Not Just Another Recession

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Top Highlights

• Coming out of the 2007–8 global financial crisis, most economists blamed sluggish economic growth on lack of demand.

• the supply constraints stemmed from more than just the pandemic.

• segments of the population exited the labor force at unusually high rates,

• post-pandemic rewiring of global supply chains to aim for more “friend shoring” and “near shoring.”

• Liquidity-charged financial markets decoupled from the real economy, which reaped only limited benefits from these policies.

• The result was financial market volatility that, if sustained, could threaten the functioning of global financial markets and further damage the economy

• encouraging a significant chunk of global financial activity to migrate from highly regulated banks to less well-understood and regulated entities such as asset managers, private equity funds, and hedge funds.

• resilience, optionality, and agility

• Three new trends in particular hint at such a transformation and are likely to play an important role in shaping economic outcomes over the next few years: the shift from insufficient demand to insufficient supply as a major multi-year drag on growth, the end of boundless liquidity from central banks, and the increasing fragility of financial markets.