2-minute read
Here’s a breath of fresh air:
What am I going to talk about with people now? My default conversation for the past two years was: “Can you believe how expensive [insert anything] has gotten?”
Rip roaring inflation is an ugly thing. I hope it is leveling off for good.
Do you think it will?
Forecasting inflation is perhaps more difficult than forecasting the stock market. I couldn’t even come close to telling you.
You can’t offer any insights?
I would say this: if you are 100% certain we won’t see another wave of inflation, I would keep an open mind.
I thought you were the naïve optimist? What happened to you?!
I’ll never be a fear salesman. But providing proper context and realistic expectations is important.
Sell me some “context,” loser.
Let’s take it back to the late-1960s, shall we? Richard Nixon just came into office inheriting a recession from his predecessor, Lyndon B. Johnson. Also keep in mind LBJ’s government also spent lavishly on the Great Society and the Vietnam War.
[scrolling phone, paying little attention]
By 1969 inflation jumped to nearly 6% during Nixon’s first year in office.[1] It was 1-2% for the majority of the decade.
[yawns, head bobs]
Nixon instituted wage-price controls to combat rising inflation. This worked until 1973 when loose monetary policy and OPEC’s oil embargo sent energy and food prices soaring again.
Alright alright. I’ll spare you the rest of the decade but here’s how it looked:
15% inflation in 1980 has my attention.
Welcome back. But also check out what preceded that. It was an absolute rollercoaster of price increases and decreases that lasted for an entire decade!
Imagine having inflation conversations for 10 years? Ugh…
Exactly!
So you’re saying we could be in for a repeat performance?
There are stark differences between now and the 1970s so I’m not sure I would bet the mortgage on it. The Fed is also trying its darnedest to not repeat the monetary policy mistakes of that time.
That’s good…I guess. Maybe we’ll see pre-covid prices soon.
I’ll stop you there. Hoping prices will revert to pre-pandemic levels is a pipe dream. You would need deflation for that which means salary cuts and other unfortunate economic events.
Ugh.
Let’s just hope we have learned our lessons from the past. I’m done talking about the price of meat everywhere I go (and paying for it).
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[1] Inflation as measured by the Consumer Price Index (CPI)
[2] This is a real picture of me circa 1993. That’s living, folks.
[3] Source: Strategas Research Partners, LLC, “An Investor’s Letter to Santa Claus”