December 3, 2021
Recovering from the pandemic recession: Silver linings introduce instabilities
RIVERSIDE – (INT) - From a demand standpoint, the U.S. economy has completely recovered from the pandemic recession. And output, although not there yet, will return to its long running trend in the near-term future.

That is the upshot coming out of the annual Inland Empire Economic Forecast Conference.

The UC Riverside School of Business argues that while COVID-19 has been a human tragedy, it has never created the depression-like economic conditions predicted by so many – and fear of those conditions led to a far too vigorous stimulus response.

According to the new forecast, the current economy has been set on fire by an overly aggressive government reaction to the pandemic, and it is that incitement that is driving today’s ballooning inflation and supply chain disruptions.

“What we saw was one of the most tremendous levels of economic stimulus ever dreamed of,” said Christopher Thornberg, Director of the UC Riverside School of Business Center for Economic Forecasting and one of the forecast author. “Lots of public money created lots of private sector wealth – $29 trillion in household wealth in the United States to be exact – and that has overheated the economy.”

The effects of that wealth are showing in the form of high savings rates, excessive consumption, rapidly rising asset markets, and exploding home prices. Indeed, for every dollar lost during the pandemic, the U.S. government gave back three and a half dollars, according to the analysis.

Although the forecast is predicting a continuation of robust economic conditions in the nation, California, and the Inland Empire over the next few years, in the longer term, the excessive Federal stimulus will introduce instabilities such as long-run monetary inflation, deepen the nation’s long-run fiscal budget challenges, and possibly plant the seeds for the next downturn.
Story Date: November 27, 2021
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