In the 2011 film, Moneyball, Oakland A’s general manager, Billy Beane, turns to statistics with the hope of helping his team win the World Series. While his efforts help his team get to the playoffs, they fail to win the championship and with the lights dimming over A’s stadium, we hear a critic say, “Nobody reinvents this game.” Whether it’s baseball, business or politics, this sentiment reveals our natural tendency to embrace the familiar, finding comfort in our traditions, even while we often hope that changes might make things better.
I am reminded of this, especially this month, as I celebrate 30 years working in this industry. Rarely has a year gone by where I haven’t wondered what advancements will come that will make our lives better. In some years, it’s a new technology that will supposedly reinvent the way we handle our finances. In other years, it’s our government trying to reinvent some aspect of the economy. In most cases, we are reminded in the years that follow that the laws of money aren’t so easily changed.
We got another reminder of that this week. Inflation is still a problem. The cost of living is higher today than it was a year ago, and significantly higher than it was before the pandemic. We feel the pinch of higher prices every time we buy gas, shop for groceries or take our families out for dinner. It is the natural consequence of a government with easy money policies. Flood the economy with money to keep it from collapsing, you get inflation. Force interest rates to zero to encourage people to borrow and spend, you get inflation. Shut down industries so they can’t produce enough goods to meet demand, you get inflation. Do all three at the same time in the wake of a pandemic, you end up exactly where we are today. The only question is why anyone would be surprised by this.
The good news is that some, if not all the tools our government has at its disposal are working to stabilize the dollar. To speed things up, Congress could limit their spending, and the Fed could push interest rates even higher. Both approaches are unlikely, however. Representatives spend taxpayer money to keep their voters happy and Fed governors maintain their appointments by keeping the current resident in the White House happy. None of them want to lose their jobs for making unpopular decisions. But even with rates where they are today, inflation could subside. It just may take longer than anyone in Washington expects.
The American economy is nothing if not resilient. Our history is replete with examples of how we adapt and change, and often are stronger for having gone through challenging times. The advancements of the past hundred years have made our financial system more stable. We are less likely to experience a 1920s-style depression because of the regulatory policies we have in place today. We can even hope that our friends in Washington might learn a lesson from the past four years, that their efforts are better spent on preserving the American dream for everyone than on tinkering with the economy, the markets, the money supply, and playing favorites with certain businesses and industries.
The next decade or two will likely be similar to the past few. Ingenious people will invent new technologies, and our elected and appointed officials will implement new policies, we hope with the noble intent of making our lives better. And maybe their efforts won’t reinvent the game, but they could improve the game for all of us. And that, I think, is something we can all agree is worth pursuing.
~ Travis Raish, CFA