Turning off the economic tap

We have a high cost of living in this county as a result.

There is a, shall we say, diversity of opinion on the reasons why, some say it’s restrictive zoning, others say it’s the influx of new jobs. They are both right. There are many other reasons too, as is usually the case.

But, let’s talk about the jobs portion of the jobs/housing imbalance.

Specifically, you can point to the Federal Reserve policies since the 2008 financial crisis — especially related to quantitative easing and low interest rates as one of the primary reasons for the jobs/housing imbalance, as it essentially emptied savings accounts and dissuaded investment in typically safe bonds. Instead, people put their money into the stock market. Investment into venture capital also exploded, spurring new tech companies to launch and expand. It created a rush to this area, and local governments still reeling from a loss of local revenue were caught flat-footed in managing the flow. Our glass overflowed.

Money was cheap and fluid. Hiring surged, and this area was flooded.

The Great Recession spurred by the financial crisis destabilized housing. Foreclosed homes were held onto by banks that could do so until the price was right, limiting supply and sending up rents from their lows in the midst of the crisis. Rents then went even higher when the tech surge began in 2010. One could argue cities should have done more to prepare, but government is by nature reactive and this was a flood.

Rates were kept low for years, and the tap was left on. Trump’s tax cuts opened the spigot further.

Add together the CARES Act, the Consolidated Appropriations Act, the American Rescue Plan and the Infrastructure Investment and Jobs Act, and the spending that came along with it. Combine that with supply chain issues and global energy constraints in part because of Russia’s invasion of Ukraine (though one could argue there has been little slow to Russian oil imports) and also falling interest and limits on oil exploration and you have exploding inflation.

Our cost of living here got even higher.

We now see interest rates rising, which is slowing the economy. People talk about the chances of a recession versus a soft landing, but I believe a slight recession is already with us. Now it’s just a matter of knowing how big it will be and how long it will last. Recessions are known for layoffs and tightening, and that is an unfortunate circumstance.

There are those who cheer for layoffs, as if it would mean a return to the ways of old, when there was less traffic and more space. But layoffs are never something to cheer, there are actual people involved after all, and we will never return to the ways of old. Or should we. We must progress. New people should come and enliven this county. After all, diversity and new people are key in keeping places alive and well.

There is some room for balance. The Federal Reserve kept the water flowing for far too long and now we turn to a mechanism to temper inflation. While long-term low interest rates may be helpful for our national debt, propping up the economy over a sustained period eventually has a deleterious effect on our nation and its people overall.

The next few months, or even years, will have its challenges, yet they also present their own opportunities. Bond yields and savings account interest rates will rise, and all that high-flying tech money made in the stock market will find a safer home there or in savings. There can be more focus on fundamentals rather than speculation. Growth can be natural rather than explosive and perhaps this might also provide us with the space to contend with some of our deeper issues over planning for the future rather than reacting to a deluge.

The economy should have cycles and balance, and we’ve had too much of one thing for too long. No one hopes for a recession, but there could be some benefits to having an economy stabilize and correct itself. But that may just be a glass half-full way of looking at things. How do you look at it?

Jon Mays is the editor in chief of the Daily Journal. He can be reached at jon@smdailyjournal.com. Follow Jon on Twitter @jonmays.