economists for underestimating inflation, suggesting it will remain higher than expected. The discussion delves into recent data from the Consumer Price Index and the complex impacts of COVID-19 on labor and supply chains. Woo also highlights the U.S.-China relationship, examining how political shifts affect economic ties and potential future reforms.
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Persistent Inflation Concerns
- The recent CPI report shows moderating inflation, but core inflation remains high at an annualized rate of nearly 4%.
- Even 3-4% inflation poses a problem for markets calibrated to low Fed rates.
Average Inflation Targeting Gimmick
- David Woo believes the Fed's average inflation targeting framework is a gimmick to lower interest rates.
- He argues the Fed will raise rates if inflation rises, regardless of the framework, due to fear of runaway inflation expectations.
COVID-19 as a Negative Supply Shock
- David Woo argues COVID-19 is a negative supply shock, not a demand shock as Keynesian economics suggests.
- He emphasizes rising freight rates, reduced labor participation among women, and supply chain disruptions as evidence.