Mortgage Credit News by Louis S Barnes - January 22, 2021

The descent of quiet on markets and the nation is going to take a while to process. It is odd to be able to hear the breeze through pine needles, children playing, and routine yelling at cyclists.
Nothing happened to rates, markets, or the economy this week -- except ongoing struggles to understand and describe Covid’s impact on the economy, and Covid’s fade sometime this year. Ad nauseum: not a recession, not a recovery, but what?
Some observers have begun to think of a good historical comparison: World War II.
US population in 1945 was just short of 140 million. Almost 10% were in uniform -- not 10% of adults, but of the entire population. Their uniforms (if not officers), housing, and food (if we can call it that) were free, paid roughly $25 per month (about $250 today). Shopping was poor on Guadalcanal, at sea, or almost anywhere little to spend on.
At home, economic life was never better nor deeper in the population, all the way to shovel-work. But all of the good stuff was rationed. Tires, gasoline, cheese, butter, beef. Not many autos were built, but why buy one if you couldn’t drive it?
War heroes and celebrities performed at massive rallies designed to sell war bonds. WWII may have been the only large war entirely funded by domestic savings, not money-printing. The Fed capped long-term Treasurys at 2.00% (which lasted another half-dozen years after the war). The war bonds paid better than bank deposits, and as incomes grew, nothing to do with the money but to save it.
The war ended. 90% of people in armed forces demobilized -- the Brits say, “de-mobbed” -- within 18 months. The central worry of the day: where would 12,000,0000 jobs come from? Old and new industrial plants switched, like Ford’s River Rouge from B-24s back to cars. Immense frustrated demand, released with savings in hand, and the new incomes of the de-mobbed likewise itching to spend... inflation in 1946 rose to 8.5%, then to 14.4%, but negative in 1949. Inflation then was crudely measured, without “hedonics.” Autos in 1946 were vastly better than in 1939. Post-war houses were built to FHA and VA building codes, no longer catawampus on stone foundations, with random stud and rafter spacing. Inflation from then until 1965 was too low to bother to measure.
When Covid fades we can expect a similar release, both in spending and supply. Restaurants, chefs, and staff are aching to return, landlords delighted to have them back. Hotels are ready. Pilots and planes are ready. Restored consumption in 2021 will not face shortages and price pressures similar to 1945. Today a lot of money has been parked in savings and debt paydown by the 80% of the economy unharmed by Covid, but I’ll hunch that most families will like it that way.
And consumption is likely to be delayed by lasting fright. It may be years before the unharmed fraction feels comfortable in close quarters. Supply to meet demand... in 1945 the outside world was blown to smithereens, and all supply had to be built here. Today, the outside world is ever-eager to sell it’s stuff to us, China over-eager. Freedom from Covid does not guarantee inflation, not even the 2% for which the Fed hopes.
There is another angle coming, non-economic. MAGA.
In 1781, George III monarch of Great Britain, asked what George Washington would do after independence. When told that he intended to go back to his farm, Georgius Rex said, “Then he will be the greatest man in the world.” In 1782 Washington did so, and was.
In 1945 the United States was the most powerful nation there had ever been. Rome could not dream of such power. And all that we wanted to do was to go home. Despite currently fashionable lefty noise about capitalism and colonialism, we were dragged into post-war engagement by Russia, and into occasional awful accidents and misjudgments of power. Economic dominance was inevitable, but assistance to the rest of the world -- sharing our wealth -- was without precedent.
MAGA. Reunification of America is more important than anything else, and perhaps as in 1782 and 1945 we can ride Covid to new greatness. Everyone has advice for Mr. Biden, so here is more.
1. Call the mayor of a medium-sized town “out there.” Maybe Grand Island NE. Ask the mayor, “May I visit?” Country folk understand “visiting.” Not making a speech, no drama, no fatuous “listening tour,” no sales pitch. Just this: “I’d like to visit for a day or two, and wondered if you would ask some of your fine citizens if they would meet with me privately, maybe a dozen at a time for an hour or two, and visit. No cameras, press, or big shots with me.” Oh -- and on your way out there, pick up a red MAGA hat and wear it. Once in a while, backwards.
2. From 1917 until 1973, large segments of the US population were drafted. Or volunteered. Booted out of a cot by the same sergeant no matter who they had been. Side-by-side in mud with people and cultures they otherwise would never have known. Today we are separated by self-selected “news” provided by the worst of e-profiteers, and those who are IT-capable concentrating in metro areas, the rest abandoned. One radical idea in 1960 led to the Peace Corps. Want to be great and at least know each other? How about two years’ mandatory public service? Earn benefits similar to the GI Bill. There is no substitute for shared experience.
3. If we wish to be great, do great things. The world looked to America after 1945 as example and savior because of military and economic success, and as the oldest democracy. But America made it to the top of the world’s hearts by its generosity. During the war the whole world feared small bands of young men in uniform, except the GIs with grins and candy bars. Afterwards the Marshall Plan, the UN, and keeping the peace. Today, would someone please propose a fraction of US vaccine production to be delivered free to health care providers in poor nations -- now, before all Americans? And pay the inventors license fees to provide our formulae to the world? And after we are all inoculated, free of charge enough juice for the world?
MAGA. We will not restore unity and grace by force of election, nor condemnation, nor bilateral stubbornness, hammering at each other on the same ground as before. We can by doing great things together.
No, I don’t have an image of a soapbox to paste here. Use your imagination. :-)