This current recession and supply line shortage may perhaps be the fault of the US Federal Reserve Bank (privately owned BTW). I have read that between 2008 and 2014 they printed three hundred years worth of money. During Covid they printed even more ! Governments and central banks simply can not continue to print fiat currency in these quantities without it having an effect on the overall economy. The history of many nations supports this theory.
Austin,
Back before the housing crisis, “Maggie” and I lived in Greenpoint and before there was a housing crisis I knew we were on a unsustainable path. All I knew is that it would end badly, but somehow the U.S. and the world reinflated a collapsed economy. One bubble led to another…
Failed businesses stayed alive, others were “rescued” deemed too big to fail, and pretty much the reset that should of happened didn’t.
Back in 1976 I graduated High School, and I could not get even a minimum wage job, that’s how bad the economy was. I experience double digit inflation and double digit unemployment.
I have a signed copy of Alan Greenspan’s book “Irrational Exuberance” because I went to a book signing when he was promoting the book. The biggest lesson was how globalization led to and created “disinflation” even though wages remained stagnant for decades. Pretty much the age of disinflation was fueled by cheap imported goods and a form of consumerism fostered by places like Walmart and warehouse shopping like depo’s like BJ’s or Sam’s.
I believe the age of abundance and disinflation is over. China has clear ambitions, but I think they “Jumped the Shark” and made a huge policy error that will lead to a collapse. Pretty recently it has become evident that Globalization is kinda done, and remember Globalization, cheap foreign labor, and export economies of developing countries were responsible for the disinflation we had and enjoyed.
But know I’m not a typical American consumer, and only a little more than a year ago I experienced Walmart for the first time. Pretty much I am not a consumer of cheap goods mostly from China. I grew up poor, escaped poverty, and have a different set of values.
So China made clear their ambitions and is not really going to be a fair player, and they will experience a population ‘Cliff” because not only will their population collapse, but it will also age, and because of their one child per family the young people that do exist are mostly boys further effecting and deepening a population collapse.
In history the prosperity and growth we enjoyed was mostly due to the population explosion after World War 2. Pretty much a baby-boom created a consumer economy a a tremendous expansion. Conversely In the U.S., Europe, Japan, and now China we have an aging population which is a drag on the economy. Taken further is that no economy can easily grow without an increasing population. Here in the U.S. this need was filled by immigration.
So the fatal mistake in China is that the collapse will be rather sudden, and before it developed a domestic market and a middle class. Pretty much the idea that China will become the world’s largest economy might be a myth, or if it does exceed the economy of the U.S. in size it will collapse rather abruptly and like its population fall off a cliff. I say it will be a very short “Empire” for China, and pretty much the default will come back to the U.S. How do you increase or grow your population with a female shortage?
So with de-globalization underway there are costs to develop domestic infrastructure and a new learning curve because we gave away lots of technology and manufacturing. I’m not so sure we have the capabilities to send a man to the moon anymore that’s how badly we ran ourselves down. The U.S has no heavy boost rocket capabilities anymore, and to emphasize the point how do players like Elon Musk and Virgin Airlines fill the void. Anyways lots of back filling has to occur to fill in erosion.
I believe in regression to the mean. Pretty much this is just statistics, and the printing of mucho money is a fatal mistake that leads to an "age of shortages.” Back in 2007-2008 this printing of money just “Kicked the can down the road,” and eventually it will come to either a collapse that should of happened or a long-long time of just muddling sideways perhaps for decades, or a combination of the two above scenarios.
I think the FED will keep on jacking rates at 0.75% until something happens. The speculated 1.0% hike would spook the market, and as it is we live in scary times that will never return to “normal.” The housing shortage I don’t think will go away, and at worse affordability and prices kinda go just sideways, perhaps for a very long-long time. Again regression to the mean, but perhaps because real estate is a hedge against inflation there is potential to increase income disparity even further. The haves and have nots will become more polarized.
I think an unintended consequence is that the housing market has a large group of mortgages that were either financed at record low rates like we did, or refinanced to historically favorable rates. This kinda creates a dilemma where homes that locked in these historically low rates become a “Dead Pool” where owners of homes that have record low mortgage rates will favor keeping those homes kinda forever.
Meanwhile people who don’t own homes get left farther behind as inflation diminishes their standard of living… Home affordability is the deciding line of the haves and have nots…
BTW my expenses are about 2/3rds of what they were when I was working and living in Manhattan, and to compound this my standard of living and quality of life are much higher. I wonder how many people are doing what I did, and if that this is the real reason for a worker/labor shortage.
I also say that the slow speed of productivity is not being factored in. Say my kitchen remodel took twice the time to complete. Pretty much very simple math when you consider output. How can an economy be growing when it takes twice as long to do a task? Funny math in my book. Eyes wide open: this is the new normal; and welcome to the “age of shortages” and a prolonged period of inflation that will destroy our economy slowly over time.
In 2007-2008 we had a choice… Now we don’t have one… Should the economy (ours and the world) been allowed to collapse bach in 2007-2008? Perhaps a slow decline over time is the better choice that a financial A-Ma-god-DEN.
At this point it is “Oh-well…”
Cal
