The Week - USA (2021-02-26)

Making money

When the pandemic passes, will there “be a

huge burst of inflation?” asked Neil Irwin in

The New York Times. The question is at the

center of a heated debate among economists.

Set off by a Washington Post column by for-

mer Treasury Secretary Larry Summers, poli-

cymakers have been arguing about whether

the proposed $1.9 trillion “pandemic rescue

plan is too big.” Inflation hawks believe the

stimulus being poured into the pandemic-

deflated economy exceeds what’s needed

to bring it back to full potential. Instead of

generating more real production, the extra

money will “slosh around the economy,

causing prices to rise” and creating the pos-

sibility of “a new recession.” The White House and Treasury Sec-

retary Janet Yellen argue that the economy is in a “do-whatever-

it-takes moment” and that inflation is a “manageable risk.”

Think of what we’re getting now as a “war budget,” said Paul

Krugman, also in the Times. It’s true that “wartime surges in

spending have often been accompanied by bursts of inflation.”

That’s not a reason for “skimping on Covid relief.” If indeed

inflation does occur, “the Federal Reserve can tighten monetary

policy”—as it has often been eager to do. The more immediate

danger here is that the government spends too little to bring the

economy back to capacity and we lose the political wherewithal

for additional spending. That’s what happened in 2009. If we

don’t do enough now, Mitch McConnell will come back just as

he did then, saying, “See, government

spending doesn’t work.” Summers is a

“natural gadfly” who’s actually been argu-

ing for years that the U.S. needs to combat

stagnant growth with increased federal

spending, said Jordan Weissmann in Slate

.com. “Now that Washington’s purse is

open, he’s suddenly freaking out.”

There are several genuine reasons for

alarm, said Bill Dudley in Bloomberg.com.

The pandemic has “wiped out a lot of

small businesses,” meaning there “won’t

be enough capacity to meet resurgent

demand” as the economy reopens. And

many households have money to spend that they saved over the

months of lock-ins. That’s a recipe for higher prices. If the Fed

has to “pull back on stimulus sooner and with greater force than

anticipated,” there may be a “volatile market reaction.”

For the moment, markets aren’t worried, said James Mackintosh

in The Wall Street Journal. Investors seem to be pricing in “the

sort of inflation they like, slightly higher in the next few years but

moderating back down after that.” The situation we saw in the

1970s came about “in large part because powerful unions were

able to demand wages rise with prices, pushing companies to raise

prices, in a nasty spiral.” The labor market is quite different now.

There’s also more “faith in the Fed” to forestall any disaster. “I

very much hope such faith isn’t misplaced.”

Inflation: How much stimulus is too much?

BUSINESS 33

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Summers: Warning of stimulus risks

Navigating the unemployment maze

Reddit has become an “unofficial hotline” for

the nation’s jobless, said Ella Koeze in The

New York Times. On the increasingly popular

subreddit forum, r/Unemployment, “post after

post conveys bureaucratic problems with end-

less variations,” from frustration with “jammed

phone lines” and “glitch-prone online portals”

to questions about “what to do if you make a

mistake on your claim.” The majority of those

answering are “other out-of-work people” who

can empathize with the concerns, although

there are some on the forum who do work for

state unemployment offices. But 10 months

into the pandemic, the volume of posting just

keeps growing; last month, “the forum had

one of its busiest weeks ever, driven by delays

in payments and uncertainty around legislation

signed late last year.”

No room in Zoom boomtowns

Home rental prices in Bozeman, Mont., have

risen 58 percent in a year, said Patrick Sisson

in Bloomberg.com, and locals are pretty sure

they know the cause: “White-collar workers

fleeing the pandemic-ravaged metropolis.” Re-

mote work has upended real estate across the

country, and not just in trendy tech hubs like

Miami or Austin. “The median sale price for a

Bozeman home clocks in around $700,000,”

and similar housing spikes are being reported

in other Montana cities like Billings and Mis-

soula. Locals in many of these so-called Zoom

boomtowns are “getting squeezed out” by out-

of-towners. “The Bozeman boom has fueled

an ‘incredible increase’ in the local homeless

population,” according to a local nonprofit,

“as well as a spate of pop-up RV communities

for those who’ve been displaced.”

Avoid investing in ETF fads

A study found that newly launched exchange-

traded funds typically “lag behind the broad

market’s returns over at least five years after

launch,” said Mark Hulbert in The Wall Street

Journal, and many don’t make it that long. In

an analysis of all U.S. equity ETFs from 1993

to 2020, “specialized funds lagged behind the

broad market’s return by an average of 5.4

percentage points on a risk-adjusted basis over

the first five years of their lives.” To capture

investors’ attention and attract assets, fund

sponsors “tend to focus on increasingly spe-

cialized sectors and investment themes,” often

to “capitalize on the latest trend.” Many end

up “investing in overvalued stocks” already

bid up to unsustainable levels “by the same fad

that tempted the ETF sponsor to launch.”

What the experts say

Casting for recovery (castingforrecovery

.org) was formed in 1996 by a professional

fly-fisher and a breast-reconstruction

surgeon to provide breast cancer patients

and survivors rejuvenating weekend fly-

fishing retreats. Each one of these retreats

includes a counselor, fishing instructors,

and medical professionals. Seventy

percent of the women who go on these

retreats have never attended a support

group, so being in nature and with others

can be an incredibly healing and sup-

portive experience. In addition, the gentle

motion of throwing the fishing line into

the river can help them increase mobil-

ity. Casting for Recovery offers dozens of

retreats across the country each year and

has helped more than 10,000 women find

hope and support since its inception.

Charity of the week

Each charity we feature has earned a

four-star overall rating from Charity

Navigator, which rates not-for-profit

organizations on the strength of their

finances, their governance practices,

and the transparency of their operations.

Four stars is the group’s highest rating.