Tag Archives: Economy

Through the Economic Uncertainty?

Posted on September 2, 2009 by danaedwards| Leave a comment

If there is one binding thought amongst us today, I would guess that we are all a little bit uncertain about the economy still. I’ve read a number of articles talking about the good and bad of Obama’s actions. The net of all of them is that there are still two sides to every issue and there is no absolute answer just different approaches to generally make life better. I don’t think any of the policymakers are trying to do a bad job or trying to make the US socialist. It’s just a flurry of different approaches. The question in my mind is whether consumer confidence is picking up or dropping off and are we moving from general uncertainty to a more positive place as a country.

Here is what I think we can all acknowledge. Unemployment has dropped from 9.5 to 9.4. Of course the question is how much of that drop is because people are self selecting out of the job search. Non-farm job loss slowed to 247,000 in June. That looks fairly promising that we are beginning to see a change. So, the labor market appears to be gettig less unhealthy than in previous months and perhaps is on the way up.

The nugget of good news that I found particularly comforting was that Freddie Mac posted positive net income and has declared it will ask for no more money from the government. That bit of good news seems to have gone unnoticed by many of the large television news broadcasts.

The next topic I will be following is the impact of countries who have beenthe recipient of many of the outsourcing efforts like China and India. Recently, I have been reading about the prosperity of China. On the surface, this sounded like very positive news and indeed it is. I think the flip side of that issue is that China’s people will become more prosperous and ultimately begin to seek more expensive goods. This will drive up labor costs and potentially erode China’s price competitiveness. Perhaps, this will bring more manufacturing jobs back tithe US and reinvigorate those part of the country that have been hit very hard by the recession.

I think that optimism will be a personal and business competitive advantage through all of this uncertainty.

- Dana

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Optimistic about the US Economy

Posted on December 28, 2008 by danaedwards| 2 Comments

Over the past few weeks, I have had the luxury of being able to spend some time at home with my family and in between other activities with them, I was able to catch various pundits preaching on TV or in news articles how the world was coming to an end because of the US economy.  If you haven’t caught any of this on the news, feel free to do a google search or visit our friends at EconomyInCrisis.org and then come back to this post.  If you don’t want to visit that site, here is the general message – Everything related to the US Economy stinks: the rate cuts don’t work, NAFTA is killing domestic companies, and several other ‘America’s Economic Policies Stink’ messages.

If you want to look at the very short term, I will agree that there is enough pain to be had for everyone and then some.  That is a very easy thing to do.  You are very likely to know someone that has been affected or will be affected by this current recession.  Dwelling on this will actually help the recession stick around because the pessimism about the economy lowers consumer confidence.  With lower consumer confidence, we will experience deflation, lower consumer spending, lower industry profits and higher inflation.

The period we are experiencing is more like a creative destruction period where the world as we understand it is being destroyed only to leave a more balanced environment.  Without a doubt it is and will be for at least 6 more months – painful. We can only thank ourselves as we went out and purchased more expensive food, guzzling cars, mini-mansion houses, and slicker pocket cell phones. Many other countries did the opposite and suppresed the urge to burn more gas than their neighbor. For example, China has grown through more cautious investment by stock-piling about $1trillion in US Treasuries.  So, there has been a natural imbalance between saving and spending around the globe.

All systems eventually reach a new equilibrium as it is natural law to do so and humans are not able to defy the laws of physics. Eventually other countries will need to buy our higher quality goods as they seek to raise their own standards of living.  This will happen but it will not happen overnight.  When it does occur, the US will need to maintain their goods at that higher quality and be there to sell. So, companies with higher savings rates will leak money to those on the opposite side of the imbalance.  The strongest companies will be those that determine how to make it from now until then without freeing themselves of all of their employees and raising the unemployment rate / lowering consumer confidence.

Here are a couple of items to be optimistic about:

  1. US Consumers are more educated about how the financial system works and consequently are staying away from riskier investments
  2. US Consumers are beginning to save more money (per www.bls.gov) – 0.75% increased to ~2.5%
  3. US Consumers are beginning to get numb to the bad news and will spend again. For example, Amazon sold almost 73 items per second.
  4. Investors around the world view this recession as a “sale” on American investments and they are buying up US Treasuries.
  5. The US Government is taking reasonable actions to combat the decline.

I don’t claim to know everything but what I do know is that it is easier to report on bad news than good.  So, as I listen to the pundits on TV, I am going to keep the facts in mind and hope that the steep drop turns into a slow climb soon.

Dana

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