Fear Itself
These are the indicators of crisis, subject to data and statistics. Less measurable but no less profound is a sapping of confidence across our land - a nagging fear that America’s decline is inevitable, and that the next generation must lower its sights.”
Barack Obama, Inauguration Address.
The economic news yesterday was brutal - more layoffs, plummeting profits, foreign banks on the brink of insolvency. Everyone I speak with in the business world is saying the same thing: this economic environment is the toughest they’ve ever seen.
Yet it was these same people who only a year ago thought the economy was as strong as ever, despite the mounting evidence for all who cared to see. Public sentiment is generally late to the party - we realize the economic ground has shifted only after the fact. Our common perception of our economy is a lagging indicator.
The same is true, I think, as we begin to recover. President Obama said it well yesterday in his version of Roosevelt’s famous words - we have a sapping of confidence. An old professor of mine said something I refer back to frequently in times like this: in an economy, things will always adjust to the new levels of supply and demand. The only question is how difficult that adjustment will be.
We have an economy deleveraging, and so the adjustment is brutal. Becuase of these adjustments, we have lost faith in even the basic mechanisms of commerce.
All around us, however, are signs that the economy still works - that we have no reason to doubt the potential of our ingenuity. As Obama said, “our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished.”
And so our sapping confidence is as indicative of the underlying potential of our economy as the irrational exuberance of the real estate bubble was. The truth is somewhere in between.
