OK, ok…I admit it. I
have been pessimistic about our economy and our recovery. Maybe it’s all the sunshine and blue skies
outside, but I am I’m starting to feel a little more optimistic. While I’m not ready to jump on the official
band wagon, I am starting to see signs of improvement.
The naysayers keep saying that production is down, unemployment
is high and Europe is still a mess. They say our economy is only moving along
because of the money the Federal Reserve is pumping into it to keep it alive and that this money will eventually bankrupt us.
This may be the case.
As I’ve said before, I’m an idiot.
But, I am also an observant idiot.
I read all of this doom and gloom and then I look outside my door and
see a Norman Rockwell painting.*
Most of my neighbors have jobs, cars, own a house, have a
little extra spending money, etc. That’s
not to say that some are not under employed, or may not have as much discretionary
spending as they had in the late 90’s early 2000’s, but outside of the top 20%
of income earners who does?
What I am saying is this; when I listen to the naysayers, I
expect to look outside and see a collapsing society, and instead I see things
running along at a good clip. Here are
the reasons I think our economy is accelerating and why you can expect
inflation over the horizon:
1.
Birth Rate verses Death Rate- While our overall
birthrates are slightly lower, people are living longer. That means every day there are more people in
this country needing to buy things.
2.
Pent Up Demand- Spending has been down for the
last 6 years. People have not been buying
things. Consumers and corporations alike
have been hording money and putting off spending. Everyone is ready to buy something.
3.
Increased Liquidity- Banks have been hording their
cash. They do not make money when they
are sitting on it. They are ready to
lend. As they put more cash, in
the form of loans, into the economy people will start borrowing and buying more.
When you put all of this together, I think we are poised to
see the economy take off and I think we can expect to see inflation. We have already seen demand for housing increase over
the last 16 months and I think this will
continue as rents increase as well.
Interest rates are going higher. We have seen this over the last 4 months. More people want loans (increase in demand)
and more people will invest in stocks versed Mortgage Backed Securities (less
supply). When demand for mortgages is
high and supply is low, you can expect the rates to rise.
Think that $200,000 house with the 4% mortgage seems
expensive now? Think how expensive it
will be in 1-2 years- $220,000 and 6%?
Maybe. This also goes for cars, tv’s, carpeting and any other
durable goods you may need.
Inflation is looming so buy now and buy a lot.
* I am not ignoring the under privileged and under paid
portion of society. I recognize there
are too many poor communities and this needs to be a focus for all of us. This is in no means a socio-economic
discussion on classes. If you want to
have that discussion, buy me a beer.
This is meant only as an observation of my surroundings.
