My main worries to end the week (Prices/CPI and other stuff)
My main worries to end the week are:
- The economic models the Fed was using in December for predicting inflation don’t seem like they’re suited for the current economic situation. The Fed needs to seriously investigate why these models are wrong and make sure unwarranted assumptions are not sticking around or leading the Fed to be less aggressive than it has to be. We really don’t need the Fed to be too optimistic about inflation right now.
- Interest rates impact the price at which investors are willing to buy stocks (the other main consideration being company profitability or expected profitability), which is part of why raising interest rates slows the economy and inflation. If food and fuel costs/shortages get much more serious (or “go parabolic”), the Fed can’t do much about that but might feel pressured to raise rates more aggressively than it has to and cause a recession (or a worse recession) without a good reason. Interest rate hikes will not magically produce more fuel and food.
- There are counter-arguments to media reports like this (I hope those counter-arguments are wrong). If an income bracket literally can’t afford food or food is simply not available somewhere, niceties (and more) go out the window. Yes, we produce food domestically but fewer imported products = more people buy a lower supply of domestic products.
- (Mods: remove if this is too political, I’m trying to keep left vs. right ideology out of it and focus on the correlation between job approval ratings and crises). Biden’s job approval rating is historically low for a president, and lower approval ratings typically go along with recessions or crises like inflation in the 1970s or the 2008 Financial Crisis. Yes, Trump’s job approval rating was also pretty low throughout his presidency but (not to get too political or get into left vs. right) many people, right or wrong, found him offensive, thought he was too ignorant to do his job, thought he was an agent of a foreign power, or thought he did not respect the US Constitution or separation of powers. Therefore, it makes sense to assume that many people perceive current federal-level leadership as weak. Yes, you should be worried about what people are willing to vote for if they decide the government or economic/social/political system can’t fix their problems and those problems get too bad. Political extremists on the far left, far right, and elsewhere often spend their time sitting around and waiting for a crisis.
- Food (at least 2 weeks, more if possible, like a few months or a year). Assume that food prices could double within the next year, though my baseline assumption is that we will face acute rather than chronic food shortages if there are availability issues.
- Get your finances in order (or try your best).
- Prepare for possible civil unrest.
- Humans adapted over hundreds of thousands of years to survive. Something in the news might shock you, but remember that you will not always feel the same way. The world could turn into a place that you don’t think is worth living in, but there’s a lot that has to happen before you know that for certain.