My case for a global economy soft landing

I'm reading Seven Crashes: The Economic Crises That Shaped Globalization by the economic historian Harold James.

James makes a distinction I find useful. A crisis caused by insufficient supply can push firms to find new suppliers, invest and expand trade. A collapse in demand can have the opposite effect: markets contract and countries turn inward. His history follows that tension through seven crises, from the 1840s to COVID-19.

The oil shocks of the 1970s and the financial crisis of 2007–2008 illustrate the difference. One made essential inputs scarce and expensive. The other damaged balance sheets and spending. Both caused pain, but the route to recovery was different.

The difficulty in September 2023 is that supply and demand shocks are happening together. The pandemic disrupted production and transport while changing what people bought. The war in Ukraine put further pressure on energy and food supplies. Inflation then weakened purchasing power, while higher interest rates began to restrain spending and investment.

That mixture is why I still see a case for a soft landing. If supply recovers, some price pressure can ease without requiring demand to collapse. Businesses and households would have more room to adjust. It is a possibility worth taking seriously alongside the recession scenarios.

There are clear risks to that view. Weakening demand can feed on itself, and interest-rate changes take time to work through the economy. China's property problems add another source of uncertainty: lower confidence and spending there can affect businesses well beyond China.

I would watch whether inflation is easing because goods and services are becoming easier to supply, or because people and firms are pulling back sharply. The same headline number can conceal very different conditions.

James's distinction helps me ask a better question about this cycle: which part of the economy needs to recover, and what is preventing it? A soft landing depends on supply improving while enough demand survives the adjustment. That is the case I am making, and the condition against which I would test it.