A recession is nothing more than a bad mood among a majority of investors & buyers. The mood creates fear; which creates a feeling of helplessness and insecurity. From there … it’s on. People stop buying things and stop behaving normally in the budgets and forecasts of businesses. When this happens, the expected revenue drops and businesses, to stay afloat, have to reduce their variable costs such as employees. More employees out of work, less income, more fear, less spending and the cycle starts again.
If the first few lines are the start of the fire, then the media continuously harping on ‘the worst economy since the 1930s’ blows like a warm wind in a dry woods. Even those people who are doing okay start to become concerned … more down moods and more stagnation of the economy.
Don’t get me wrong, there are plenty of fundamental problems in today’s economy that need cleansing. Terrible saving and spending habits by what looks to be a large amount of Americans, combined with at best shortsighted and at worst nearly criminal business practices by financiers (read: leaders for houses, cars and credit cards); seasoned with pandering economic policies by the government have created an unsustainable economic system that must / most likely be burnt to the ground and rebuilt with more reasonable and old school fundamentals.
The forest fire is raging right now and if the stories are correct it’ll keep burning through all of 2009. And, possibly 2010. The good times and now being offset by the bad times and for good reason. The fundamentals where people spend more than they can afford; businesses lend more than they should; a government that encourages both can’t go forward. The long run answer isn’t socialism, nor is it laissez faire economics but a free market than encourages saving for the future, investing in quality education & goods without government interference except to insure there’s as much credible information for markets as possible (over leveraged; etc) is good for our country.
The first step is getting our own houses in order; then pushing for the government’s house to be in order when the time comes. $1 Trillion in deficits is unsustainable in the long, and possibly short run. But, history suggests they are necessary to keep the rest of the forest from growing stagnant and cold while the fire burns.
For now, everyone just needs to relax … the American – Western Economy Dream – isn’t over … it just took a wrong turn and needs to burn down a little toxic forest to get back to the right road. It’s not easy to accept, but we’ll all be better off in a few years.