There is a stark conflict that has been emerging for some time: government responsibility vs. personal responsibility. It’s difficult for me to understand that the government can spend nearly $10 trillion in less than a year. This is on top of the already $20 trillion debt. This is the dynamic of big government vs. small government. However, these ideas have morphed into abrasive elements of liberal vs. conservative.
If you’re an independent businessman of any business, you generally become conservative because you know that there will be good years and bad years, and plan for it. Forget about this past year because it’s an anomaly. Most businesses have learned how to work through the COVID-19 economy by necessity.
The industry that received the brunt of the pandemic was the hospitality business, which represents 4.3 percent of GDP. This category includes arts, entertainment, recreation, accommodations and foodservice.
The GDP of the U.S. was $21 trillion in 2020, down $500 billion from 2019, which was up 4 percent from 2018. The way I see it is the economic retraction of $500 billion and the hospitality industry’s contribution to the U.S. economy is about equal.
My point is that while there was a portion of the economy that clearly suffered, hospitality, the government completely overreacted by spending nearly $10 trillion, which is classic Keynesian economics. Meaning it’s the responsibility of the government to inject the economy with cash to stimulate the economy. Or you let private industry work its way through it.
Last year the government was literally giving money away and still is—the average working citizen received $3,000 in cash. And we at WLJ took PPP money, just like everyone else. Agricultural markets suffered and the government offset those losses with CFAP funds.
Hindsight is very clear, 20/20 vision. Everybody in the hospitality industry suffered to some extent. The big guys weathered the storm, but the little independent folks suffered the most; they lost business. Independent support people, like waitresses, bartenders, bag handlers, all lost big time and needed the most support. They deserved the most support, but the government’s one-size-fits-all mindset was at work.
In my mind, it would have been better to give the states the funds to support citizens. The closer you are to the problem, the better chance you have to fix it.
I don’t know how you feel about our government spending more than they receive; debt is now 150 percent of GDP. And we have the largest economy in the world. How can our elected representatives have a clear mind spending that kind of money, and how can a responsible voter vote for them?
Now we are waiting for the inflation bomb to drop. Typically, when you have lots of money in the economy and consumers are chasing fewer products, you create inflation. Look at the housing market. Homebuyers are offering more than listing price and it’s becoming common. Too many people are chasing too few homes.
Janet Yellen, treasury secretary, was asked about inflation and replied, “I really don’t think that is going to happen. We had a 3.5 percent unemployment rate before the pandemic and there was no sign of inflation increasing. I really don’t think that is going to happen.” Meanwhile, commodity prices are rising—you name it and it’s higher.
Finally, the fed cattle market is breaking out and fed cattle prices were expected to trade last week at $121-123. With feed prices rising 40 percent, it’s not clear where breakevens are on cattle feeding. A pound of gain is priced at $1.19/lb. right now, so $123 isn’t going to cut it.
Fed cattle prices will go higher. Carcass weights are back to a normal range, 858 lbs. last week, which tells me that cattle feeders are current, and the calf feds are in the market; they don’t finish as heavy.
I’m certainly not an economist, just a businessman, but the dollar index has been falling ever since the feds started pouring money into the economy. I don’t know where this goes, but I go along with the theory of for every action, there will be an equal opposite reaction. Protect your equity. Also, pray for spring rains. — PETE CROW