What the Future Holds

I’m worried.


My worry does not relate to our current state of affairs: lockdowns, virus spread, and market volatility. Those things will sort themselves out eventually. Instead, my worry relates to the government’s response to those events. And even more, about how future business decisions will be made in light of the government’s response.


In the wake of the coronavirus chaos, the government pulled out all the stops when it came to resuscitating the U.S. economy. It shoved fistfuls of money into nearly every facet of the economy. When all other economic activity was coming to a screeching halt, the government stepped in to fill the void.


And it worked. Events could have spiraled out of control, and it is not a stretch to say we could have faced a second Great Depression. Things were that bad. In those times, fear can feed on itself, creating a terrible cycle of more and more fear and more and more problems.


The government – I’m lumping Congress and the Federal Reserve into that bucket – swung into action, and they did so remarkably quickly. Congress, which can’t seem to get both sides of the aisle to agree on anything these days, worked together at warp speed to assemble a massive relief package. Money rained down on individuals and businesses through unemployment programs, forgivable loans, and stimulus checks in the mail. The Federal Reserve unleashed piles of money through the financial system and began buying certain bonds that it had never purchased in the past.


All of these efforts propped up an economy hanging on the ropes like a battered boxer.


It is generally believed the powers-that-be did the right thing. They saved us from an unmitigated catastrophe. That’s likely true.


But still, I’m worried. I’m worried the government might be doing too much.


To be sure, I hope my worry is for naught. I admit it may be entirely misplaced. Perhaps the government is walking the fine line just fine.


My concern is that by interjecting into the economy so deeply each time we face financial hardship, the government gives businesses and everyday people an unintended wink and nod to take risk without the worry of loss. After all, if things get tight, the government will step in to help out – or bail out. History will have proved it.


But at least in my view, it is not the responsibility of the government to ensure every part and person of our economy avoids financial distress at all times.


Going through periodic bouts of economic pain is not entirely bad. Pain can be cleansing to the system. Excesses are reined in and a sharp reminder is delivered that risk is not just a theoretical concept. It is real, and it is to be properly regarded.


It is unquestionably a tricky balance. I doubt many people believe a second Great Depression is just what we need to keep risk in check – now or ever. But will people give risk its full due if there are limited financial consequences to their actions?


No one knows how much is too much or how little is too little. It’s like adding salt to a sauce. It can be a matter of taste. There is a range that is acceptable to most palates. But it can be taken too far.


I suspect lawmakers and Federal Reserve officials would prefer to err on the side of caution and go too far, rather than not far enough. Given the environment, that may be the right perspective. Unfortunately, there are likely to be side effects of some sort or another. Like an experimental drug, we just don’t know what they will be at this time. We are now living through a grand experiment.


I am not at all fearful of the future. We will ultimately figure it out and will be fine. But I am worried we are setting ourselves up for future agony that cannot be swiftly or easily counteracted.


I could be wrong. I hope I am.

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