From Investing.com: 2024-11-10 03:06:00

1. Modern Monetary Theory (MMT) has been under scrutiny as inflation soared in 2022 and 2023, but seems to be working now with inflation near 2.0%. The federal deficit remains wide, but MMT proponents are using fiscal stimulus to stimulate growth, despite rising interest costs on federal debt.
2. The inverted yield curve has historically signaled a credit crisis and recession, but the prevention of a credit crunch last March allowed the expansion to continue.
3. The Treasury yield curve has disinverted in September, with a slight positive spread. The Fed is cutting rates as a precautionary measure, unlike past disinversions followed by rate cuts due to crisis.
4. The Leading Economic Index (LEI) has inaccurately predicted a recession for two years due to its heavy focus on the manufacturing sector, which is less indicative of overall economic performance.
5. The Phillips Curve model failed to predict inflation due to a tight labor market promoting productivity growth without a recession.
6. The neutral interest rate debate emphasizes the importance of productivity growth in determining rates, with some advocating for lower rates due to falling inflation.
7. The Taylor Rule for setting interest rates depends on unmeasurable factors, leading to differing opinions on when rates should be adjusted.
8. The Sahm Rule, a recession indicator based on unemployment rates, signaled a recession in July but proved to be a false alarm as unemployment decreased.
9. Excess savings were expected to derail the economy, but rising real wages and positive wealth effects have kept consumers spending, as Baby Boomers retire and spend their savings.
10. The contraction of the M2 money supply did not lead to expected outcomes, suggesting that monetary policy may not be as crucial for economic growth as once thought.

Read more at Investing.com: 10 Long-Held Macroeconomic Theories That Don’t Hold Up in Today’s Economy