The last two years have seen major global upheaval, with the Covid-19 pandemic having a clear and dramatic effect on the economy. Emergency measures to counter this disruption – such as furlough pay and Quantitative Easing – provided a much-needed short-term solution, while we collectively reaped the benefits.

However, like all good things, it must come to an end, and now we need to pay for what we’ve had.

If you look at the news, it’s easy to see signs that this ‘payback’ is taking place. The US Federal Reserve has recently announced a 0.5% increase in the interest rate, and NASDAQ has retreated significantly since its high in November/December 2021. Markets are reacting wildly, suggesting that we’re at a turning point in the global ecosystem. At the time I’m writing this, Apple and Microsoft are worth $2.8 and $2.3 trillion respectively. If we think back to our old loaf of bread analogy (with the humble loaf costing just 50p in 1990), this isn’t because there is more to go around, but simply because there’s far more money.

These changes are a natural knock-on effect of all that’s happened. When the world is in trouble, the recent solution is to print more cash. For a time, this gives us convenient, cheap money, such as furlough pay and low mortgage rates. However, this leads to an increase in prices (back to our loaf of bread again), which in turn prompts counter measures to avoid these price hikes.

In short, we enter into a balancing act in which we attempt to avoid any one negative thing taking over. Rather like the proverbial Dutch boy, we can plug up one finger-sized hole in the dyke, but the water will inevitably burst out from somewhere else. What we’re seeing now is the manifestation of Government fiscal policy that’s taken place over decades; 1971 set the wheels in motion, but Covid-19 has sped them up significantly.

One obvious counter weight to our ‘easy money’ is that house prices have now soared. In Cornwall, the sheer number of people moving due to the pandemic has seen the average house price rise by over £33,000.

While many hoped that this was all a blip, it’s more realistic to assume that we’re in the first month of a much longer contraction. We’re not dropping down a precipice that we can power out of, but into something longer-term and more insidious. It could be that paying back our collective dues takes between five and ten years. While governments the world over have tried to smooth the decline into a cost of living crisis, it was nevertheless always going to happen.

So, now we’re here, what can we do? If the situation is set to last, it’s time to get serious and batten down the hatches. Inflationary times call for different tactics, so the sooner you can agree on your strategy, the better. Many people are considering remortgaging to fix their costs, while proper financial and wealth management are also things to factor in. We can help with these areas, so if you’d like to know more, do get in touch.