The Economic Storm Ahead

Last week, I spoke to a group of community organizers in Western Colorado, and was asked to provide a big picture of the economy. I apologized to the audience for ruining their otherwise cheery day. Even though the economy is in calm seas now, I said, a hurricane looms over the horizon. We can quibble whether it will be a Category 1 or Category 5 storm, but communities would be wise to batten down the hatches and prepare for a calamity ahead.

The President’s team is feeling buoyant right now because key numbers—on inflation and unemployment, two of the most important economic indicators—are more or less where they were a year ago. Plus, the Dow Jones Industrial Average just hit a record at 50,000. All true, but…

Here are five things to worry about:

• Trade Wars – We have foolishly piled tariffs on all our trading partners. In the case of Canada, our closest trading partner, we have pushed them into the arms of our largest global competitor, China. Thanks to retaliatory tariffs, our exports, everything from soybeans to manufactured goods, are getting crushed. Meanwhile, a report from the New York Federal Reserve confirms what we all know—that 90% of the tariff costs are being borne by US consumers and businesses. Last year, producers tried not to pass this along as higher prices, but this year it’s inevitable. Expect inflation to creep up. As I noted in a previous blog, this is one of thirteen reasons why prices are rising. Today’s Supreme Court decision knocking tariffs down will only change the Administration’s legal rationale, not the resulting trade disruption.

• Declining US Dollar – Foreign bondholders look at our nutty economic and foreign policies and are basically saying, “I’m out.” They are dumping our Treasury bonds and holding fewer dollars. As a result, the value of the dollar has declined by 10% over the past year. That isn’t necessarily a bad thing, because a weaker dollar could make our exports more competitive. But only in theory. In fact, our exports are less welcome because of our hostile trade posture—and our trade deficit in goods is increasing! We’re importing more than we export, and those imports—with higher prices—will mean more inflation.

• Loss of Fed Independence – The President is doing everything in his power to seize control of our central bank. Why? Because presidents like to keep interest rates low, especially before an election, even if it triggers long-term inflation. The last President to interfere with our central bank—Richard Nixon, who leaned on Fed Chair Arthur Burns in 1971—set off the worst inflation in the last century. Even if the Supreme Court limits outright presidential control of the Fed (we’ll know its decision soon), subtle manipulations—like make-believe lawsuits on Fed board members—chill the Fed’s independence and investor confidence. It’s happening already.

• Stock Market Crash – A good measure of whether the stock market is overvalued is the price-to-earnings (PE) ratio. Historically, this averages about 16-20. We’re now closer to 30. And an estimated 80% of stock gains over the past year have come from AI companies, whose PE ratio is a stratospheric 70. It’s a classic bubble that will pop once investors realize that AI companies lack reliable revenue models and there are too many for the marketplace. Stock market crashes beget recessions, and with the inflationary pressures, we will get stagflation, which is notoriously hard to fix.

• Job Losses – Even the small number of AI companies that remain after the bubble pops, however, could gobble up jobs. I’m optimistic that over time, AI will generate more jobs than it replaces, but the transition could be long and ugly. Every time you see a Waymo that replaced an Uber or taxi driver, consider how many other jobs robots might soon absorb. Employers like robots because they don’t demand higher wages, health care, or time off.

How then should communities respond to these imminent storms? By increasing local self-reliance, especially on basics like food, energy, and water. And by shifting investments from Wall Street to Main Street. Put another way, the innovations we share every week are not just curiosities—they are the essential building blocks for fortifying your community’s well-being.

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Here are some stories you’ll find in this issue that can help you fortify your community:

• Co-ops are standing up to Big Tech in Silicon Valley, expanding in the United States, and testing creative new designs.

• The ideas of economist Henry George about land taxes, from more than a century ago, are being brought to life with new tax proposals for Maryland.

• The Kensington Corridor in Philadelphia is connecting local investment with equitable redevelopment.

• The first new Black-led bank in 20 years is now taking off.

• Scotland has admirably redesigned its economic development programs around the principles and practices of community wealth building.

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— Michael Shuman, Publisher

Publication of The Main Street Journal depends on your support. If you like what you’re reading, please consider becoming a paid subscriber today. Paid subscribers can attend our monthly “Mondays with Michael” and receive a free consult on their projects.

NEWS

• Socialist Co-ops Against Silicon Valley Empires, Jacobin (February 11)

• Worker Co-ops Rising in the US, Co-op News (February 7)

• Why Maryland Counties Deserve Property Tax Reform, Baltimore Thrive (February 10)

• Kensington Corridor Trust Demonstrates Neighborhood-Led Revival Without Displacement, ImpactAlpha (February 8)

• America’s First New Black-Led Bank in 20 Years Is Picking Up Steam, Next City (February 3)

• Scotland’s Community Wealth Building Bill, Democracy Collaborative (February 8)

SPONSOR CORNER

The National Coalition for Community Capital (NC3) is dedicated to educating, advocating, and activating community capital and serves as MSJ’s fiscal sponsor. Thank you for being a part of a growing movement! Contact NC3 for support in integrating local investing in your work: info@nc3now.org.

NC3 UPDATES AND ANNOUNCEMENTS

NC3 CEO Chris Miller spent a day in Macon, Georgia, recently, meeting with NewTown Macon to discuss how an NC3 community investment fund could support their work.

