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This will be first article I have ever written or podcasted like this.
Throughout the years working in corporate America and as an independent consultant, the business community has seen ups and downs. These economic peaks and valleys are called cycles.
The housing industry has boom and bust cycles every 10-15 years. American homebuyers and renters have just entered the bust cycle by now seeing interest rates rise from 3% to 6% over the last 180 days.
The good news about the just announced recessionary economy? It is man-made...forced upon Americans by Let's Go Brandon and his supporting cast. The current financials-all across the board-are not driven by historical, supply and demand economics.
Like I said, that's the good news.
The bad news is Let's Go Brandon appears to want to continue with non-market forces to reduce productivity and handcuff supply side economics.
FYI...please click HERE to understand the definition of supply side economics.
Supply-side economics is better known to some as "Reaganomics," or the "trickle-down" policy espoused by 40th U.S. President Ronald Reagan.
President Reagan and his Republican contemporaries popularized the controversial idea that greater tax cuts for wealthy investors and entrepreneurs provide them with incentives to save and invest, and produce economic benefits that trickle down into the overall economy.
To give readers an example of how media companies interpret "supply side" economics either positively or negatively, I purposely included a supply side definition with the phrase "wealthy investors". Over the years, Keynesian economics-productivity driven by government-has tried to demonize Adam Smith supply side economics to grow the economy by claiming only the wealthy people benefit.
Here's a newsflash: wealthy people are needed to provide the capital to expand. Wealthy people always reap capital investment rewards by assuming great financial risks. Why would any sane person or group invest billions of dollars without an opportunity for a good or great ROI?
Click HERE to read a more mature, realistic supply side economics definition.
Supply-side economics advocates tax cuts and deregulation to drive economic growth.
The Laffer Curve is the visual representation of supply-side economics.
The opposite of supply-side is demand-driven Keynesian theory as the government makes financial decisions about productivity and growth.
President Reagan used supply-side economics to combat stagflation. It was dubbed "Reaganomics," for this reason.
Supply side economics impacts how much revenue small business owners generate.
Meaning, restaurant owners, night clubs, construction companies, plumbers, and even sex workers benefit when the economy is booming.
Here is a good example of supply side economics.
A restaurant charges $25 for an evening meal. The restaurant is packed and people are waiting in a line. Some people do not want to wait (the queue) and leave. The restaurant earns $10,000 per evening serving 400 people.
The restaurant owner wants to know how much he or she can raise prices such that people will still come. The owner decides to charge $30 per meal and patrons still dine, but the queue is not as large. People still leave to find another restaurant. The restaurant earns $12,000 serving 400 people.
The restaurant owner decides to raise the meal prices to $40 and notices the number of diners drops to 325 and the queue vanishes. More shocking, the restaurant has no customers during the last 45 minutes the restaurant is open. The restaurant generates $13,000, about $1,000 more than at $30, but has 45 minutes of dead time.
Finally, the restaurant owner, fearing people will see 45 minutes with the restaurant serving no one, the owner drops the price to $35 and 420 patrons dine. There is a queue but the people do not leave. They wait to be seated and dine. At $35 and 420 patrons, the restaurant owner generates $14,700
Above is the best definition of supply side economics. The restaurant owner ultimately discovered that $40 was too high, $30 was too low, and $35 was the price patrons found fair for the dining experience.
In a free market society, buyers have just as much power to say yes or no as the owner (or seller) has the right to increase or decrease prices. The market decides the final outcome.
But what Let's Go Brandon has done is inserted government (Keynesian economics) into the picture and damaged the free market economy.
Since January 20, 2021, when Brandon shut down the oil pipeline, the price of gas has more than doubled. These increases are not market forces because the government intervened.
The chain reaction has been felt across all businesses and with all Americans.
American businesses cannot accommodate exorbitant, unnatural pricing spikes like the restaurant owner who adjusted prices to maximize profit and still satisfy customers.
Exorbitant price increases cannot be passed down to vendors and consumers without major repercussions.
The three ways businesses can adjust to temporary price spikes are:
Raise consumers prices
Layoff workers increasing unemployment
Use less costly or inferior products.
This blog/podcast topic would be incomplete without providing the above context.
I mentioned three ways businesses can adjust to temporary price spikes. However, there is a fourth solution that must be implemented under this Let's Go Brandon economic environment.
This fourth solution involves working smart, working hard and using a system. No longer can small business owners limp through days and months in their businesses, not being aware some of their potential customers are experiencing economic uncertainty.
Uncertainty is a killer business word.
Our consulting firm has the solutions.
Rick Nappier
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