DoubleLine Podcasts

S11 E13: Dr. Ed Yardeni on Profits, Productivity and the Pragmatic Powell Pivot

Dr. Ed Yardeni, economist and President of Yardeni Research, discusses his new book “In Praise of Profits,” the pivot by Jerome Powell from healing unemployment to fighting inflation, his near-term outlooks on economic growth and inflation (28:52), his bullish case for U.S. equities (38:43) and his longer-term view on why the 2020s could become a decade of prosperity-creating advances in business productivity. “Productivity really is the source of prosperity,” Dr. Yardeni tells cohosts Jeffrey Sherman and Samuel Lau (13:42). “Productivity allows for wages to rise faster than prices. It allows for profit margins to stay high. And that’s what we want to root for. We want to give entrepreneurs the incentive to provide us with goods and services based on more and more productivity, which then allows them to pay their workers more – in real terms. It does nobody any good to see wages go up and then prices go up just as much.”

Contrary to the view of some that recent shortages of goods have been due to a breakdown of America’s supply chain, Dr. Yardeni’s analysis of the data says the problem stems from government fiscal overreaction to the COVID-19 pandemic in the form of excessive stimulus checks, combined with ultra-accommodative monetary policy by the Federal Reserve. That combination created excessive demand (11:36). The third round of stimulus checks by the federal government, he says, “was really what created this demand shock that in turn overwhelmed the supply system. So the supply disruption just didn’t occur out of nowhere. The system was just overwhelmed. As a matter of fact, if we look at 12-month average of West Coast port traffic, … it’s at an all-time record high.” This episode of The Sherman Show was recorded on Nov. 30, 2021.

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