What Does the Future Hold For Small Business?

     According to Forbes, American Billionaires have collectively risen in net worth of upwards of $1 Trillion dollars. This comes to no surprise as many businesses were mandated to close at some point during this pandemic. We all hope 2021 brings better news for all of us. While we are all in this together, small businesses across America have felt the pain of this crisis more so than others. Small businesses need to be supported more so than ever. Local employment coupled with financing requirements by lenders account for a large portion of real estate values in a given region. Small businesses, especially those in towns or communities that are more remote from metro areas likely will experience price volatility and/or declining real estate prices if small businesses close more frequently. The Federal Reserve has implemented “QE Infinity” which creates an interesting element to home values.

The Fed and “QE Infinity”

      The Federal Reserve is the central bank given the power to create fiat currency. This currency is backed by US Bonds / Treasuries in which for each dollar created a US bond is sold as collateral. The crux here is the Federal Reserve is now monetizing their own debt by purchasing US Treasuries. With the creation of trillions of dollars being injected into the economy all while the Fed purchasing its own collateral, this sets the stage for three possible scenarios:

1. Inflations of goods and services with relatively low employment (stagflation)
2. Inflation of goods and services with resumed employment (inflation)
3. Collapse of the US Dollar / Creation of a new currency (likely a digital based dollar similar to the digital Yuan)

After America resumes to its pre-COVID era, its important to note that while Wall Street was record setting, government deficits were at all time highs. The Coronavirus exacerbated the problem and whether we return to prior levels of commerce or not, the money supply has been largely expanded. Appraisal values are a snapshot of a given time in history, its important to know that times ahead are very volatile. The Fed is under their projected inflation targets (of 2%) and anticipate on catching up to this rate. That being said, they have been below the benchmark for several years and do anticipate exceeding this annual average so long as it averages the 2% however this is just a target.

Speculating the Market

     The challenge is speculating what the likely outcome will be. Without knowing the end of this pandemic, it is highly uncertain to gauge home values as the Federal Reserve can and does manipulate the measuring unit – dollars! Imagine trying to measure an object with a ruler that changed size as you did it. Projections can be found throughout the web and range from one end to the other in regards to outcome. In the end, the certainty is there is more dollars in the market. How that materializes in the economy is the story we all wait to hear. Small business has to remain open. Even the slightest efforts to continue shopping with your local businesses may make the differences in whether they can ride out the pandemic storm. When the dust settles, you will want the local commerce to support home values. Continue to support the local businesses – our future depends on it.