Screwflation and the Barbeque Recovery

As we go through life we see that certain events, technological developments and general changes in our social behaviors often give rise to new words or terminology. For example, as a result of various technological developments over the past decade or so, most of us are now familiar with terms such as “smart phone”, “hotspot” and “phishing.” You probably know what a “tweet” is even if you’ve never used Twitter. Thanks to Facebook, you can now use the word “friend” as a verb.

Sometimes, technological developments create the need for a word to describe something that existed all along, but was so ubiquitous that no other word was necessary to describe it. For example, the widespread usage of e-mail has allowed us to now refer to the US Postal Service as “snail mail” while the creation of the mobile phone requires that we refer to the old technology as a “landline” phone. Most traditional phone calls had always travelled over landlines, but we didn’t refer to it them as such until cell phones became common.

Science has also yielded some new words and terminology over the past few years, or at least made then a part of everyday language. Most of us probably have some understanding of what a “carbon footprint” is, regardless of whether or not you believe in “global warming” or “climate change.”

Economic events of the past few years have given rise to new words and terms as well. Thanks to the financial crisis, you are probably quite adept at using “subprime”, “bailout” and “toxic debt” in cocktail party chatter and you certainly know that our largest banks are still “too big to fail.” The recession that lasted from December 2007 until June of 2009 is now referred to as the “Great Recession” and that’s fairly apt given that is was so severe. Perhaps one of the most well-known terms of all – the “new normal” – was coined by Bill Gross and his colleagues at the investment firm PIMCO; you might have read about the new normal while relaxing on a “stay-cation” recently.

There are a couple of new terms over the past year that haven’t been as widely adopted, but which I believe are worthy of further integration into our vocabulary. You probably know of the stagflation – the period of high inflation and unemployment that persisted during the 1970’s – but you probably haven’t been introduced to “screwflation” until now. Screwflation is a word that was coined by hedge fund manager Doug Kass and I think it does a good job of describing the current economic environment. In its simplest form, screwflation means the following: everything that you own is going down is value, meanwhile everything that you need to buy is going up in price. The past decade served-up two stock market crashes and a housing market crash, so chances are good that you’ve lost money on some of your largest assets in the past 10 years. Meanwhile, everything that you need to buy – food, energy, healthcare, education, and so forth, continues to go up in price. In other words, middle-class Americans have gotten screwed in the past decade and now retirees are left with pitifully-low interest rates on their savings and have diminished ability to pay for their post-retirement needs.

Turning to the next word, I first read about the “Barbeque Recovery” from Paul La Monica, an editor at CNN Money, and I believe this term does a good job of characterizing the economic recovery: very slow progress in the job market and overall economic growth that is considerably below the long-term potential. For those not familiar with barbeque (or simply “BBQ”) it is a method of cooking that utilizes very low amounts of heat over a very long period of time, often referred to as “low and slow.” As someone who lives in the Texas Hill Country – arguably the birthplace of barbeque brisket – I have a certain affinity for this term. However, while the “low and slow” method of cooking may be perfect for a brisket, there is no question that it is a disastrous condition for a heavily indebted economy that has just endured twin asset price collapses in stock market and housing market.

I hope you all have a good week ahead. If you happen to find yourself involved in an economic discussion with friends and family, perhaps you’ll be able to contribute by talking about screwflation and the barbecue recovery.

By Suzana