It's an idea so radical that in mainstream academic and financial circles, it borders on heresy -- the sort of thing that in the past only Turkey's populist president, Recep Tayyip Erdogan, or the most zealous disciples of Modern Monetary Theory would dare utter publicly.

But the new converts -- along with a handful who confess to being at least curious about the idea -- say the economic evidence is becoming impossible to ignore.

...

This is, the contrarians argue, because the jump in benchmark rates from 0% to over 5% is providing Americans with a significant stream of income from their bond investments and savings accounts for the first time in two decades. "The reality is people have more money," says Kevin Muir, a former derivatives trader at RBC Capital Markets who now writes an investing newsletter called The MacroTourist.

...

Einhorn notes that US households receive income on more than $13 trillion of short-term interest-bearing assets, almost triple the $5 trillion in consumer debt, excluding mortgages, that they have to pay interest on. At today's rates, that translates to a net gain for households of some $400 billion a year, he estimates.

We would note also that present structural interest rates aren't actually "high" -- they're still historically a bit low (with the average prior to the QE era being around 6%). Money does need some time value for the economy to work properly, we've been saying around here for over 15 years...

We've suspected for a while that Jerome Powell secretly agrees with this stance, too.

(A final point, consumer interest rates have lost most coupling from the Funds rate and similar rates a long time ago. With usury laws buried, typical consumer credit card rates have been north of 22% for a long time. When the funds rate went up from 0% to 5%, these credit card rate levels bumped up to 25-30%. So what? That's just not a significant enough proportional change to make a difference. We just don't see many out there who would make different buying decisions on a 30% CC versus a 25% CC; and the population who would default at each rate level is probably the same. Therefore, overall, we would think that Einhorn's point about consumers ending up with more cash when structural interest rates go up as being on the balance, the prevailing factor.)

...

Yet Mr. Kelly of J.P. Morgan lists various reasons that periods of U.S. economic growth may be elongated and less chaotic going forward. Federal deposit insurance, introduced after the Depression, sharply reduced bank panics and failures. Vastly improved information on inventory levels among goods-producing businesses, he said, has "tamed" the inventory cycle, preventing mismatches between supply and demand that can cause mass layoffs.

...

[But] Mr. Herndon noted the work of the 20th-century Polish economist Michal Kalecki, who argued that business leaders feel "undermined" by the maintenance of full employment. Using their substantial influence over policy, Kalecki argued, they can help institute restrictive economic policies that bring times of economic expansion to an end and reset them with softer, more tolerable labor power.

And Mr. Herndon said he thought old-fashioned "bubble" manias and "credit cycles" remained a danger, too.

It's remarkable given economists were expecting 1.5% annualized GDP growth last quarter. It's even more remarkable considering a year ago they were all but certain there'd be a recession by now and the economy would grow at a meager 0.2% rate

Wild idea -- what if the main cause is that the US has best normalized interest rates to a functional level? I.e. malinvestment at the top is curtailed, and people can accrue savings again. Just a thought.

The report, compiled by the progressive Groundwork Collaborative thinktank, found corporate profits accounted for about 53% of inflation during last year's second and third quarters. Profits drove just 11% of price growth in the 40 years prior to the pandemic, according to the report.

Costs have come down substantially, and while corporations were quick to pass on their increased costs to consumers, they are surprisingly less quick to pass on their savings to consumers," Liz Pancotti, a Groundwork strategic adviser and paper co-author, said.

Some of the reasons it's hard to build are complex. Interest rates have surged, which raises the costs of both buying homes and building new ones. Labor shortages in construction-related trades remain dire, and intermittent supply-chain issues persist.

Those problems will be difficult to resolve. But a more basic one should (theoretically) not be so challenging: local zoning rules and regulatory environments that obstruct development, including in many places that claim to care most about residents burdened with unaffordable housing costs.

New York City is on track to complete only 11,300 new residential units this year, according to a report released Wednesday by the New York Building Congress, a trade group. That's roughly half the number completed last year, which were already too few. In a city of 8.3 million, where rents are stratospheric, it's positively pitiful.