MacroVoices #431 Lakshman Achuthan: 2024 Turning Points
ECRI co-founder Lakshman Achuthan discusses global industrial growth upturn signals for 2024, predicting inflation will likely remain sticky or rise rather than continue falling, with central banks facing political pressure that may lead to policy mistakes similar to the 1970s inflation cycle.
Summary
Lakshman Achuthan from ECRI provides an in-depth analysis of current economic cycles and turning points. He explains that while the US was previously caught in a tug-of-war between cyclical downward pressures and fiscal spending, ECRI made a global industrial growth upturn call in December 2023, predicting that industrial production growth would bottom and turn up in 2024 across major economies including China. This recovery has dual implications - rising demand for industrial activities but also potential inflationary pressures. Achuthan argues that inflation may not return to the hoped-for 2% target before the next inflation cycle upturn begins, with goods disinflation potentially reversing to goods inflation, catching markets off-guard. He draws parallels to the 1970s secular inflation period, noting that from the late 1960s to early 1980s, inflation averaged 7% with huge cyclical swings and higher lows in each cycle. The discussion covers how central banks face political pressure that may lead to policy errors, with current professionals lacking experience in managing secular inflation since those with 1970s experience are now in their 90s. Achuthan emphasizes watching the future inflation gauge and global industrial indicators, noting that gold benefits from both commodity price inflation and as a hedge against extraordinary monetary policies. The conversation concludes with warnings about goods inflation returning as a component that could disrupt the prevailing narrative of controlled inflation.
About this episode
MacroVoices Erik Townsend & Patrick Ceresna welcome back, ECRI co-founder Lakshman Achuthan. They’ll discuss growth and inflation cycles, why inflation is likely to remain sticky, precious metals, energy, and much more. https://bit.ly/3yPlR7v ⚫ Follow Lakshman on X: https://www.twitter.com/businesscycle 🔻Download Big Picture Trading Chartbook: 📈📉: https://bit.ly/4c7SjjF ✅Sign up for a FREE 14-day trial at Big Picture Trading: https://bit.ly/46Ul2FD 🔴 Subscribe to Patrick’s Youtube Channel: https://www.youtube.com/@Patrick_Ceresna 🔴 Subscribe to Erik's Substack: https://eriktownsend.substack.com/ 🔴 Check out Energy Transition Crisis on YouTube: https://www.youtube.com/@EnergyTransitionCrisis1 🔴 Check out Nick's YouTube channel: https://www.youtube.com/c/Optionfinity ✅ Join OptionFinity discord: https://discord.gg/Rvnsv6Y 🔴 Subscribe to Nick’s Medium: https://medium.com/@ngalarnyk Please visit our website https://www.macrovoices.com to register your free account to gain access to supporting materials
Key Insights
- ECRI made a global industrial growth upturn call in December 2023, predicting industrial production growth would bottom and turn up in 2024 across major economies
- Inflation may not reach the hoped-for 2% target before the next inflation cycle upturn begins, creating a higher floor under inflation than expected
- Goods disinflation, which has been helping lower coincident inflation measures, may reverse to goods inflation as global industrial activity recovers
- Current financial professionals lack experience with secular inflation since those who managed the 1970s inflation are now in their 90s and no longer active
- During the 1970s secular inflation period, inflation averaged 7% with cycles showing progressively higher lows, creating embedded inflationary expectations
- Central banks face increasing political pressure that may lead them to make policy errors, potentially tightening too much and causing harder economic landings
- China's industrial and export sector, representing roughly 20% of its economy, is finally gaining cyclical traction after premature recovery expectations in early 2023
- Gold is benefiting from multiple factors including the global industrial upturn supporting commodity price inflation and serving as a hedge against extraordinary monetary policies and mounting debt levels
Topics
Transcript
This is Macro Voices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors. Macro Voices is all about the brightest minds in the world of finance and macroeconomics telling it like it is, bullish or bearish, no holds barred. Now, here are your hosts, Eric Townsend and Patrick Ceresna. Macro Voices episode 431 was produced on June 6th, 2024. I'm Eric Townsend. ECRI co-founder Lakshman Achuthan returns as this week's feature interview guest. We'll discuss the growth and inflation cycles, why inflation is likely to remain sticky, precious metals, energy prices, and much more. And I'm Patrick Ceresna with the Macro Scoreboard. Week over week. As of the close of Wednesday,…
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