Newtown Macon is a remarkable organization, laser-focused on creating a downtown that’s vibrant and powered by local individuals and businesses. Led by core values of (1) local loyalty, (2) imagination, (3) accountability, (4) action, and (5) empowerment, downtown Macon and NewTown Macon have achieved stunning success at building a unique historic downtown.

During the visit, Chris was able to meet with the entire staff of NewTown Macon, meet with a group of local leaders, and meet with the NewTown Macon board. The quality of the individuals leading the work and their commitment to the community were evident, as was the result of that work in his tour of the community. That work was recently recognized by MainStreet America, when it named Macon its Great American Main Street Award winner, the highest award for the single best MainStreet in America.

PARTNER NEWS & VOICES

• Invest Local: Choose Black-Owned, American Independent Business Alliance (February 19)

• What Does It Mean When Anchor CDCs Start Selling Affordable Housing? Shelterforce (February 13)

• Place-Based Investing for Inclusive Communities: From Local Lessons to Global Applications, SOCAP (February 13)

• The End of Extraction: A Blueprint for Designing a New Economy Rooted in Justice and Shared Prosperity, Council Fire (February 13)

• Recording: Hiding in Plain Sight: Lessons From 600 Business Leaders Who Chose Values Over Short-Term Profit, Transform Finance (February 12)

• Lifting the Veil, Witness the Common Good (February 12)

• Beetniks, Healthy Skeptics and Trust-Starved Citizens, Slow Money (February 12)

• A New Model for Global Worker Cooperatives, Equal Exchange (February 3)

NOTABLE NEW RESOURCES

• Event Highlights: Employee Ownership Roundtable in Perth, Employee Ownership Australia (February 9)

• What is a Public Bank? Public Banking Institute (February 6)

EVENTS

• Science and Practice for Just and Sustainable Communities - Virtual Course: Begins February 23

• Rupture vs Solidarity Economics: La Siembra and Equal Exchange Integrate -Virtual Event: February 25, at 12 pm ET

• The Future of Business: How Shared Ownership Drives Innovation and Performance - Virtual Event: February 26, at 12 pm ET

• Building Prosperity: Employee Ownership for Chicago’s Industrial Sector and Communities - In-Person Event (Chicago, IL): February 26

• When Algorithms Set the Price: How Dominant Corporations Inflate Costs and Undermine Competition - Virtual Event: March 3, at 1 pm ET

• Unnamed: A Conversation at the Edge of Sense - In-Person Event (Great Barrington, MA): March 7

• Rethinking Succession: Employee Ownership for Licensed Professionals - Virtual Event: March 10, at 1 pm ET

• How Ownership Actually Works in a Worker Co-op: A Hands-On Introduction to Ownership Design - Virtual Event: March 11, at 12 pm ET

• Purchasing with Purpose: Putting People and Planet First - Virtual Event: March 12, at 1 pm ET

• The Living Systems Summit: From Doughnuts to Deep Roots - In-Person Event (Okotoks, Alberta): April 13 - 15

• Connecting for the Common Good - In-Person Event (Cincinnati, OH): May 4 - 6

JOBS BOARD

• Black Farmer Fund: Impact Lending and Relationship Manager

• Doughnut Economics Action Lab: Business & Enterprise Lead

• Democracy at Work Institute: Worker Ownership Cities Program Manager

• The Agroecology Fund: Agroecology Investment Consultant

About The Main Street Journal

The Main Street Journal aims to catalyze the movement of $50 trillion from Wall Street to Main Street, facilitating economic development and economic justice. It’s sponsored by the National Coalition for Community Capital, with grants from the Heron Foundation, Wallace Global Foundation, and the Bondi Foundation. We welcome feedback about everything, from our design to our content. Please send ideas to Jen Risley at jen@main-street-journal.com. 

Our Team:

• Michael Shuman – MSJ Publisher

• Paul Spinrad - Decent Tuesday Writer & Editor

• Jen Risley - MSJ Editor

• Wendy Wasserman - Strategic Advisor

PARTNERS

Abrams+Angell | American Independent Business Alliance | American Sustainable Business Network | Candide Group | Capital for Change | Capital Institute | Community-Vision Solutions | Cordata Capital | Council Fire | Crowdfund Better | Crowdfund Capital Advisors | Democracy Collaborative | Eleanor LeCain | Exit to Community Collective | Fair Food Network | Future Roots | Garlic and Roses | Impact Finance Center | ImpactPHL | Initiative for Local Capital | Institute for Local Self-Reliance | The Kassan Group |Longfellow Health Clubs | Mission Driven Finance | National Coalition for Community Capital | Natural Investments | Neighborhood Associates | Neighborhood Economics | New Majority Capital | Next Egg | Nonprofit Quarterly | Ownership America | Ownership Capital Lab | Ownership Matters | Partnership for Southern Equity | PathLight Law | Project Equity | Project for Public Spaces | Prospera Partners | Raise Green | Revalue | Rising Tide Capital | Schumacher Center for a New Economics | Shelterforce | Slow Money | SOCAP | The Super Crowd Inc. | Sustainable Business Network of MA | Transform Finance | Uwharrie Bank | Village Well | Zebras Unite

We welcome any nonprofit or for-profit entity committed to local investment as a partner. If your organization is interested, please contact Jen Risley at jen@main-street-journal.com.