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Inflation, recessions, and war, oh my!

Where is the U.S. economy going?

The economy will be fine.

Be afraid.

Don’t worry about inflation – it’s not that big of a deal.

A recession is coming.

If you feel like your head is spinning, so did the 900 or so attendees at the 2022 Land Investment Expo in Des Moines on Jan. 1. Economist Alan Beaulieu, the president of ITR Economics, shared his insights about what’s ahead for the U.S. economy, the globe – and beyond.

His firm, which was founded in 1948, is the oldest privately held, continuously operating economic research and consulting firm in the United States. Economists at the firm also have a long-term accuracy rating of 94.7% forecasting such events as the Great Recession of 2008. ITR provides this service to companies and trade groups across the country.

The Land Expo, held each January, includes farmers, investors, financiers, and technology companies all interested in farmland. Here are some of Beaulieu’s comments.

The U.S. Economy

Don’t worry, he assures. Yes, we are going to see inflation continue into 2022. It will have an effect, he says. There will be a softening of the U.S. economy into 2023, but GDP will prevent the economy from tanking, Beaulieu says. He predicts that inflation pressures will abate in later 2022. And don’t worry about it becoming a recession: it takes two consecutive declining quarters to constitute a recession.

It’s not just the United States that will see some softening. “The world is slowing down,” he says, and worldwide demand will be easing. Leading indicators show a deceleration of global economies, especially in the latter half of 2022.

Supply chain

By Beaulieu’s tracking, global container shipping throughput continues to rise, meaning products are moving across the globe. “Traffic is moving,” he says: there is congestion in ports but intermodal container traffic – a sign of healthy trade – is doing pretty well. Supply chain pressures should ease up through 2022, he says.

The United States is still the second-largest manufacturing country in the world and the second-largest exporter in the world.

Speaking of recession

Land Investment Expo 2022
Lookout for 2026, according to Beaulieu. We will have a “sizable” recession, a “noticeable, unpleasant” recession, in fact. His advice: If you’re near retirement and have a business to sell, sell your business to someone you don’t like in 2026. (He was kidding, of course.)

But what about interest rates rising? Will the Federal Reserve raise rates twice in 2022? Four times? Don’t worry about it, according to Beaulieu. “It’s not enough of a rise to ding the economy. It’s in the longer run that it becomes problematic.”

His suggestion for today’s low interest rates: go borrow money now – before rates go up. While rates are still historically low, use borrowed money – not your cash – to invest now. Should you buy a home? Yes. Buy two, in fact, according to Beaulieu.

Government spending

The government’s spending spree of the past three years has propped up the economy, but the bill will come due, Beaulieu claims. What he described as “wild spending” will come back to bite the American economy at the end of the decade – when higher interest rates will make the bill even steeper, according to Modern Monetary Theory (MMT) or, he jokingly calls, the “Magic Money Tree.”

Who’s to blame? Blame both Democrats and Republicans, according to Beaulieu. Both parties have increased the deficit equally, he says, starting with Ronald Reagan’s presidency. “The seeds of our financial problems will lead to a very tough 2030s,” he predicts. Growth will be harder to come by in the future.

COVID bounce-back

Beaulieu expressed an amazement with the resilience of businesses and people during COVID. “We came through it to the other side, and we’re still in business, and still profitable.” His motto: the Great Before will lead to a Great Tomorrow.”

It’s people, people

One statistic he watches to make his global forecasts is population. He described China’s lack of population growth as severe. Populations in Japan and Russia are already in decline. However, the United States has a “secret weapon: we have kids,” he said. Where population grows across the United States, so go customers, businesses, growth, and prosperity.

Farmland ‘levels off’

The rocket ship of farmland prices over the past year will cool off in the second half of 2022, according to Beaulieu. As GDP leads, land values will follow. “For the long haul, you’re going to want to own farmland,” he says. He tried to calm the farmers in the room: “It’s good to be you. You’re in the right place. You’re the forgotten army and soldiers who make this work.”

Basset hounds?

Beaulieu also chided farmers and ranchers to “identify your basset hounds.” What’s that? “Basset hounds” are things you should stop doing on your farm – right now. How do you find them? Ask a millennial, he says. Younger producers have a clarity of ideas and a willingness to change. “Pay attention, they are the future. Listen to them. There are basset hounds that you can get rid of – and the operation will benefit.”

One more surprise

Beaulieu threw out to the audience that he is predicting that China and Russia could team up for war against the United States. In 2024. All of his economic plans go out the window if that should happen.

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