Hungry for another crisis?
It’s April 19, 2022. Here’s the rundown:
The coming recession(s)
Hungry for another crisis?
Numbers, links, and faces
The coming recession(s)
There’s literally always a recession on the way, so you may as well embrace it.
I’m going to start including some of the best stock images I can find, because this is gold, Jerry, gold.
Are we about to experience another recession? The answer, when you think about it, is always “yes.” Though we did have a brief recession caused by the pandemic, we’ve been able to sidestep a big one for nearly 15 years now.
But the recession alarm bells are once again going off. And there’s a good reason for it. Greg Ip, in The Wall Street Journal, notes that there are three main things that could push us into a recession in the near term:
Financial support for the markets and individuals is drying up
Interest rates are rising
Prices are rising
In the case of lessening financial support and raising interest rates, the entire point is to slow the economy down, so as to get a handle on rising prices. So, in a sense, we’re kind of giving the economy a sedative on purpose.
And, as for how we got to a place where prices are rising so fast and so high? It’s complicated, and many have pointed to the numerous rounds of stimulus which were enacted in reaction to the pandemic.
Yes, we did pump a lot of money into the economy, which has likely contributed to inflation. It’s entirely possible that we went overboard — likely because we went “underboard” during the Great Recession, which is why the recovery seemingly took forever. In terms of COVID relief, it looks like we went overboard. Plus, a lot of the programs designed to help people were looted.
So, here we are — waiting for the economic shoe to drop, and mete out financial punishment. That can, understandably, put a lot of people on edge.
Bank of America’s strategists are even telling people to prepare for a downturn. As is Deutsche Bank, which thinks a recession will strike next year. This all sounds a lot like the news cycles of 2018 and 2019, before the pandemic came in and delivered an economic walloping unlike any of us have ever seen.
What am I getting at, exactly? That recessions are normal, necessary, and lurking around every corner. We can blame anyone and everyone for them — some people more than others, maybe — but there’s always a recession on the horizon. So, it may not be of much use to worry about it, other than always being prepared for one in whatever way you can be.
It’s not fun, of course, to always be on edge, but really, what other choice do you have? Being afraid of a looming recession is sort of like being afraid that Christmas is going to eventually roll around on the calendar — it’s going to happen.
The severity of these future recessions is something to worry about, but if you, like me, had to fistfight your way through the Great Recession, it’s hard to gauge what a mild recession feels like. I think I’ll forever have images of bankers (or someone) dumping McDonald’s applications on protestors’ heads when I think about the aftermath of the financial meltdown.
But I try to keep in mind that the Great Recession was “great” for a reason — it was a particularly bad one. Recessions are sort of like forest fires, an economist told me last year, in that it’s good to have one come through and burn up all the deadfall, and let new life find its way up from the char.
I think that’s a good way to look at it. Though it may be unsettling to think that the next recession is on our doorstep, it’s just another part of the cycle. On the other side, we’ll hopefully be better off.
Besides, we have bigger things we should probably be worrying about.
Food prices are rising at a record pace
That Big Mac is going to take a Big Wac out of your bank account.
Fertilizer prices - image: Russ Quinn/DTN
Everything is more expensive, and food is no exception. It’s probably going to get worse, the war in Ukraine is the cherry on top, too.
In February, the U.N. Food and Agriculture Organization’s Food Price Index was at its highest level since being created in 1990. The Index tracks changes in international food prices (like a market index), and between February and March, it went up 12.6%. It’s increased more than 50% since the middle of 2020.
As with seemingly every existential crisis we’re facing as a global community, there are a lot of reasons this is happening: The war is disrupting food production in a big way, and there are still supply chain snarls causing backups, for example.
Other contributors to the problem are weather and climate-related changes, which caused serious damage to corn and wheat crops in the U.S. last year. Plus, fertilizer costs are rising substantially, further compounding costs.
In fact, three types of fertilizer have seen astronomical price spikes: Urea, liquid nitrogen, and anhydrous ammonia have increased in price by roughly 150%, 190%, and 235%, according to the USDA.
As American Farm Bureau economist Shelby Myers told Modern Farmer:
“The unfortunate piece of this is there’s so many supply and demand fundamentals at play,” Myers says. “It is a matter of waiting for supply to catch up with demand and allowing for those prices to come back down. The other frustrating piece is that we are still in an economy that is trying to recover from multiple economic shocks it has experienced over the course of the last two years.”
Suffice it all to say: Things aren’t looking too good, and there’s no immediate fix. The food market will simply need to sort itself out with time. For us, that means pricier trips to the grocery store or restaurants. And there isn’t really anything anyone can do about it.
One element worth highlighting is the environmental aspect of it all — and specifically, the role we, humanity, have played.
Last year, I read a book about the Dust Bowl: “The Worst Hard Time,” by Timothy Egan, who’s one of my favorite authors. One huge takeaway from that book is that the Dust Bowl was, by and large, a man-made problem. Instead of sticking to sustainable, healthy farming practices, large parts of the South and Midwest were scraped to the bone to make as much money as possible. Then, the right combination of weather and lost resources led directly to the Dust Bowl.
We may be seeing that happen again.
The Midwest has lost 58 billion metric tons of topsoil over the past 160 years, according to a new study in the journal Earth’s Future, which was led by the University of Massachusetts Amherst. “This is nearly double the rate of erosion that the USDA considers sustainable,” reads a corresponding UMass Amherst brief.
That brief also mentions that the damage is occurring “despite conservation practices put in place in the wake of the Dust Bowl in the 1930s.” Not good.
So, while we’re facing threats to the food supply from all directions, we may be stepping on a proverbial rake every single year, further destroying the soil. Now, I know nothing about farming, but I hope that this is something we can correct. We obviously have sustainable farming practices, but it appears that, once again, there’s little incentive for many farmers to use them. As we discuss, again and again, subscribing to short-term solutions for long periods of time is going to be what dooms us all.
But until then, food is going to be pricey. If you have any recommendations for gardening YouTube channels, send them my way!
Numbers, Links, and Faces
$150,439: The amount of federal income tax the Bidens paid during 2021 — a rate of 24.6%. (The White House)
$16,000: How much some Wall Street interns are earning per month. (Bloomberg)
Wenatchee, WA: The city where young women earn the most relative to young men. (Pew Research)
Are gas stations doomed? As EVs become more common, gas stations may become fewer and further between. (Recode)
Frowny Face: Jordan Belfort, aka “The Wolf of Wall Street,” is back, and now he’s a crypto guru. Who isn’t, though? (The New York Times)
Smiley Face: On March 29, wind turbines generated more electricity in the U.S. than coal-fired power plants or nuclear power plants for the first time. (EIA)