Main Street Never Wins
One of the defining features of the post-Lehman era was the glaring juxtaposition between massive inflation across financial assets and comparatively meager bang for monetary policymakers' buck in the real world.
In simple terms, central banks underestimated the efficiency of the transmission channel from accommodative policy to financial asset prices and overestimated the effect of the same policies on the real economy.
The vaunted "wealth effect" worked -- it just turned out to mean somethin
I hope that We can embrace the necessary pain in order to defend democracy at home and abroad and am surprised Biden hasn’t more explicitly evoked American patriotism. Dictator musical chairs will not inspire Americans even if it takes some of the bite from rising energy prices. Early polling shows that americans are on board with sanctions for Russia even if it means hurting them at the pump and beyond. Somewhat ironically given their leaders positions germans feel that way as well…
TBD if those early feelings last as the pain increases.
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… and I saw a story today about a German poll showing that the German people feel equally inspired to part with a few extra euros in the interest of supporting Ukraine and punishing the Russians.
Another thing – I agree with your point about Joe Biden invoking patriotism. I’m not at all a flag-waver. But with The War in progress in Ukraine, I foresee greater US and NATO involvement becoming more likely. And that inspires me to recognize that Putin plays one-dimensional chess (not 3-dimensional, as some commentators have credited him), and the time for play is over. So, by all means, the rhetoric from our government needs to change. I’ve shared similar comments elsewhere on H’s site just today. Throughout our history, and in dealing with the Putin monster, our country finds itself on a path. We have considered our steps well, and carefully up to this point. But the path can lead us to turn and see a fuller perspective of the landscape, affecting how we approach it. The rhetoric we use as we move forward, and how we use the rhetoric, will matter.
H-Man, once this disparity turns into “Let them eat cake” all hell will break loose.
Among fascinating stuff connected the GFC and that memorable long recession period, was the spillover effect of foreclosures on property rentals.
As the housing bubble continued to hiss, after popping, holders of ninja loans, flippers and a a long string of over leveraged entities walked away from their nest egg dream homes and ended up renting. That mass exit resulted in a huge ongoing demand for rental units, and, to this day, we see a fanatical zeal to obtain more rental units.
With that background, I’m scratching my head wondering how a serious recession impacts renters. We’re hopefully a long ways away from a serious downturn, and may not actually get there, but this time seems like there will be new dynamics mixed into the stew.
I contemplate a cash home buying market with no let up in demand for nice homes in nice areas, even if a recession unfolds. As such, rentals will remain in short supply. However, if Joe Plumber Jr is laid off from a job and rents are 2000+, that’s gonna make the job market very competitive.
I guess I’m just wondering what happens when a housing bubble, possibly a stock bubble and a war overlap.
The pandemic opened a whole new chapter in economic books, with simultaneous global supply and demand shocks, with QE and then the supercharging of stock and housing speculation/investment.
The V recovery evolved into a weird K that dovetailed into a bottleneck of labor and supply chain confusion that connects to serious war that will cause widespread inflation and instability.
Nonetheless, we seem to be living in a time where all these various layers of dynamic overly are connected to hyper reaction and game like exploitation, including rents going up while wages stagnant.
This all seems fragile and prone to liquidity imbalance and greater risk.
Here’s a thought to ponder.
What if, consumers, in general, will be more resilient as recessionary trends unfold? Inflation ramps up, gas and donuts are like luxury goods, but, due to pandemic training, modifications, adaptions and changes, virtually everyone on Earth is now far more adaptive than they were around 2008 or whatever recession time period you can name.
Let’s suggest, things basically hold together but everyone shares in painful sacrifice, like driving less and perhaps adapting to online consumption.. let’s assume bottleneck inefficiencies eventually result in supply efficiency and the excess inventories that were choked off eventually result in warehouse inefficiencies that can only be solved by decreased prices.
What if Russia defaults and Putin is confined to a large room with beautiful red rubber walls and in time, war ends, trade expands and normalcy returns, even in China.
The pandemic shocks have prepared the global economy to be more resilient and that’s a possibility, versus a Fox news spin that sleepy Joe destroyed the world.
The new organizing principle is the old organizing principle- oppostion to nuclear power terrorism- Russia and China. I like to couple that with oppostion to financialization- running the economy to boost asset prices and serve the greed of the financial industry. The asset bubbles are not an accident of naivite- they are the logical result of deliberate policy- a feature, not a bug. Even Putin is driven by greed as much as anything. If if was Russia, I would be much more interested in exploiting Ukraine than Afghanistan. Follow the money.