THE FUTURIST: Current inflation is a short-term blip on economic radar – Sarasota Herald-Tribune

David Houle| Sarasota Herald-Tribune

Mainstream media is full of inflation stories. The reporting is shallow and comes with a lot of short- and long-term hand-wringing. I understand short-term concerns, but I challenge the longer-term consequences.

I think that the inflation we are now seeing will be temporary and by spring 2022 will start to rapidly decline. We are moving through a short-term massive disruption in the global economy, not the beginning of baked-in long-term inflation. I think it will slowly fall off starting in January and will be at minimal levels by late spring.

Why I see the rise in inflation as temporary:

COVID-19 renders any year-to-year comparison invalid for 2019-21.

We have not fully moved beyond the pandemic status globally.

When given the cover of inflation, companies will raise prices.

Buying habits will be changing rapidly.

Lets take a closer look.

During the summer and fall of 2020, when speaking to groups of CEOs or C-level executives at corporations, I warned them that any year-to-year comparisons would provide invalid comparisons. It would not be valid to compare September 2020 to September 2019 due to the virus.

It is clear that while prices may be up 6%over 2020-21, they are not up that much when compared to the last non-virus year.

The lack of vaccine distribution in developing countries and the anti-vax movement in the U.S. and elsewhere means that the move from pandemic to endemic is still in the future. Clearly this will affect economic recovery, so while some countries or regions might be reaching 90% vaccination rates, other ones will still have restrictions in place affecting economic growth. This will mean that demand growth will be varied.

Companies will take advantage of the inflation cover. This has happened in the few instances in my lifetime 1970s, late 1980s, late 1990s and mid-2000s when inflation stories in the media gave cover for companies to raise prices or rates. All could say that they had to do so as their costs were increasing due to inflation, whether they were or not.There is anecdotal evidence this is happening today. Once they raise their rates to get ahead, they will not raise them when demand goes down or competition is re-energized.

Current evidence shows that current price increases are more with goods than services. This is a major swing from a year ago or from last winter when large parts of the population were in some form of lockdown or quarantine. While in quarantine the U.S. population spent more money on services delivery, broadband, streaming, video conferencing than goods.

People are now spending money on goods as much as if not more than on services. This is to be expected in the holiday season. After the first of the year, when much of the U.S. and Europe will be in the dead of winter, services could again have rising demand, whiledemand for goods may decrease.

The single largest overarching dynamic, however, is that we are in the 2020s, the most disruptive decade in history. Think of the decade as a transition from the old to the new. A threshold between the room of the past and the room of the future. This means that the metrics of the past may not suit the new reality. The massive amount of creative destruction that always occurs when humanity moves from one age to another will happen in the condensed time frame of a decade, not several decades. This means that industries will collapse and others will emerge, which will upset traditional linear year-to-year comparisons. This will be, as it usually has been, anti-inflationary.

My latest book, The 2020s: The Golden Age of Design and Redesign, has just been published in eBook format. It is available at a promotional price of $2.99at amazon.com.

Sarasota resident David Houle is a globally recognized futurist. He has given speeches on six continents, written seven books and is futurist in residence at the Ringling College of Art andDesign. His website isdavidhoule.com. Email him atdavid@davidhoule.com.

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THE FUTURIST: Current inflation is a short-term blip on economic radar - Sarasota Herald-Tribune