The Economic Snow Globe

By Tony Moorby July 29, 2021

Over the years I’ve been fairly confident in dealing with economic issues, assessing market environments and even anticipating a few events but perhaps stopping at predictions. I prefer to leave those to the professionals, who these days, are everywhere with assistance from clever software and even a growing artificial intelligence capacity. When I worked in the auto auction business there were none, specific to the business. Our company got that ball rolling by hiring Tom Kontos who rapidly brought clarity and confidence to our interpretations of the various levels of the used-car marketplace.

He brought the figures and numbers to form the backbone of the industry’s first Used Car Market Report. Our editorial commentary and assessments made the publication highly sought after. Happily various forms continue today.

Today I view the morass of the economic outlook with such trepidation because nearly all the normal inputs have been skewed, especially by the hiatus of the coronavirus pandemic. Supplies and demands have been pushed and pulled in all directions.

Food, cleaning supplies and home products were an early indicator of spiked demand creating shortages and price increases. But things have reached global proportions and have touched almost every corner of production; food has been stretched with the attendant dropped jaws at the supermarket checkout. Parts and machinery shortages have slowed or even stopped production of all kinds of stuff for consumers who are eager to get things back to whatever is normal these days.

Trees haven’t stopped growing but housing demand has sent prices for all wood products through the roof (sorry).

All this at a time when a workforce’s 9 to 5 mentality went out the window long ago. Working from (a new) home is appealing for many with less of a need to be in commuting distance of the city so office space is now cheap and abundant. Maybe offices will be converted to apartments at this rate. 

Government subsidies, preciously needed to stem short-term poverty and provide continued housing, are now needing to be funded along with infrastructure and healthcare improvements. Taxes will be increased at every opportunity and for a very long time. We’ll look and feel more like Europeans in the not-too-distant future; lots of social services but high taxes as a norm.

Now the ogre of inflation looms threateningly large and the Feds are watching closely as pressure on wage raises bulges massively.

At the lower end of the wage scale, the incentive to get back to work is at its nadir, as people prefer the sofa to stacking shelves or flipping burgers. That’s going to end soon enough and wages, even at the low end, are likely to increase to attract workers back – more pressure on prices to go up and fuel the fire of inflation. 

If interest rates rise to stem the upward spiral, housing demand will probably come down; with the accompanying price decreases after folks have been willing to pay out the wazoo for a house. What happens to equity then?

Uncertainty will threaten the international markets that are already trying to assess the growing economic powers of places like China who are now investing heavily in counties which have huge mineral wealth but need money to extricate the ores and so on. Africa and South America come to mind as our influence diminishes. And all the while we’re in this political upheaval, it makes things even harder to figure out as even my political leanings have been stretched this way and that.

My crystal ball currently looks more like a snow globe. It’ll take a while to get settled.

Last modified on Thursday, 12 August 2021 23:58