Nothing New

Disclaimer: This is a very short discussion of the economy. It would take a lot more time and paper to fully discuss the issue of bailouts, foreclosures, etc. More than one party is at fault and, yes, I think the heads of some of the mortgage companies and banks should lose everything but their shirts if they entered into shaky loans. They have a fiduciary responsibility to their investors regardless of what the politicians were urging them to do. And, if warranted, criminal sanctions should be considered. On the other hand, people who entered into mortgages which they could not afford do not have my sympathy. The question is, will the solution be worse than the natural consequences for our country?

What has been is what will be, and what has been done is what will be done; and there is nothing new under the sum.
Ecclesiastes1:9

Current events or historical facts?

Still the reforms, the projects, the adventures in social reconstruction followed “treading on each others heels, so fast they came” – bills to supervise the traffic in investment securities, to prevent the foreclosure of farm mortgages, with one to save the owners of city homes from the mortgage incubus, bills to regulate the railroads, bills for federal action in the oil industry.
Meantime committees were in session investigating the crimes of the past – the sins of big business, of the bankers, the railroads, of Wall Street and of the power barons. Washington had become a headline-writer’s paradise.[1]

I love the bumper sticker that says, “If you aren’t worried about what is going on around you, then you haven’t been paying attention.” While I generally discount worry as a non-productive activity, recent trends in the financial markets have gotten my attention. So, I began to research the most historic banking crisis in our history and found the quote above in a book about Franklin D. Roosevelt.

The economy is an interesting thing. Left to itself without too much interference, it can hum along nicely and serve us all well. There are a lot of technical aspects of economics, but let’s keep it simple. The most important thing necessary to make a sound economy is consumer confidence. When citizens are secure in the knowledge that they will have money tomorrow to buy the goods and services they will desire or need, they tend to freely spend or invest their income. When they are convinced that the “sky is falling” they tend to hold more tightly to their money.

So, the question is, “If enough gloom and doom is preached, can we talk ourselves into a crisis?”
The answer is a resounding “yes.”

When I worked in retail sales, there was a story shared at one of our meetings about the owner of a hot dog stand. The gist of the story was the self-fulfilling prophecy of the owner who was told that business was down. In response to the news, he reduced his orders of hot dogs and buns. He turned away customers because he ran out of food. The more customers he turned away, the fewer repeat customers he had. So, he ordered fewer and fewer hot dogs until, one day, he closed his stand altogether.

We are in an election cycle where one party benefits from the failure of the other. In order to convince voters that a change is needed, voters must “feel the pain” of the poor economy. In all honesty, times may be slower than the booms to which we have become accustomed, but if people were more responsible in their use of credit and the politicians would quit requiring and rewarding bad behavior, the markets might actually make a natural correction.

However, if the politicians succeed in convincing the voters that we are in crisis, that is the one sure way to ensure that individuals will stop spending disposable income, make a run on the banks and hoard their cash. Prices will increase, products will become scarce and pessimism will rule. In other words, we will close the hot dog stand.

Keep things in perspective. The poor in our nation have a higher standard of living than the wealthiest in most nations. We do not have universal health care, but no one is turned away at an emergency room for medical care. Eating out, computers, televisions and cell phones are luxuries, not necessities.

Most of us have everything we need and most of what we want. If you have neighbors who are hungry, feed them. If they need a place to stay, take them in. If they are cold, buy them a coat. If you wait for the government to do it, none of us will be able to afford it.

Lord, give our leaders wisdom through this economic crisis to do the right thing, rather than the politically correct thing.

[1] The Roosevelt Myth, Flynn, John T., Revised edition 1956, pg 12-13.