3rd Quarter 2022
Market Watch
by Joe A. Hollingsworth, Jr.
This is America’s first time being faced with high inflation, coupled with a substantial supply chain problem. So, there is no historically proven path forward.
The previous administration kept us afloat during the COVID experience. And as we look back and more clearly understand, while there were great intentions for the multi-trillion dollar package to sustain businesses, it complicated life for these businesses by restricting materials and supplies and promoted a general attitude of “the government will look after us.” Most of the time in life if we don’t face reality quickly, the issues magnify, then become severe problems.
As most all businesses will attest, the “work ethic” deteriorated rapidly with all the surplus of government “feel good money”. We were all faced with making do with what labor we currently had. The deteriorated work ethic clearly has created a supply chain problem; meaning very few businesses can get enough workers in the office or on the plant floor to produce enough products presently demanded by the market. The result is non-existent competition for most products and extreme shortages of others. When you have virtually no surplus of products being offered there is no competition in the daily marketplace. The basic lesson of economics teaches us a shortage of materials and supplies will drive up prices. We have a shortage in almost every industry at present. This inflation was induced by the government being overindulgent in progressive ideas and providing an extravagant safety net to individuals that the government should not promote. And surprise to all you elite “‘know it alls”; the result is high inflation.
For decades, when inflation is high, you simply raise interest rates to slow demand. But, this time “supply” is unreasonably restricted! A simple question needs to be asked. While raising interest rates and subsequently wrecking the economy will solve the demand problem, what allows the work ethic-related supply problem to be solved?
Unless both the inflation and supply chain issues are addressed, I think there is a distinct possibility that this could be a “horrific” government-induced recession. Demand must match supply and supply is artificially low. If a few basic governmental policies were stiffened to get people off the couch and reintroduce them to the workforce, this would greatly lessen the potential of a “crash”.
Those of us that live in the “real world” and have to make things work are getting frustrated with those, in positions of power, that seem hell-bent on destroying our economy and work ethic with their progressive theories!
Our position on industrial real estate is it will bear an outsized “brunt” of the recession because of the wrong decisions and policies being made for the last two years. Those without “staying power,” beware!
