One minute demand inflation is heating up. The next the economy is slowing down and commodities are falling. One quarter the economy is picking up and the next it's starting to lose steam. It's hard to find a trend line that popular opinion is willing to stick with. The animal spirits are all over the place. Fiscal tightening in the USA coupled with European austerity and bank tightening in China all would suggest the economy is going to slow. I have a list of reasons I think not and I bet you have a list too. Follow me here.
Start a list of the stuff you need. On my short list I need a new roof, a new wall oven, a new car, new carpeting, a new lawn tractor, and a new suit and a sport jacket. How about you? I bet you've got a bunch of big purchases you've put off. Add on a few things you really want to do like a nice vacation, maybe a Broadway show, a faster smartphone, an iPad2, and that big landscaping project. I believe people's lists of needs & wants has never been longer because as a country we've never put off so much for so long.
Age and obsolescence make an increasingly compelling case to add to our list. As all our stuff gets older much of it simply wearing out. But a lot more of it is becoming obsolete. What I mean by obsolete is that thanks to innovation in technology, design, and materials a lot of stuff we once enjoyed is becoming less attractive to us. Take your phone or computer for example. I don't need new phone, my Droid2 works fine. But the new one available is 4G and I want it! I don't need a new laptop, but the new ones are so much lighter and better. In some situations the improvements that come from innovation nearly pay for themselves. We are seeing this when it comes to more energy efficient solutions when eventually the savings from energy efficiency virtually pay for the capital cost of replacing the old item, for example with an old hot water heater or with incandescent light bulbs.
If you think you've got a long list, just imagine what some families in developing countries need. A young Chinese or Indian couple that is upwardly mobile and joining their country's version of the middle class has a list that would make you count your blessings if you compared. This is a reality that isn't being lost on General Motors, let alone KFC!
Can you guess what else is wearing out! You body!! OK, maybe not your body, but I can assure you there's a half million other bodies that need new knees, hearing aides, eye glasses, and dental work. The Great Recession has forced a lot of people to put off taking care of themselves. Time marches on and as it does it takes its toll on our health and appearance. Fortunately, when we find the money we'll also find that improvements in technology, design, and materials have provided for some pretty attractive options in this area as well.
My list, your list, and the lists of things people around the world want and need keeps growing. The recovery will see to it that we have the means to cross-off some of the items on our lists. Or is it the other way around? It's the list that will see to it that we have a recovery!