What Worries Me in 2023

 

Happy New Year!

 

In the last week of December, I received a few e-mails from people who live thousands of miles apart and I have confirmed have never met. They each asked, “What keeps you up at night as we enter 2023?”

 

Well, family members can confirm that nothing keeps me up at night. Regardless of the situation, I am a world class deep sleeper. At the same time, I do have concerns as we enter this new year and I do not believe that they are covered with much clarity in the major media.

 

They are:

 

1)  The condition of the US and global economy

 

2)  Global demographic trends

 

3)  Reaction to climate change

 

Over the next few weeks, I intend to cover each topic from my own perspective. Today, we touch on the US economy.

 

Candidly, I am surprised how well the economy has held up despite the inflation that we are experiencing. What I find concerning is that in recent years we have been in an “easy money trap” and continue to run huge deficits and also have a Federal Reserve addicted to money printing. Sooner or later, it must end badly.

 

I have been following this trend for 50 years. Each time the “gloom and doomers” forecast disaster. In the 70’s, it was Harry Browne and Harry Schultz. Harvey Peters wrote “America’s Coming Bankruptcy” and Alexander Paris penned “The Coming Credit Collapse.” We did have problems forecast by the gloomsters (milder than their drama but very real) yet they were always literally and figuratively papered over with more debt.

 

So, each time we have a recession or a sizable pullback in the equity markets, I always quietly ask myself—Is this the big one?”  At some point our national credit card will get over the limit. Now, the US government is different than a household. They can print money and tax the public. Yet, the value of the US dollar is based 100% on confidence. As long as people accept it and foreign investors and governments buy our debt, things can go on for a while. If we lose our status as the global reserve currency, then school is out.

 

Financial pundits agree that debt, both public and private, is uncomfortably high in the U.S. but generally mention that most other nations are in worse shape than we are. Comments such as “we are the best-looking house in a seedy neighborhood” or our t-shirt is dirty but Europe’s is filthy” abound.

 

The internet does not help things. Over the years, I have subscribed to many investment advisory and economic forecasting services. Most are not good and I cancel them. They then sell my name to other newsletter writers who fill my e-mail box almost daily with catastrophic forecasts. I rarely open them but, when I do, their predictions are more shrill than the ones I saw in 2008 which gives me pause.

 

Will the world come to an end in 2023? Nope. But we could be headed for a 1970’s style “Stagflation”. What is that? It is a period of slow economic growth, fairly high unemployment, and high inflation. It is difficult to shake as if you fight inflation too hard you kill economic growth and put an upward spike in unemployment.

 

So far, other than some highly publicized tech layoffs, unemployment is historically low. If it starts climbing, we would be in for stagflation which is my biggest fear right now.

 

More to come in the next several days.

 

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.