Are we headed for an economic recession or merely a slowdown of our current rate of growth? According to George Erickcek, an economist with the Upjohn Institute, it will likely be a slowdown. George pointed out that our economic strength lies in our well educated workforce with strong engineering and manufacturing skills.
The housing sector has been extremely hard hit as the sale of new homes has hit an all time low. The ripple effect is impacting other industries, such as appliances, and home furnishings. The Commerce Department reported this week that sales of new homes dropped 26.4 percent last year to 774,000. This is the worst sales year on record, surpassing the old mark of a 23.1 percent plunge in 1980.
Business, like life, is cyclical by nature. We often think about the economy in a linear fashion, believing that current trends will continue indefinitely. If we can match our behavior to these natural cycles as closely as possible, we can accept change with equanimity. When growth slows and the economy declines, we need to remind ourselves of the cyclical nature of business and calmly act by adapting to the change rather than fearfully react.
Courage, faith and confidence are three words missing from the media’s disaster version of economic events. Our leaders need to help us focus on the future, steering us through these economic storms when they occur. Long-term vision and understanding will help us remain calm and focus on our opportunities rather than fall prey to media-driven fear, uncertainty and doubt. It is a time for us to come together and support each other, helping those in need. This is what we do best as a community.
The Federal Government is preparing to “stimulate” the economy in the short term by borrowing another $150 billion through the issuance of treasury bills. These treasury bills will likely be purchased by our Chinese bankers so that we have an opportunity to buy more Chinese goods.
What if we instead set an example by spending our stimulus windfall locally, where it might have an impact in the long term? We could invest in our educations, purchase goods and services from local merchants, or pay down our debts, freeing up more capital in the long term and investing in our own futures. Let’s keep our “tax refund” at home and let it re-circulate in our local economy rather than spending ourselves further into debt as we send more wealth offshore.