The Economy – It Just Seems Like the End of the World
Something in our cultural psychological makeup makes us gravitate toward catastrophe. This little psychic quirk makes doom and disaster the best friends in every genre of the media. Over the past few months, we have been fed a steady diet of grisly and frightening forebodings about our economy. Historic plunges in the stock market, massive bankruptcies in heretofore stalwart financial institutions, a teetering auto industry, the nation wide stall in the housing industry and a global economy headed toward recession are indeed serious and scary situations. But, it is time for the reporters to remind us, we have been to the brink of economic disaster before and come out of it stronger if not wiser.
In an article entitled, Breaking News: It’s Not Different This Time, by Joni Clark, Chief Investment Strategist for Loring Ward, she points out that the only difference between what is going on in our economy today and what has been going on over the past thirty-five years is in the details. Using magazine covers from TIME Magazine, she makes her point. Consider the following cover captions:
October 14, 1974 Trying to Fight Back – Inflation, Recession, Oil
December 9, 1974 Recession’s Greetings
September 12, 1977 Sky High Housing – Building Up, Prices Up
April 21, 1980 Is Capitalism Working?
March 8, 1982 Interest Rate Anguish
December 3, 1984 America’s Banks – Awash in Troubles
November 2, 1987 The Crash – After a Wild Week on Wall Street, the World is Different
October 15, 1990 High Anxiety – Looming Recession, Government Paralysis and War
September 14, 1998 Is the Boom Over?
March 26, 2003 Looking Beyond the Bear
Clark goes on to point out that in spite of the very real concerns in each of these recent decades, the ecomomy rebounded with each setback stronger than before. Although no one can predict the outcome of our current crisis, perhaps our fragile psyches need the reassurance of our history; stay calm, nothing is really different and we will be the better for all of this.
November 20th, 2008 at 12:31 pm
Hi Blair – A timely and thought-provoking post! I went back to Joni Clark’s original article to get a better perspective on her argument which seems to be, in essence, that Time Magazine has been overly negative about the inevitable cyclical downturns in our economy. If one goes back to the original article, the author includes the Time Magazine front covers of all the articles you reference. They are very interesting. Yes, indeed, reporting of this sort sure sells magazines. After all, that’s the business Time Warner is in.
Unfortunately, Clark wrote this article in September of 2008, prior to some of the most deeply troubling economic events in our history:
1) Real-life bank failures. Not small ones, enormous failures
The three top auto manufacturers going to Congress with hats in hands begging for PUBLIC assistance.
2) A significant rise in unemployment
3) Softening of international markets
4) A moratorium of lending between banks
5) A de facto real estate disaster
6) An almost non-existent manufacturing sector shrinking even more
7) A failing infrastructure
9) Banks begging for money from Congress (and the Fed providing over $2 Trillion of taxpayer money to UNDISCLOSED banks well beyond the $700 Billion approved by Congress)
I could go on. My point being, Lori Clark is an investment strategist whose job it is to preach the virtues of free market economics. Unfortunately or, depending on one’s economic philosophy fortunately, the American system of capitalism cannot sustain itself. Indeed, we are not a poor country; however, it’s important to take a cold hard look at our current reality and know that we need to grow up as a society. We are witnessing the results of over 30 years of Reaganomics (trickle-down, voodoo economics) which has created a wealthy class of Americans (a mere 10%) who earn more than the rest of the country. We have an administration that, over the last 8 years has waged a cynical war against the very governmental agencies designed to protect and defend us. We are seeing the retirement accounts dwindle, as well as college funds, University endowments and many other investments evaporate.
No, this isn’t like the 1st Great Depression. We will, with some luck, emerge from this crisis a bit wiser. What angers me so much is that the very Capitalists who benefited from the system are now begging for assistance but don’t want to be labeled “socialists.” What a bunch of hypocrites.