Econ Weekly (Oct. 18, 2021)
Featured Place: The Villages, FL
Issue 40: October 18, 2021
Inside this Issue:
Looking Less Transitory: Latest Inflation Figures Fuel Further Fears
Learnings from Earnings: Banks Bullish as Q3 Reporting Gets Underway
T’was the Risk Before Christmas: Worsening Supply Woes Threaten Peak Season for Retailers
Fossil Fuel Frenzy: Oil Prices Up Again
Shock Chain: PNC Bank Uneasy about Stablecoins
Ominous Scars from Autonomous Cars? Waymo and the Future of Labor
Challenging Choices: China’s Path Forward as Debt Despair Mounts
The Power Shock: How Electricity Changed the American Economy
And this week’s Featured Place: The Villages, Florida, Graying and Growing
Quote of the Week
“I do continue to believe that currently, elevated inflation is episodic, driven by pandemic conditions such as disruptions to supply chains and labor markets. A major caveat though, is that the severe and pervasive supply chain issues will probably last longer than most of initially expected… We will be watching closely.”
– Atlanta Fed president Raphael Bostoc
Market QuickLook
The Latest
Season’s greetings. Q3 earnings season is now underway, kicked off last week with reports from the nation’s leading banks. They’re still doing well, notwithstanding sluggish net loan growth and ultra-low interest rates. More importantly, default rates are low, balance sheets are rock solid and activities like investment banking and wealth management are thriving. Households are no doubt still spending—on houses, cars, consumer goods and even some travel and dining out now. Banks, furthermore, see the prospect of higher interest margins as the Fed prepares to wind down its dovish money policies. But banks are, of course, paying close to attention to the drama unfolding with inflation.
Inflation, it seems, looks less and less likely to moderate anytime soon. Last week, the Labor Department published its latest monthly report on the consumer price index, which showed a 0.4% jump in prices from August to September. Annually, inflation is now running at 5.4%, or a still-high 4% excluding fuel and food (see chart below for a more detailed look). In the past, anything exceeding 2% was considered uncomfortably high. Yes, the Fed is more relaxed now, content to let inflation run a bit hot for a while. But how hot, and for how long?
Fed officials will soon stop its loose-money bond-buying policy (perhaps as early as next month). And some are now talking about raising interest rates as early as the end of 2022. As a summary of the Fed’s late-September meeting noted: “Most participants saw inflation risks as weighted to the upside because of concerns that supply disruptions and labor shortages might last longer and might have larger or more persistent effects on prices and wages than they currently assumed.”
One current member of the Fed’s policy committee, Atlanta Fed President Raphael Bostic, sounded rather hawkish in a talk last week with the Peterson Institute. “Evidence is mounting,” he said, “that price pressures are broadening.” Bostic, incidentally, is… (TO CONTINUE READING, VISIT www.econweekly.biz)
Q3 Bank Earnings
It’s a good time to be a U.S.-based bank. American households and businesses are in strong financial shape following extraordinary government fiscal support. And GDP has rebounded sharply from the short, pandemic-induced recession of 2020. Covid caused difficulties and disruptions of course. Costs increased. Interest rates reached… (TO CONTINUE READING, VISIT www.econweekly.biz)
Places:
The Villages, Fl: It’s the dream of every child: To visit Mickey, Donald, Goofy and Pluto in Orlando. But there’s a different group of people who dream of central Florida—of living there, in fact. Just an hour north of Disney’s Magic Kingdom is a kingdom of sorts where children aren’t welcome—as residents, anyway. It’s a giant retirement community called The Villages, spread across three Florida counties. And guess what? The Villages was America’s fastest growing metro area during the 2010s. It kind of makes sense—The U.S. population is rapidly aging, with retiring Baby Boomers creating a senior bulge. The research group PRB projects the number of Americans aged 65 and older to increase from 54m in 2019 (16% of the total population) to nearly double that by 2060 (23% of the total population). That’s a future with nearly one out of every four people old enough to qualify for benefits like Social Security pensions and Medicare, implying heavy fiscal pressure on these programs. The demographic shift, furthermore, could have profound effects on the labor market, and on the types of products and services consumed. Actually, the effects are already visible—just look at the huge expansion of the health care sector even since 2000, when just 12% of the U.S. population was 65-plus (it was 11% in 1980). One thing about demographic trends: You can see them coming in advance. At least one visionary real estate developer certainly did… (TO CONTINUE READING, VISIT www.econweekly.biz)
Looking ahead
Self-Driving Cars: Tekedra Mawakana is the co-CEO of Waymo, a subsidiary of Google’s parent company Alphabet. Its mission? To develop and market autonomous vehicles for use as taxis. Mawakana spoke with Decoder’s Nilay Patel about the company’s progress, including its launch last fall of a driverless ride-hail service in Phoenix, Arizona. A trial service is now operating in San Francisco as well. But these are just trials, and it will take some time before deployment at scale. She calls it the “engineering challenge of… (TO CONTINUE READING, VISIT www.econweekly.biz)
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