Behavioral New World January 1, 2023Thanks for reading Behavioral New World! Subscribe for free to receive new posts and support my work. Inflation redux I first wrote about inflation one year ago in the January 1, 2022, newsletter. Strangely (or perhaps not), inflation hasn't gone away yet. In fact, it seems to be a bigger celebrity than ever, showing up almost daily in the headlines. And for good reason: the current high level of inflation has serious consequences for all of us.
I always think things like inflation that have a global effect will take longer to get better (or worse). Not because I am brilliant at eliminating my biases but because of what I remember from my past. My parents built a house in the mid-seventies and had a double-digit interest rate on the mortgage. They were delighted years later when they got it refinanced for only 8%! (refinancing was a bit harder then, and you paid more "points" to do it). I started my technology business right before the dot com bust and was running it when the 2007-8 crash happened. Each time, it took three years or so before a new "normal" settled in, and you just had to work your ass off to get through it. I also remember working with a local bank in 2006 that was expanding like the real estate growth would never end. I took their money but refused to put my money in their bank as I knew it would all come to a bad end (although I didn't realize how bad). In 2008, they underwent FDIC receivership and were sold off in pieces. Given all that is happening, I think that we will be lucky if inflation settles into a "normal" in the next three years. I'll check back in 2026...
I always think things like inflation that have a global effect will take longer to get better (or worse). Not because I am brilliant at eliminating my biases but because of what I remember from my past. My parents built a house in the mid-seventies and had a double-digit interest rate on the mortgage. They were delighted years later when they got it refinanced for only 8%! (refinancing was a bit harder then, and you paid more "points" to do it). I started my technology business right before the dot com bust and was running it when the 2007-8 crash happened. Each time, it took three years or so before a new "normal" settled in, and you just had to work your ass off to get through it. I also remember working with a local bank in 2006 that was expanding like the real estate growth would never end. I took their money but refused to put my money in their bank as I knew it would all come to a bad end (although I didn't realize how bad). In 2008, they underwent FDIC receivership and were sold off in pieces. Given all that is happening, I think that we will be lucky if inflation settles into a "normal" in the next three years. I'll check back in 2026...