JUST PLAIN TALK: Inflation or infection — which is worse

Buz Livingston
Buz Livingston

The biggest threat to your portfolio might not be inflation but infection.

Vaccination rates in America aren't going to get us to herd immunity. Inflation can be severe, but worrying about it while ignoring science is akin to putting the cart before the horse.

England may be the proverbial canary in the mineshaft. COVID-19 rates are up there despite the fact they had one of the best responses to the pandemic. Adjusted for population, death rates in England are one-tenth of ours. No one goes broke over medical bills in England either, but that's another story.

Thankfully the United States is emerging from a COVID-induced recession. Since school is out, we flew to Houston on a packed airplane to see the grandkids and catch Hayes Carll's show at the Heights Theater, two things off our radar this time last year.

The increased demand for goods and services compared to a year ago is driving inflation numbers. Supply chain bottlenecks also crimp inventories leading to higher prices. Greater demand often drives up prices; it's Economics 101.

Just look around. South Walton is a prime vacay destination for Alabamians. Unfortunately, Alabama has the second-lowest vaccination rate in the country. I don't mean to bash the Yellowhammer State; the southeastern United States has significantly lower vaccination rates than the rest of the country. Folks come here by plane, but most from the Southeast drive. Of course, there's no place for all the cars, but that's another story, too.

I worry about the service industry workers. They tend to be younger, and the variant now prominent in England affects young people more dramatically. I don't know if our country can adjust to high infection rates again. If rates stay low in England, we should fare well here.

Inflation is a legitimate concern. Let’s don’t forget that several years before the pandemic, the Federal Reserve worked diligently to bump inflation to 2% with little success. Even now, the Fed doesn't appear overly concerned. Before blaming political appointees at the Fed, the bond market remains unconcerned. The Federal Reserve controls short-term interest rates, while supply and demand rules the bond market. For example the ten-year Treasury remains lower than it was prior to the pandemic, currently trading around 1.5% (June 11, 2021).

As a budding entrepreneur the double-digit interest rates of the 1980s aren’t a usurious theory for me, but we are light-years from there. A dozen years ago, in the wake of the Great Recession, politicians and pundits used the specter of high interest rates and inflation to argue against government spending. The recovery from the COVID hit was one of the sharpest in history. One reason is because of our robust response from Congress and the Federal Reserve. Let’s don’t take our foot off the pedal in the struggle against the virus or to strengthen the economy.

You can't always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.