QuickEconomy - Time to Exhale Yet?
This great image of a cat holding its breath is from www Anatoliaimfor.com
So how bad will the recession get in 2009? Some of my business partners are making some scary predictions. The scariest I have heard is that by the third quarter 2009, the world could plunge towards dark and deep depression. There will be social unrest and perhaps war. I have been holding my breath. So, will this happen? Or is it time to exhale?
The simple answer that is no one really knows. Not even Larry Summers. Not even Peter Schiff. Certainly not my business partners. Sure Microsoft laid off 5,000 workers. At the same time Google and IBM both beat fourth quarter earning expectations. Sure China’s economic growth figures are down — to 6.8% growth.
The problem is with the data. Both the good and bad numbers relate only to what has already happened — and tell us nothing about what will happen. Why not? They say nothing about causes. To try to identify causes, you have to buy into an economic model. And all economic modelling is based on broad assumptions about human behavior. Models are not reality.
The most level headed thinking I have seen yet about the current situation came from a blog called The Simple Dollar. It is a conservative blog — in the old fashioned sense. It promotes frugality, giving out concrete advice on how to keep your cap on you head. Ignoring the commentary, and just looking around, the Simple Dollar thinks we are no where near depression levels of stress and hardship. True, we have hit a sharp recession, but it looks a lot like prior recessions. If this is true, we have or will bottom out soon, and sputter along for a time with little or no growth as the buziness world re-tools to offer what it can sell. But we have not driven off a cliff.
So? Instead of holding my breath, I should (1) stop crying that there is no low hanging fruit around, (2) re-check what value I am adding to the purchase chain and (3) ramp that up. Gotta go!
FOLLOW - Paul Krugman gives a good example of the “holding your breath” style of writing in his op ed today. The problem I have is that his advice is geared to get policy makers to push the panic button. It doesn’t help the rest of us keep our breakfast down. Calm down Paul!