Standing deep in left field

A veritable economic twilight zone

"May you live in interesting times" is an English expression that is claimed to be a translation of a traditional Chinese curse. The expression is ironic: "interesting" times are usually times of trouble. (Source: Wikipedia)

We live in interesting times

For the last several years, nothing has behaved as it should (or as it ordinarily does) in the realm of economics.

In 2019, the U.S. economy gave every indication of an impending slowdown.

In 2020, Covid-19 hit. Fear gripped our economic overlords that things would come to a complete and immediate halt, so they threw money at everyone and dropped interest rates to zero (or lower in some locations around the world). But in reality, only the hospitality, travel, and personal service industries were really impacted by Covid-19 as technology enabled everyone else to continue working remotely.

In 2021, free money caused everyone to go into financial excess mode, but a side effect of only a portion of the economy being shutdown was that money previously destined for the likes of travel was redirected into capital goods. All this additional demand for capital goods, especially at a time when supply chains were coming under stress due to the need for isolation, resulted in inflation.

In 2022, central banks who (in 2021) thought inflation was due to Covid-19 related supply constraints and therefore transitory, realized that it was in fact demand driven inflation and so it needed their special attention. Interest rates were raised double time.

In 2023, everyone was expecting recession but, while there were stresses and strains, “resilient” was the adjective du jour in the U.S. This resilience was due to a never seen before level of migration into the U.S. across its southern border as people fled from troubled lands. This unexpected growth in new consumers and labor force came at a time when an aging population was rapidly shifting into retirement. It was a godsend … at an aggregate level.

However, the locals didn’t see this immigration as a godsend at a personal level or in their communities. On top of the financial strains of higher interest rates that showed no sign of falling (because of the aforementioned resilience), the massive influx of immigrants became a political issue (it had been for some time).

In 2024, a new (old) President was elected in reaction to strained personal situations. Tough talk that promised to revive economic fortunes domestically at the expense of other nations sounded good.

In 2025, people begin to realize that tariffs hit consumers, not foreign companies. Additionally, having an anti government bureaucracy ideology is all well and good, but both the formation of policy and its implementation (just like for an investment strategy) needs some planning and a process developed rather than adopting a Piñata approach.

In summary, we’ve had 5 years of what we thought was happening turn out to be something entirely different.