“It’s World War I again” says the economy

It’s a war between spending and saving. (Photo: The Other Press)

Every wallet for itself

At a certain point, living through one historical event after another gets exhausting. A pandemic, a war, a moment when companies realized that all of this really could’ve just been an email, and soaring inflation prices that have hit an all time high in 40 years.

Is it too much to ask that maybe we just want to live in a time where nothing significant happens?  

During the first world war, the world economy (unsurprisingly) was a massive sh*t show. Obviously, I can’t speak from experience but I’m going to take a guess and say that it wasn’t exactly easy earning money and buying anything during a time when everyone is shooting at each other. 

People from Wall Street seem to think that what’s happening right now, in our global economy, is looking like what it was in WW1. It’s rough, it's ugly, and it’s very painful. 

Inflation is high. The circumstances are very volatile and we’ll be experiencing long-term effects from everything that’s happening. Water is wet. 

The CEO of BlackRock, Larry Fink shared in his annual shareholder letter that the conflict between Russia and Ukraine has “put an end to the globalization we have experienced over the last three decades.”

This means that companies and governments will start to move away from engaging in international trade as prices for products and services continue to rise. What will happen is that many will start to pivot towards onshoring their own operations. 

Fink’s prediction makes sense considering that despite the global economy being up in flames, the job market continues to turn heads as more and more people are getting hired. Companies are really just saying, “Fine, I'll do it myself.”

Spending through the pain

Yes, money is a very big problem right now for the whole world, people are still somewhat spending. It probably helps that average hourly earnings have risen by 5.1%, exceeding initial expectations from economists.

But, as with everything, there is a but. 

The US Department of Commerce revealed last Friday that retail sales have increased by 1% in June. However, if taking into account the 1.3% rise in inflation during the month, the sales weren’t exactly anything worth celebrating. 

“The 1% [month-over-month] rise in retail sales in June isn’t as good as it looks, as it mainly reflects the boost to nominal sales values from surging prices,” said Andrew Hunter, senior US economist at Capital Economics.

It’s not anything massively significant but it also doesn’t mean that people aren't buying anything. In fact, PopMenu recently conducted a survey that found 40% of monthly individual or family food budgets are spent on restaurants.

Brendan Sweeney, CEO and Co-founder of PopMenu, said, "With grocery prices going up, the economics between dining out at a restaurant and using groceries to make a meal are not so different anymore." 

I can’t say I don’t believe him. Last time I looked at the grocery bill, I contemplated living on just water alone.

People were really amused that they were able to save up money during the first two years of the COVID-19 pandemic. A lot of canceled plans and trips led to less spending. Now that people have more leeway to move around, the economy is doing everything it can to make sure it’s harder to spend. 

The numbers will tell you that the people still want to spend. Just look around you. Restaurants have people dining in them, your friends are going on vacations, and delivery services are zooming on the streets. 

You think doomscrolling was bad? Doomspending is probably worse.