Pork and beef products are displayed on a shelf at a Safeway store on October 4, 2021 in San Francisco, California.
Justin Sullivan | Getty Images
There’s been a great deal of chatter of late in financial papers, broadsheets and business television on how to exactly describe, and deal with, the economic environment in which we find ourselves.
There has been much talk of “transitory” inflation, “stagflation,” or, as I have described it, “panflation,” or pandemic-induced inflation.
I have altered my view about this environment, to a degree, after a trip to Savannah, Georgia this week, where I spoke to members of the Savannah Economic Development Authority. Among those in attendance were officials in charge of Savannah’s port, the fourth-largest port in the U.S.
Unlike some others, JP Morgan’s Jamie Dimon for instance, port officials were a little less sanguine that global supply chain disruptions, and attendant shortages of material goods, will abate by mid-2022.
They believe these issues will dog us into the autumn and, quite possibly, for all of next year. With a massive shortage of dockworkers, truckers, rail capacity and warehouse workers to move goods from port to store shelves, auto showrooms, or even to online distributors, this appears to be a logistical problem not easily solved.
As I thought further about the condition of the domestic and global economy, this has all the earmarks or a post-war economy — deferred purchases of good and services, resources redirected to beat back the scourge of Covid-19, and its variants, that are ultimately overwhelmed by pent-up demand that exceeds the ability of the goods and service sectors to deliver their wares to a waiting public.
In 1947, inflation surged by 20% after all the deferred consumption that was the result of both the Great Depression and the War. Similar surges occurred after World War I, while there were more mild, but still important, price shocks after the Korean War, Vietnam and the first Gulf War.
After World Wars I and II, there were similar shortages, and capacity constraints, albeit to to a much greater extent than today, given that the productive capacity of the modern world was nearly destroyed in each of those instances, save for that of the U.S.
Today, we shut off capacity and shut down the global economy in order to deal with a pandemic that was racing out of control. Prices eventually settled back down and were, essentially, “transitory” as the supply of goods and services rose to meet demand in each of those post-War periods except for Vietnam.
Too many individual commentators are comparing this period to the 1970s and early ’80s, as I recently pointed out, and suggest “stagflation” is just around the corner and that today’s inflation is the result of easy monetary and fiscal policies.
The “stagflation” of the ’70s and early 80s led to double-digit unemployment, interest rates and inflation, none of which is evident today, nor likely in the immediate future.
We had extremely easy monetary and fiscal policies in the wake of the Great Financial Crisis and inflation persistently failed to rise to the Fed’ stated target of 2% at any time prior to the global pandemic.
In addition, the pandemic has radically altered the psychology of the working population, exacerbating trends that might have been short-lived had not some 4.3 million workers exited the labor force.
Three million individuals retired early as Baby Boomers with plenty of savings dedicated, according to some reports, to make up for lost time caused by the pandemic and get out of Dodge.
There are still over 1 million women who have yet to return to work as the uneven roll out of school reopenings and the surging costs of child care make it economically impossible to leave young ones at home, or drop them at daycare, and go back to the office.
Further, according to a recent Harris Poll, some 50% of Americans are contemplating quitting their jobs for better pay, more flexible hours or more satisfying jobs. About 40% of workers around the world share those views.
The only way to solve this current conundrum is to launch some sort of “Marshall Plan” to mobilize the industries that bring us materials goods and much desired services.
Whether it’s the National Guard, which some have already suggested, or other federal workers, this nation, this administration and this Congress, need to recognize that we are on post-war footing. Normal rules do not apply.
As we wrestle with putting an end to the pandemic, hopefully once and for all, we must also act quickly and efficiently to unclog ports, repair infrastructure and adjust to a rapidly de-globalizing world.
We are, as some have observed, moving from an economy that prided itself on having “just in time” inventories to one that will require “just in case” inventories.
There’s no time to lose or the word “transitory,” which never in my mind implied only a few months, will truly lose all its meaning as we lose more and more money to a wildly inefficient economy.