“The essence of optimism is that it takes no account of the present, but it is a source of inspiration, of vitality and hope where others have resigned; it enables a man to hold his head high, to claim the future for himself and not to abandon it to his enemy.” -Dietrich Bonhoeffer
In case anyone‘s wondering, we‘re not at the start of the “Great Depression II,” though a quick scan of most newspapers and television news programs make our current situation out to be the beginning of a calamity of that magnitude.
I started feeling that way myself, after reading the sobering threat analysis presented by Mike McConnell, Director of National Intelligence, last week (an analysis confined to the back pages of many newspapers, including The Washington Post. Gee, if that isn‘t news, what IS?)
Thanks to Steve Myers head of medium and heavy truck sales out at Moser Ford for dumping a cold pail of “virtual” water on my head to snap me out of it. Gotta hand it to our readers out there; when the going gets tough, you folks are like linebackers making a goal line stand - you just tighten the chin straps, adjust the shoulder pads, and dig the cleats into the turf a little deeper.
“Our future is as bright as we make it,” Steve told me. “We went hundreds of years without flight. Then, in less than 100 years went from our first flight to landing on the moon. USA all the way! No one said it was going to be easy. Problems are made to be solved and we‘ll solve them.”
Amen to that. I mean, look at our situation right now - yes, our country is a financial wreck (with an $11 trillion and growing federal deficit at the top of a long list of woes) and yes, we‘ve lost our manufacturing prowess and still lack a comprehensive energy policy - leaving us vulnerable to major economic shocks from seesawing oil prices.
But are we really on the verge of another Great Depression? Hardly. Unemployment is predicted to jump up to around 8% by next year - not even close to the “official” 33% unemployment figure in U.S. during the Great Depression - which reached 50% in some parts of the country.
In another example, people talk about the impact of the housing market meltdown on our economy and while it‘s indeed bad, it‘s not being put in proper context. Right now only 3% of all mortgages are in default - meaning 97% of home mortgages are being paid on time, according to Donald Broughton, managing director and equity analyst-transportation at Avondale Partners.
“This is not the Great Depression - it‘s not even the recession of 1982-83,” he said at the 33rd annual Truck Blue Book Workshop held in Aspen, CO last month.
Noted economist and Newsweek Contributing Editor Robert Samuelson calls some of what‘s going on a state of “affluent deprivation,” which he describes not as actual poverty but rather a state of mind in which people feel poorer - even as the U.S. remains a wealthy society.
“Whatever happens, the future of American affluence will be a state of mind as much as a state of production,” Samuelson notes in his new book, The Great Inflation and Its Aftermath: The Past and Future of American Affluence. “So much of our national identity is wrapped up in economic progress that the failure to achieve it in palpable quantities would sap Americans‘ self-confidence." (You can read more of his analysis in the Nov. 10 issue of Newsweek by the way ...)
He writes that the “good news” is that even if the present slump deepens - such as an 8% peak jobless rate would make it the third worst recession since World War II - the odds are that it won‘t approach the Great Depression in severity or suffering.
“Too much attention is being paid” to that comparison, he notes. “The bad news is that [economic] recovery - though boosting employment - may prove unsatisfying.”
What the new president, and everyone else, needs to understand is that the present crisis marks the end of an economic era, Samuelson explains. “For nearly a quarter century, the U.S. economy benefited from the expansionary side effects of falling inflation-lower interest rates, greater debt, and higher personal wealth - to the point now that we have overdosed on its pleasures and are suffering the proverbial hangover,” he stresses. “In our zeal to identify the villains of the present economic debacle, we ought to recognize that the larger causes lie in this prolonged prosperity and the permissive attitudes and practices it inspired.”
Professor Jerry Osteryoung from the college of business at Florida State University also has some thoughts on this subject, though he believes things will get better - albeit not without passing through a period of great difficulty - so I‘m going to let him share his view directly with you. Professor, the floor is yours:
“If you pick up a newspaper or watch TV, you are going to be bombarded by reports of how bad the economy is doing. Indeed, the construction business is down, retail sales are down, the auto industry is doing poorly, unemployment is increasing and the stock market is in a free fall. On top of that, we have a large liquidity crunch with our financial institutions. None of this is good news at all.
The problem is that we have had a housing bubble burst. That is, people were able to purchase homes with unsafe financing means, and as a result, the prices of these homes increased until there was no one left to buy them at these unrealistic costs. This is so similar to the dot.com bubble where investors bid up the price of tech stocks to unreasonable levels, and then the stocks crashed.
In 1720 the price of stocks in South Sea Company (a financial institution) soared to the stratosphere and then imploded. In 1721, Sir Isaac Newton said in reference to this bubble: ‘I can calculate the motions of the heavenly bodies, but not the madness of people.‘ While Sir Isaac Newton was declared by many to have a greater effect on science than Albert Einstein, he lost his entire life savings in this South Sea bubble.
In combination with the housing bubble, we are experiencing an economic slowdown. Our economy and capitalism is predicated on business cycles. Cycles have their ups and their downs. From 1937 to the present, we have had 13 recessions that varied in length from six to 16 months. The important thing to remember here is that with each of these recessions, we emerged into a dynamic, growing economy. I promise you that we will come out of this recession probably in late 2009 or early 2010.
While the news is not good now, concentrating on the negatives that are bombarding us daily is not good for you or for your employees. All of this negative news is causing uncertainty and fear in your staff. They are fearful for their jobs, their families and so much more. If there is ever a time to be especially kind and compassionate with your staff, this is it. They need to see you upbeat showing them that we will get through this and be even more prosperous.
One thing that you can do is try not to watch excessive amounts of TV. There is so much gloom out there that it is contagious. You just cannot afford to catch this ‘gloom flu.‘ More than ever, your staff needs you to be an upbeat leader who focuses on the positive and demonstrates the certainty that we will come out of this economic morass. Watching negative news stories will not help this at all. Make sure you clearly communicate to your staff that this market will turn around, and things will get much better - probably within the next year.”
Good advice, Professor -- advice I, too, must follow.