Interesting piece:
Bloomberg’s Noah Smith notes –
“A demand-side boom probably will end of its own accord. If loose monetary and/or fiscal policy is driving up demand, then it will likely eventually cause inflation to accelerate, prompting a clampdown by the Fed. If animal spirits are responsible, it could lead to over-borrowing and an eventual debt crisis and crash — indeed, corporate debt is looking worrisome, as levels of risky debt rise and credit spreads narrow.
A supply-side boom, in contrast, is likely to moderate rather than crash. Any positive effect of tax cuts will eventually dissipate as the economy settles at its new steady state. A technological boom could peter out after a few years, or could even accelerate if new discoveries build on each other.
If I were forced to pick one leading explanation for the boom, I would go with animal spirits. Exuberant business sentiment and the build-up of risky corporate debt seem indicative of good times that won’t last.”