Another Year Older and Deeper in Debt
That pretty much could be anyone and everyone. Time marches on and a new year is upon us but the problems from 2022 haunt us still. I could do a whole column on all of the crap that we dealt with from last year, but I won’t. Let some other source give you the details of what you already know. I am about looking forward today.
There are concerns on multiple fronts; The war in Ukraine, inflation, recession, higher interest rates, higher crime rates, illegal immigrants. These are all carryovers from last year and while everyone seems to think they have some sort of answer, they don’t.
I like things simple as you well know by now and every issue we will be dealing with this year is way more complex than I make them out to be. I admit it. I try and dumb things down to root out a simple solution but these problems have no simple solution but I do believe that to start solving complex problems you need to start by simply understanding the root causes of those problems and over the last two years I have tried to unwind complex things simply.
For example: Inflation. The solution is more complex than the problem apparently because it seems the solution has evaded even the smartest economists. In my simpleton approach, I believe that if you decrease demand, pricing pressure should lesson. Pretty simple right? Well, it is what the Fed is trying to do with it’s more aggressive policy towards interest rates. Raise interest rates so it becomes more expensive to borrow. When it’s more expensive to borrow, corporations and individuals tend to spend less on corporate expansion and consumer products, thus reducing demand. Yes, I know it is more complex than that but in a nut shell, that is what is supposed to happen. In a normal economic environment, this strategy should work. It may take 12- 18 months for that higher interest rate environment to truly impact inflationary pressure, but it will. Not so fast skippy. The biggest engine of this round of inflation has been the Federal Government. Do not believe the BS about the war in Ukraine or Russian oil output. It is the hellfire spending of the US Government and no one else. Understandably, the government needed to flood the economy with cash in early 2020. If not, we would have sunk into something akin to the Depression in ‘30. It was the right thing to do. It should have been the only time the Federal Government pumped money into the economy. It wasn’t. The Biden administration continued to send trillions of dollars out into an economy that A. Did not need it, B. Could not absorb it. This was like busting a dam onto a flooded valley.
Americans are not really savers, they are spenders. They also would rather take on debt than pay it down. So, they spent, or tried to spend. Then spend some more. “$8 for a pound of Philadelphia Cream cheese, who cares, Biden will send me more money to pay for it.” You get my point. It was a perfect example of consumer gluttony and the system broke. Too many dollars chasing too few goods and services.
All that money and you have to wonder where it is going to come from. Hmm. We will print more and more of it. Let the Fed worry how to control the results. Pay for it? Huh? What? You mean we have to pay this bill? Come on, we are Democrats, we don’t pay bills, we make them.
Anyway, This is where we are at. Another 1.7 trillion into the economy late last year and they expect inflation to subside? I know, only around 400 billion of that is new sending but still, did we need it? Oh wait, 40 billion is being dropped in Ukraine so there is that.
I still think we will see a mild recession this year. Timing is impossible to say but my gut says sooner rather than later and I do not look at GDP to gauge a recession. I dig down and look at housing starts, permits, construction spending, employment gains, etc. Plus, on the ground. Shoppers in malls (old School) Coupon inserts (new school), traffic, restaurant availability.
Coupon inserts? Yes. As inflation reared it’s ugly head, actually physical coupons started disappearing. I am raising prices, why would I want to discount something I can get full price for plus my little inflationary bonus? So, coupons disappeared. The first sign of a recession or slowdown will be those coupons coming back. It’s simple. Producers will no longer have pricing power. They can’t reduce prices consistently so what they can do when things slow down is incentivize people to use a coupon to specifically buy their product. You see more of them in the mail, you know things are going to get bad. Don’t laugh, it works.
I wrote a column a while ago and it was about the pendulum swinging back towards the center. This had to do with politics at the time and while after looking at the mid-terms election results, I know it still has a bit of a way to go. It is moving though and that is a positive sign. Real quick, when was the last time did you hear a peep from anyone from “The Squad”? You haven’t because no one cares what they have to say. Period.
The pendulum could also be used for describing how crime has started moving in the right direction as well. Liberal policies about policing have failed in almost every major city and the people who live in those cities know it and want change. I am not saying we are going to return to “Stop and Frisk” but police are starting to make imroads into reducing crime and as long as liberal politicians stick with bringing in 2 million illegal immigrants a year and stay away from policing our cities, things will become safer.
Oh wait, I mentioned illegal immigration. Here is a simple problem with a simple solution. The Federal government should put time and effort into reducing the amount of illegal immigrants that are allowed to come into this country. Not hard. Build a wall, fly constant drones, I do not care. For 200 years there has been a process to allow legal immigration into this country. Sure it is a pain in the ass but not one person who has gone through it and legally became US citizens would ever say it was not worth it.
Why, all of a sudden do we need to allow over 2 million illegals into this country? Why are they different? Jews migrated legally to escape Nazi terror. Czech citizens migrated to escape Russian tyranny. They went through the hoops to become US Citizens. Escaping from drug gangs in Nicaragua is no different. I will never say that we should allow no one in this country. I am just saying, do it legally. No expedited processes. Tough crap, my grandparents had to do it, so should they. Oh, call me crazy but not one of these people should be allowed to vote until they become legal citizens.
We enter a new year and it looks to be the same as the old year and the only thing that will be changing is our age and the debt we are in. We made it through last year and I am sure we are going to make it through this year. While I am traditionally a grump, I do believe that this will be a much better year. I do think there will be a resolution in Ukraine. I think economically we will end up better than were we started. Lastly, the dim bulbs in the White House will only get dimmer and accomplish (damage?) less.
Here is to 2023!! Good riddance to 2022!