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Goldilocks Economy?

by Richard Lerch

The story of Goldilocks and the Three Bears is one of the most popular fairy tales in the English language. As you likely recall, Goldilocks discovers a house in the woods in which she finds and tries three bowls of porridge, three chairs and three beds successively, with the first two being “not right” for opposite reasons and each time finding the third “just right”.

The finance industry has coined a term, the “Goldilocks Economy” (often attributed to economist David Shulman), to describe an economy that is not too hot or too cold but “just right”. Economic growth, employment, and inflation are balanced such that they are warm enough to prevent a recession but not so hot as to cause a rabid inflationary environment forcing the Federal Reserve to hike interest rates in an effort to slow inflation before it gets out of control.

Whether we are currently in a “Goldilocks Economy” has been debated widely in the press for the past several years. As we have stated often in Partner Talk letters, we know that no one can predict the future, but it does not mean that we should stick our heads in the sand and ignore what is occurring in the economic, financial and political environments.

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