So Long to Build, So Short to Wreck

By Dennis Sweeney, Executive Vice President
HBA of the Greater Rockford Area

It takes months to build a new house but just minutes for it to be wrecked by a fire, tornado, or flash flood. And then it takes months to rebuild it.

It takes years to rebuild a healthy national economy and just months to tip it back into stagflation and recession. And then it takes years to rebuild it. When economists say the jury is still out on whether or not there will be a recession, it sounds to me like wishful thinking and whistling past the cemetery.

With inflation on the rise, transportation fuel costs at all time highs, and, increased costs for natural gas and electricity to cool and heat your homes and businesses – compare those unit costs to a year ago -people are running out of money, or, worrying about running out of money.

When that happens, consumers cut back on discretionary future “wants” spending to save money for their existing “needs” like rents, mortgages, gas, cars, food, utilities, school, etc. And because consumer spending makes up about 66% of GDP in a healthy economy, the economy is going to shrink and that is a recession.

Today inflation is over 8.0% ; the average 30 year fixed rate mortgage is 7.168% , car loan bank rates are around 5.0% and the arrow is pointed up for all three. The Federal Reserve has increased the Federal Funds Rate by 75 basis points and promised there will be future increases to curb inflation. The Federal Reserve is getting no help curbing inflation from the Legislative and Executive branches of government through spending and tax cuts, and deregulation. The Federal Reserve goal is to have inflation back in the 2.0% range in 2024.

It’s going to be a long two years.