MacroVoices #431 Lakshman Achuthan: 2024 Turning Points

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.