Friday, April 03, 2009

A Thought on this Economy

We are in a deep recession, no doubt about it. And it has been a long time since we've experienced something like this. It used to be that recessions were deep, painful, and relatively frequent. Because they were frequent, people knew what to expect, and they didn't panic. But now we've gone 25 plus years since our last deep recession, and even those amongst who were productive members of the economy at that time have been partially numbed to the pain.

So here we are, terrified that we are looking at the abyss, standing on the ledge of a new Great Depression. I won't lie-we could very well be in that position. Something is nagging at me, though. Yes, leveraged (homes, cars, luxury goods) spending is way off. Yes, business spending is down as companies batten down the hatches. Yes, consumer spending is taking a beating because of unemployment and over-indebtedness. Yet I still see a lot of people, as nervous and as stressed as they are about the economy, spending money like they always have. For instance, I know of 7 people who have (or will be) taken expensive trips outside of this country in the period between December and this coming May. None of them are filthy rich-they are in the lower to upper middle class range.

A contraction in this economy is necessary. We got ourselves into an over-leveraged, over-priced situation across the board, and that has to be corrected. And if we just get out of the way, we'd find that the pain, while bad, doesn't hurt as much as we'd feared. Yet for the last 6 months, our government has acted out of that fear, and just as we start to claw our way out of this, we may very well get slapped in the face by worse problems that we've allowed our government to create.

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