Did you do a lot of “this time is different” thinking about the markets during the pandemic?
Did you flip your savings from boring mainstream stocks and mutual funds into meme stocks, cryptocurrencies and SPACs?
Did you buy residential real estate, figuring that, “it always goes up.”
Or, if you’re of a less markets-oriented persuasion, did you embrace modern monetary theory (MMT) and assume the government was, from now on, going to give everybody a job and boost wages and regulate away those pesky booms and busts that so regularly ravage the capitalistic economy?
If you gave in to any of that “this time is different” thinking over the past two and a half years, today must seem like a particularly disappointing and deflating time.
We’re back to worrying about interest rates and inflation, gas prices, employment rates and consumer sentiment. Stocks have stopped going up forever. So have house prices.
Some guy somewhere made a bunch of money playing with leveraged call options on GameStop, but that more than likely wasn’t you. Most people into meme stocks traded away the pandemic cash governments sent them, buying and selling multiple times. Oh well, at least the trading platforms made money.
Cryptocurrencies are great for drug dealers, porn peddlers and hackers. For most folks, they’re a way to invest money in a sure thing that fails, just like most tips on junior mining stocks and lucky lottery numbers.
When it comes to economics, MMT has evaporated from “the conversation” that even lefties are having. MMT makes total sense unless you try to use it in the real world. Of course, we didn’t get anywhere near to actually employing MMT because the inflationary storm it would have surely brought began before it could even get started. Massive government “stimulus” spending hit supply chains that had badly reduced capacity, sending prices soaring as optimistic consumers decided to spend like it’s 2021.
That boring old thing called supply-and-demand kicked in, and when a bunch of new demand was created for a reduced amount of finite goods and services, an unfashionable degree of inflation pounced.
We’ve moved into a world that seems decidedly normal, in a pre-2020 way. Tight crop supplies have been leading to extremely high prices, exacerbated by export restrictions, rumours of export restrictions, hoarding, and all the other things that come along when people and their governments fear hunger.
Unemployment is very low and wage demands are increasing.
The prices of goods and services are rising as limited quantities of finished goods and labour sort out who in our society really wants something.
Dreamy dreams of everybody driving an electric car soon have been dashed as battery and electronics makers fight over the limited amounts of critical commodities that everybody needs lots of and nobody has much of.
Government policies designed to make the price of fossil fuels go high and discourage people from investing in fossil fuel production have worked perfectly. So perfectly that we’re all dreading paying for our summer holidays.
Interest rates have begun rising and house prices and sales have fallen.
Demographics are exerting their influence, with aging populations in China, North America and Europe leading to weak economic growth, tight labour supplies and increased crotchetiness.
Supply-and-demand economics seem to have survived the pandemic just fine. Shame about all the other stuff, which gave us lots to talk about for a couple of years. We’re back to the same-old, same-old, which you might term “reality”.
