Talking Down The Economy
Economies are a fickle thing. Then tend to reflect the attitudes of the individuals who make them up. When individuals believe the economy is strong, they go about their lives spending their money. Sometimes then spend too much, and eventually they have to pay the piper.
The opposite is true as well. If everyone believes that the economy is sinking - it will. All it takes is for people to stop spending money because they are concerned about their jobs, or banks to stop lending because they are afraid that loans will not be repaid. In no time the economy heads into a downward spiral.
What is particularly concerning is that politicians are talking down the economy in order to push through their favorite spending bills. I listened to Pres. Obama earlier today and he stated at least twice that we are in the greatest economic crisis since the Great Depression. While talking down the economy may help him spend another $800 Billion, you have to wonder was the benefit is.
Unemployment is about 7.6%. That seems high, until you think back to 1992 when it was about the same. Of course in the early 1980s, most people would have been excited about an 7.6% unemployment rate. Back then it went well over 10%.
What we ought to do is take the sting and move forward. Unfortunately, since we have a maxed out our credit cards and every other form of debt, we have decided to borrow from our children. If we are lucky, the Chinese will purchase our debt and our children will get to pay for our lack of self control. More likely, however, is that the Government will simply print money to make up for the short fall. We did it in the late 1970s. That is what brought on the high unemployment rate of the early 1980s. Oh, don't forget, it also brought inflation (as printing money usually does) which drove interest rates up to 18%. The 5% fixed on a thirty year mortgage looks pretty good.
The next time you hear someone talking about how this is the worst crisis since the Great Depression, consider those who were alive in the early 1980s. Ask them what it was like having 10%+ unemployment. Or buying their first house at an a.p.r of 13.5%. Yes, we have economic problems - lets just not make them worse by talking down the economy.
The opposite is true as well. If everyone believes that the economy is sinking - it will. All it takes is for people to stop spending money because they are concerned about their jobs, or banks to stop lending because they are afraid that loans will not be repaid. In no time the economy heads into a downward spiral.
What is particularly concerning is that politicians are talking down the economy in order to push through their favorite spending bills. I listened to Pres. Obama earlier today and he stated at least twice that we are in the greatest economic crisis since the Great Depression. While talking down the economy may help him spend another $800 Billion, you have to wonder was the benefit is.
Unemployment is about 7.6%. That seems high, until you think back to 1992 when it was about the same. Of course in the early 1980s, most people would have been excited about an 7.6% unemployment rate. Back then it went well over 10%.
What we ought to do is take the sting and move forward. Unfortunately, since we have a maxed out our credit cards and every other form of debt, we have decided to borrow from our children. If we are lucky, the Chinese will purchase our debt and our children will get to pay for our lack of self control. More likely, however, is that the Government will simply print money to make up for the short fall. We did it in the late 1970s. That is what brought on the high unemployment rate of the early 1980s. Oh, don't forget, it also brought inflation (as printing money usually does) which drove interest rates up to 18%. The 5% fixed on a thirty year mortgage looks pretty good.
The next time you hear someone talking about how this is the worst crisis since the Great Depression, consider those who were alive in the early 1980s. Ask them what it was like having 10%+ unemployment. Or buying their first house at an a.p.r of 13.5%. Yes, we have economic problems - lets just not make them worse by talking down the economy.
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