Craig Robson, Founding Principal and Managing Director
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As a family, we typically make trips from Atlanta to Florida this time of year for our children’s ice hockey tournaments and scuba dives. However, this year we experienced sticker shock! We felt the elevated inflationary environment first-hand; with our airfare, rental car, hotel, food, and restaurant purchases. In this Craig’s Corner, I’ll explore what’s causing the highest annual inflation numbers reported since 1982,1 and why I feel these higher inflation trends aren’t going anywhere.
The pandemic exacerbated our inflationary trends as our government increased our debt with COVID relief funding. So, how are we going to pay off this debt? Today, the U.S. government has $20 trillion in outstanding debt. This accounts for 100% of our GDP (the size of a country's economy)2 and unless individuals and institutions believe taxes will exceed $20 trillion to pay off the debt, we will continue to experience higher inflation going forward.
The last period in which we experienced similar inflation numbers was in 1980, when inflation peaked at 14.8% (only 25% of our GDP).3 To cure the inflation experienced in 1980, the FED raised rates to near 20%, which coincided with a protracted and painful recession that lasted for years.4
I believe raising interest rates alone will not cure inflation and we need fiscal restraints, like controlled government spending. This could put us on a realistic path towards debt servicing and pay off. Please email me if you see any scenario where our current policy makers and government would sign off on a similar response today (I’m not holding my breath).
Also, in the thoughts of many Americans, are the people of Ukraine. I can only imagine the fear, pain, anguish, and uncertainty the citizens are experiencing each day as they cope with their "new norm.” As difficult as it has been for me to watch, I have also been incredibly inspired by the Ukrainian citizens, as well as their president Volodymyr Zelensky. From my perspective, we are witnessing a textbook example of leadership from President Zelensky. He is fighting with his fellow citizens in the streets and he’s challenging other nations to help his country by providing them both resources and a seat at the UN. Leadership may be expressed in various ways, and President Zelensky has shown the world how to lead by example, regardless of the outcome of the war between Russia and Ukraine. My prayers are and will continue to be with him and the Ukrainian people.
I'll close this Craig's Corner with a quote from President George Washington, who historians have documented as a person who led by example, “Taking responsibility increases your chances of success."
Founding Principal and Managing Director