Confounding and Confusing Events 11/29/21
President Biden reappointed Chairman Powell as head of the Federal Reserve. This creates an environment in which there will be some consistency in the position and also sends a message that Mr. Biden is looking for other than political solutions from this very important position. Many Democrats dislike Mr. Powell’s actions during his tenure to date, however in my view his actions have largely been within the ballpark of reasonable and that is what we should be looking for from the Federal Reserve, but also in all aspects of government and politics.
Canada has suspended PEI potato exports to the US as a result of a fungus which has developed in the Province. The farmers are fighting back, claiming that the fungus is not problematic and that exports should be allowed. This of course has the feel of the Irish Potato Famine which is always of interest to me.
The typical US home price went up 13.2% from May 2020 to May 2021. If you are looking for a culprit for inflation, clearly this is a huge factor. If you reflect back on the last year to eighteen months, you will see that the panic buying during COVID and the housing increases did not induce inflation, that occurred when buyers were breaking out of COVID, had substantial dollars to spend, and the supply chain broke down. This is clearly a supply chain driven inflation except for oil and gas, which have been historically found to be impacted by the manipulations of large US oil companies and other national oil producers like Saudi Arabia and Russia.
President Biden has decided to tap in to the US oil reserves and a number of other countries are doing the same in an attempt to bring down gasoline prices. This all is predicated on the idea that this is a legitimate supply and demand problem. As I noted above, there is a real question because of the historical acts which have created prior oil crises in the United States and around the world. Let’s hope that Mr. Biden’s actions will in fact, result in lower prices at the pump and for the home.
The Wisconsin Christmas parade murders raise an interesting question. Given the position taken by the Judge in the Rittenhouse case, one can only assume if he were sitting on this case, he may well find self-defense as a valid argument for driving a vehicle involved in these deliberate acts since had those people not been in his way, he would not have run them over. Thus, he was only acting in self-defense. I recognize this sounds a bit specious and sarcastic, but one can only wonder what that Judge was thinking and to some extent what the prosecution was thinking when they did not create a simple syllogism; if you introduce yourself into a violent situation, you are armed, that there is likely to be a bad outcome and that you bear at lease some responsibility for it. To acquit Rittenhouse on all accounts seemed irresponsible and illogical. On the other hand, the Aubrey verdict showed that the application of logic is still viable with the rejection of self defense when those asserting the claim created the situation.
It appears that Canadian truckers who have been exempt from vaccination will now be required to be vaccinated which could eliminate a substantial portion of the truckers who bring goods between the United States and Canada. The loss of potentially one third of the truckers because of this mandate could further exacerbate the supply chain issues. What is also problematic is that those truckers will not get vaccinated. Again, they are creating a health issue for not only themselves but for the rest of society and now an economic issue because they are not using common sense. Irrespective, this is a very significant issue and could have a dramatic impact on how we move forward with the supply chain issues.
On a more interesting note, an ancient wooly mammoth’s tusk was found 150 miles from land in 10,000 feet of water off the California coast. This was a surprise to the scientist who found it and continues to create opportunities to learn much about wooly mammoths who lived hundreds of millions of years ago, including information taken directly from the tusks because of the way in which they grow, the possibility of securing DNA, a general insight into the lives of these wooly mammoths, the conditions of the earth at that time, and likely many more facts that we would have never have had access to absent this unusual opportunity. Again, science creates opportunities for us that we should never ignore.
Unemployment insurance claims fell to 199,000 which is the lowest weekly number since 1969. Clearly over the last several months the flow of claims has been highly uneven, but this may be the next step in the process toward reestablishing a stable labor market. Obviously, we continue to run the risk of increasing COVID cases due to the new variant and that ultimately could derail this very positive movement. Nonetheless, a good sign.
The US hiked tariffs/duties to 17.9% on softwood lumber. Will this impact inflation? My bet is yes as US lumber producers will raise prices given the new ceiling the US created for them.
Orders for big ticket items – washers, computers, and cars have fallen for the second consecutive month. The reasons include higher costs for inputs, supply chain shortages, and increased labor costs.
Bill Owens is a former member of Congress representing the New York 21st, a partner in Stafford, Owens, Piller, Murnane, Kelleher and Trombley in Plattsburgh, NY and a Strategic Advisor at Dentons to Washington, DC.
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