Do we need a large dose of 'irrational exuberance'?

"The global economy is in a new expansion cycle and output will return to pre-covid crisis levels by the fourth quarter, according to Morgan Stanley economists," wrote Enda Curran. "Predicting a 'sharp but short' recession, the economists say they expect global GDP growth will trough at -8.6% year on year in the second quarter and recover to 3.0% by the first quarter of 2021." "Data from the Fed (US Federal Reserve) on Thursday showed its peer banks around the world this week tapped it for the fewest dollars in nearly three months", which "Coupled with other indications of slackening demand for the Fed's bevy of emergency liquidity facilities, the reduction in currency swap usage is for many analysts a sign that global financial markets are returning to near-normal after being upended by the coronavirus outbreak in February and March," wrote Dan Burns and Megan Davies. "The German economy should return to a growth path in the third quarter after an expected double-digit contraction between April and June, Klaus Wohlrabe, an economist at the Ifo institute said on Wednesday." The German economy suffered falling output for two quarters, which qualifies as a recession. "Gold, forests, property stocks, inflation-linked bonds - these are just some of the assets investors are pouring money into on the view that the recent explosion of government spending and central bank stimulus may finally rouse inflation from its decade-long slumber." In 2008 governments relied mainly on monetary policies by central banks, but this time, fiscal spending has also increased. The International Monetary Fund (IMF) predicts a 4.9% contraction of global GDP this year and is not so sanguine about recovery next year. A majority of 160 economists polled by Reuters predict a weak inflation because they expect a "deep slump in demand" as the virus hits livelihoods. Governments love inflation because it reduces national debt. However, if prices rise too far or too fast it may make people angry and there is a danger of losing elections, as the Congress discovered in 2014. "UK debt is bigger than GDP for the first time in 57 years" as "Public sector debt was fractionally below two trillion pounds at the end of last month - equivalent to 100.9 percent of GDP." "The Federal Reserve struck the right tone in its first pandemic-era economic outlook, suggesting years of extraordinary policy support for an economy facing a slow and long slog back, according to a majority of economists in a Reuters poll," wrote Shruti Sarkar. Recovery can take many shapes but investors will not risk their money until they know what to expect. That might slow things down even further. Perhaps, some irrational exuberance might help.