—There’s too much confusion, I can’t get no relief—
All Along the Watchtower | John Wesley Harding (1967)
Although the version of this song performed by Jimi Hendrix at the Isle of Wight concert in August 1970 may be better known than Dylan’s own version, the message is the same one that we expect to see from business owners and consumers in this week’s Beige Book. Business uncertainty has been a major restraint on business capital spending in recent years, despite the positive backdrop of low interest rates, an aging capital stock, banks’ increased willingness to lend, and very low odds of a recession in the next few years. Businesses of all sizes have been reluctant to do any capital spending, citing concerns over the regulatory environment, healthcare costs, and more recently, the uncertainty surrounding next month’s election. The election was cited 7 times in the September 7, 2016 Beige Book, all in a negative context. The presidential election campaign has turned even more combative and divisive since then, so we’d expect that the election will once again get plenty of attention from business owners and consumers in this week’s Beige Book.
CONCLUSION
In the last stanza of Dylan’s “Talkin’ World War III Blues” (The Freewheelin’ Bob Dylan, 1963),
Dylan sang:
“Half of the people can be part right all of the time, Some of the people can be all right part of the time But all of the people can’t be all right all of the time”
That line reminds us that historically, the U.S. has often preferred pragmatism to ideology. No one knows it all, so we’re willing to be a nation of compromise, even if it means we occasionally need to be a nation of gridlock as we work out some of the thornier issues. It’s part of where the spirit of “know-how” comes from. We like our truths bottom up. If it works, there’s a truth in there, and that’s always a good start to knowing more. And that’s why we keep coming back to the Beige Book — our window on Main Street, the economist’s folk music. It doesn’t read like Dylan; but then, no one really does.
John J. Canally Jr., CFA, is the chief economic strategist at LPL Financial.