... stop buying stuff!
Back in 2008, in the waning days of the Bush administration, the economy collapsed. It was all propped up on inflated housing values, financed with funny-money mortgages which were generated by people paid per mortgage issued, not based on good mortgages issued. Those were in turn packed up and sold as "investments" even though half of them were basically guaranteed to go into default.
It all fell apart and a major investment house went bankrupt and others had to be bailed out (they did pay back that bailout money, though). The overall economy collapsed, and GM went bankrupt, Chrysler (owed at the time by venture capitalists) was sold to Fiat. Again, there were bailouts, but they were paid back. The only bailouts not paid back were "mortgage adjustments" to a few lucky individual homeowners.
Gas in 2008 was over $5 a gallon in some places, but by 2009, had dropped dramatically as illustrated in the chart above. Why? Because people stopped buying gas! "But Bob!" you say, "People have to buy gas! How else would they get to work or go to the store or go on vacation?"
Well, that's true, but how much gas you consume is somewhat flexible. And in 2009, people cancelled vacation trips, lost their jobs, went shopping less, combined trips to save fuel, bought more fuel efficient vehicles, and slowed the fuck down for a change - and gas consumption plummeted. As a result, prices plummeted - the law of supply and demand kicked in, as it always does.
It was heaven - for a few months, anyway. You could go on I-95 and there was no traffic. What traffic there was, was traveling at a reasonable pace. Even (or especially) truckers slowed down, realizing that going from 5 to 6 miles-per-gallon made a huge difference in fuel costs (20%!). People stopped racing to red lights and then slamming on their brakes. They stopped flooring it when the light turned green. They stopped tailgating and zooming around traffic, trying to "get ahead." It is amazing how a small increase in the price of gas affects behavior.
But overall, prices dropped across the board. McDonald's introduced its "dollar menu" and for a couple of bucks, you could get two burgers and a small fries. No kidding. Other restaurateurs followed suit as customers evaporated. You had to offer something to get people in the door - or close the doors for good.
Over time - 20 years or so - we got lazy and fat (metaphorically and realistically speaking). I went to a friend's house the other day to help them install a split-system A/C unit (I am too old for that shit! It nearly killed me!) and his wife was nice enough to get Chinese take-out. She drove over 20 miles, round-trip to get it. Financially, it made no sense, particularly when there are restaurants here on our island. But you see this all the time online - people complaining about their "door dash" delivery going horribly wrong, after paying a $20 upcharge on $15 worth of McDonald's food (delivered cold and congealed, if delivered at all).
In short, people are spending money like drunken sailors. And companies are making record profits - they always are, by the way, as inflation ratchets up all prices. I kind of get sick of statistics like that - "housing prices are at an all-time high - you could buy a house in 1950 for $5000!" Well, duh - inflation.
A Chevy Vega or Ford Pinto cost $1999.99 back in 1972 ("under $2000") and today, with inflation, that would be about $14,396 which oddly enough is not far from the price of the cheapest new car sold in America today. Of course the car today has standard air conditioning, power windows and locks, six air bags, radial tires, disc brakes, sound system and so on. Add those options to the Vega (such as were available back then) and the price is dead even - or even cheaper today.
Always be suspect when someone touts a statistic that such-and-such is at an "all-time high" - because everything is always at an all-time high, due to inflation, if nothing else.
But I digress. Enough soapbox!
The pandemic may have been part of the problem, in two ways. First, a lot of money was pumped into the economy, not only in terms of unemployment benefits and stimulus checks, but also in massive "PPP" loans that were forgiven. Scratch a "rugged individualist" driving a new Suburban to his overwrought mini-mansion, and chances are, you'll find a "businessman" who had hundreds of thousands of dollars in PPP loans forgiven. He's the one pissed off because "no one wants to work anymore" and his PPP money doesn't go as far as he thought it would.
The second aspect is that getting sick or seeing others get sick (or die) you realize life is finite. So a lot of folks are "YOLO"-ing their way around and spending money because, well, life might end tomorrow so you might as well spend it, right? That is the mentality, anyway. And the recession, which has already started, worldwide (but not in everyone's mind just yet) is about to change that mentality with one helluva hangover.
These companies buying up apartments and houses to "control" the rental market may find themselves owning a lot of overpriced assets. Empty office space is so useless they are basically giving it away. Maybe some can be converted to housing, but as I noted before, this presents a lot of zoning and technical issues. The point may be moot if the housing market collapses - which it could and probably will do, in the next few months.
As I noted before, there is no such thing as unaffordable housing - when people can't afford a house, they stop buying them, and then prices drop. And small differences in supply and demand drive up prices - and drive them down again. It could all change in a big hurry, but so long as some chump pays top dollar today on a funny-money mortgage, the party will keep going like its 1999 2008.
Even the guy or gal who was just laid-off from Meta or Google - with a six-figure salary - isn't cutting back just yet. After all, they have severance pay, and surely another tech firm will pay them top bucks for an HR administrator position, right? There is a lot of hysteresis in the system, as I noted before, and it will take months before the laid-off person runs out of severance money and unemployment and realizes - after one failed job interview after another, that they have to reset their salary expectations and lifestyle choices. First to go is the lawn service and the twice-weekly housecleaners. Door dash? Take-out food? Restaurant meals? That went away long ago.
But again, this takes time and it may be the 4th quarter of 2023 or even next year before we see the impact of these layoffs and contracting economy. Then it won't be "no one wants to work anymore!" but "hey buddy, you got a job for me?" and all this talk of $50-an-hour minimum wage will evaporate, at least for the time being.
And prices will come down - for everything - but only for a while, as the above-chart illustrates. Prices of everything go up over time, to be sure. A bubble in pricing occurs when the slope of the graph (Oh my! Mathematics! Too hard!) spikes briefly. In order for a correction to take place, the upward trend may reverse (and over-correct in the opposite direction) before resuming its upward climb. These spikes and valleys are excellent opportunities for people who are smart or just lucky - which is why some argue these events are orchestrated, not organic.
Yea, it is pretty odd how every tech company suddenly lays off tens of thousands of people all at once. Is it the recession? Or are they just tired of paying top dollar for salaries and know a good way to put the fear of God back into employees too coddled by work-from-home and in-office gyms and daycare. You throw a few of their coworker into the fire and well, the rest get back to work, harder than ever.
Once again, cycles!
