WAS 2021 GOOD OR BAD? YOUR PERCEPTION MAY BE THE REALITY
“Move along, nothing to see here.” Officer Barbrady from South Park.
Commentaries like this one, i.e., a retrospective of 2021, are often ubiquitous and contrarian. The particulars are dependent upon one’s point of view. For example, a pessimist will point to the next COVID variant, inflation, labor shortages, supply chain catastrophes, the imminent invasions of the Ukraine and Taiwan, and the seemingly interminable wait for the next episode of Ted Lasso. The optimist will cite the ever-burgeoning real estate market, soaring stock prices, historically low-interest rates, the Federal Reserve staying well ahead of the next possible recession, and the possibility of an Eagles playoff game.
Therefore, you either try your hardest to avoid watching the news or make so much money that you are unaffected by any of the bad stuff. Either way, 2021 presented as many twists and turns as a good Agatha Christie novel.
At some point in my real estate law class, I explain to my students the basic causes of the 2008 great recession. However, I always need to remind myself that many of them were about ten years old at the time. As a result, the same question invariably pops up, “…when will it happen again?” Most economic cycles last about one year on the bad side and five years on the good side. There are exceptional cycles, and we are clearly in one now. Absent something disastrous politically, militarily, or medically, I see no reason why the good times should not continue to roll.
Nevertheless, we should not lose sight of issues that we can never seem to resolve. There is a shortage of meaningful affordable housing, a balancing of environmental protection with the need for self-sustaining energy resources, a fair and understandable tax code, a living wage that outpaces inflation, and finally, an end to political acrimony.
There is no doubt that COVID has taken far too many lives. For those of us fortunate to live through it, some degree of uncertainty will prevail. Policymakers, such as governments and central banks, can use their policy tools, including targeted spending and tax adjustments, to try to alleviate the effects of uncertainty. But uncertainty about policy choices may also contribute to uncertainty. For that reason, looking too far into the future may be a fruitless endeavor. There is always uncertainty about the future – but large increases in the uncertainty of the kind that we are now experiencing are thought to confound the ability to form a confident view about the future. This means that it is harder to make these forward-looking decisions. Covid-19 is associated with a huge increase in uncertainty about the future. It combines non-economic uncertainty, economic uncertainty, and policy uncertainty.