By limiting demand and the productive capacity, the pandemic has been deflationary as opposed to inflationary. While some market watchers think high federal debt and low interest rates will eventually trigger an uptick in inflation, the more immediate concern is too little inflation. Worried companies and consumers invest and spend less, reducing supply and demand for goods and services. Putting money behind an idea requires a high degree of confidence not only in the entrepreneur themselves, but in the economy.Īnd Main Street confidence–or the lack of it–trickles up to the macro level. They take out loans, seek investors, and raise money from friends and family. To bankroll ideas, entrepreneurs often tap into their own savings. #2 Deflation, not inflation, is the bigger short-term risk In the 2021 economy, the pandemic, not politics, is still calling the shots as it constricts our lives, our economic activity, and confidence on Main Street. On the horizon is President-elect Biden’s new $1.9 trillion coronavirus and stimulus plan, which may take time to move through the political process, even under unified government. Despite rock-bottom interest rates, only 8 percent of business owners think it’s a good time to expand, a troubling finding for those of us hoping that a second round of fiscal stimulus from the Payroll Protection Program will be a salvo. Small business confidence dropped in December for the first time since May according to a closely watched survey from the National Federation of Independent Businesses.
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Weekly jobless claims sounded a warning on Thursday, rising to 965,000 new claims in single week, the highest since August.įor small businesses, those big jobless claims numbers represent personal sacrifice, laid-off colleagues, lost revenue, and uncertainty. The bad news is that some 10 million people who had jobs in February don’t now. Īs of the third quarter of 2020, the economy has recovered about two-thirds of the output lost in the second quarter of the year, when GDP plummeted at a -33 percent annualized rate. Borrowing costs for consumers and businesses also were low, with the federal funds rate around 1.55 percent after the Fed cut rates three times in the second half of 2019. The federal funds rate hovered moderately around 5 percent.ĭuring Trump’s first impeachment in 2019, unemployment was at a 50-year low and stayed there until right before the onslaught of the pandemic in March. The unemployment rate was 4.5 percent in 1999 and had fallen to 4 percent by the end of Clinton’s term in 2001. The economic environment was quite different in 1999. The Federal Reserve, trying to contain inflation, had hiked interest rates, pushing the benchmark federal funds rate to 12 percent in August 1974 as Nixon’s impeachment inquiry began. Unemployment would rise to over 8 percent over the next 12 months.
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The Senate acquitted Clinton in 1999 and Trump in 2020. Nixon resigned in 1974 knowing his impeachment was imminent. In the past 100 years we’ve seen only three other impeachment proceedings - against Richard Nixon, Bill Clinton and Donald Trump.
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#1 Macro conditions, not politics, shape the economy So, while the country’s attention was affixed to politics last week, I dug into the Bureau of Labor Statistics release of the Consumer Price Index (CPI). In short, my opinion on events is more suited to sharing over a drink in Midtown or in debate with my 13-year-old.
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I’ve taken a grand total of one political science class and whatever history was required in high school. It’s a remarkable time in political history and there’s a lot to unpack.īut this isn’t that type of article. Last month we witnessed a second Trump impeachment in three years.