Opinion: Vicious cycle


Times are tough for some and about to get tough for a bunch more. Inflation is significantly outpacing wage growth and interest rates have been pushed up dramatically for the first time in many years. Sure, we seem willing to pay $4 or $5 for a gallon of fuel.  And rents or purchase of housing are hitting all-time highs. But for now, we continue to spend our hard-earned money even as the stress is beginning to show.

It is not the first time our nation has been confronted with such a series of unfortunate events, and it probably won’t be the last. We can look to the past for guidance, if not a prediction, of what might be on the road ahead. Businesses and individuals alike will recess into a posture of preserving and holding onto the cash we have. Unnecessary expenses will be forestalled or permanently derailed. We might carry a bigger balance on the credit card thinking that cash-in-hand is always better than promised credit. In the most severe of cases, we might start delaying routine payments to our vendors just a bit past the due date.

In some industries, the slowdown is already under way. As labor costs have skyrocketed and more consumers are unwilling to pay for the required increases, it leaves a significant gap. Business owners trim margins and end up being the bank for some of their customers. Would it be better to go to a vendor in advance disclosing that the squeeze is going to delay payment? Or is it better to keep the circumstance secret hoping that it all blows over? Is it passive aggressive, an indication of no other option, or a smart strategic move? How can the vendor make payroll if the customer takes too long? Who suffers most?   


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