Jan. 28, 2022

2021: All That Glittered Was Not Gold.

The year 2021 will go down as what I call the Super Stimulus Economy.

Yesterday, we got the latest report on the Nation's Gross Domestic Product. GDP Grew in that all-important fourth quarter at the best rate in 33 years. While real estate and the stock market both appreciate solid double digits.

Truly remarkable numbers.

But beware of the financial legerdemain which leads us to these levels. All that glitters is most definitely not gold.

Last year the financial authorities in this country. The Administration, the US Treasury, and the Federal Reserve pushed the economic accelerator as hard as it had ever been pushed.

Sending stimulus checks out to everyone with a pulse. Shoving dollars into the financial system, like never before.

The results were predictable. Those individuals, companies, and systems that could soak up the most became even wealthier. Corporate profits exploded, financial markets boomed, and the very wealthiest among us, put Midas to shame.

Thus we launched our new super stimulus economy in 2021.

Now it's easy to live through a time like we've just been through and assume that it's normal. That things have always been like this. But let me assure you, this economy is anything BUT normal.

This is an economy that's hyped up on financial stimulus.

Yesterday it was reported that the nation's Gross Domestic Product grew at a 6.9% rate for that last quarter of the year. Over the past 33 years, we have never been able to achieve that level of growth. We did it in 2021 solely on a hyped-up financial stimulus.

In fact, yesterday's GDP number was a third of a trifecta of stunning economic results. The real estate market was up over 18% last year. While topping the list was the stock market, with a better than 25% gain for 2021.

It's plain to see that much of these gains were the result of our super stimulus financial policies of 2021. They enabled the largest speculators among us, to leverage up. And take advantage of deals that might not otherwise be available.

Thus the largest corporations got even larger, as corporate mergers and acquisitions were on a torrid pace. Cash was easy to borrow, for the very largest borrowers, so why not use that to buy up even more?

And many institutional investors found a whole new asset class to invest in residential real estate. As there were so many dollars looking to find a “home.”

And of course, in a high inflation environment, you can always pay back with cheaper “after inflation” dollars.

In a world of 5% annual inflation, you're paying each dollar back in 12 months with just 95 cents equivalent.

But that was then.

That was way back in 2021, a full 4 weeks ago.

Today is new. It's all different. We're going from stimulus to austerity.

Some of these changes we already seen predicted by the “powers that be.” Higher interest rates. No Quantitative Easing. And I predict much tighter money.

So for anyone who thinks that 2022 will be anything like 2021. I urge you to beware.

All that glittered was not gold.