Tuesday, November 15, 2011

Why I am Optimisitic...

Things will get better with time.  They always do, in the long run.

I like to think that I am an optimistic person.  While I may come across as negative when it comes to our consumer-based economy and the idiotic actions of the average individual (which bring them much grief but little introspection), overall, I think our country and our economy will recover from our current problems, such as they are, and move on to bigger and better things.

Why is this?  Well for starters, our "problems" are not as bad as some folks make them out to be.  The people crying doom-and-gloom are people who have an agenda - to gain political office, to lower their taxes, or perhaps to remove regulations that don't work in their favor.

But to me, a crash in the economy is not really a big surprise, but a predictable outcome of a bubble market and a decade of over-consumption.  Perhaps after 9/11 we all went on a binge - binge spending, binge building, and even binge eating.  A decade later and we are all overweight, in debt, and unemployed.

Well, actually, not all of us - and that is one reason I am optimistic.

We are hammered every day about our unemployment rate, which is a staggering 9% or so.  This is bad?  Well, 9 out of 10 of us are still working.  It is hardly the Great Depression, where 30% were unemployed at one time.

And the reason why a lot of people are unemployed is the same reason there are a lot of foreclosures on the market.  No one wants to buy a tacky, overwrought and cheaply built mini-mansion anymore.  There is no demand for overpriced crap.

And when it comes to employees, well, we have a huge selection of overpriced crap.  Everyone wants to be a $100,000-a-year "manager" with lots of perks, no real responsibilities (or liabilities, in particular), but no one wants to work.  And our colleges and universities are cranking out legions of young folks with useless degrees that qualify them for nothing.  They are, in effect, the overpriced and overwrought plastic houses they were raised in - which may explain why their values are all screwed up.  They assumed that the cheap veneer of their youthful life would carry them over into adulthood.  That being popular and getting good grades in school was the whole deal.

There are, of course, still lots of jobs out there - many unfilled.  Why?  There are no qualified candidates to fill them.  Not much demand for philosophy majors or 2.5 GPA law school grads.  But someone who can weld, fix a car, repair an air conditioner - they are still in demand.  Someone with an Engineering degree - they are in demand.  Philosophy degree?  Unemployed - and likely to stay that way.

But eventually, these folks find work.  They always do.  I mentioned before the story of the Alfa Romeo and Fiat repair shop in Virginia that I visited once.  The three mechanics were Physics majors in College, and bought old Italian cars for a song, so they would have something to drive in school.  They broke down often, of course, and they learned how to repair them.  Once they graduated, well, they ended up with a job skill - just not the skill they went to college for.

Unemployment is actually good for the economy.  People will be willing to work for less, and once they get over that difficult hurdle, employers will be more willing to take the chance on hiring them.  And with a lower labor cost structure (more competitive with overseas labor) employers will prosper and then hire more.

Will people make less money?  Those with fewer or obsolete skills, yes.  But again, since we live in a sea of cheap consumer goods, the net effect is still a higher standard of living today than even 30 years ago.  Bear in mind that the average poor person in America today has Air Conditioning - in their car - as well as their house.

And yes, the housing market will recover.  Why?  Because people still need places to live, and the population is growing, albeit the rate of growth is stagnating.  Ill-advised immigration policies will slow this growth further and prolong the recovery - but we will still recover.  It will take five solid years before we see housing go up - in most markets.  But it will happen.  Only a nuclear war or a major epidemic that decimates the population could deter long-term growth in this sector.

And yes, the stock market will recover - even after the gold bubble bursts and the dot com bubble bursts.  It always does, you know - if you look at the historic picture.  Companies come and go, but the market remains - and even in a down market, folks make money.

Yea we have wars, famines, and all sorts of catastrophes in our history.  But humanity recovers from these sort of events, and, as painful as they are, they often lead to a new era of increased freedom and prosperity.

And compared to some of the catastrophic economic meltdowns of the past, and the various devastating wars we've had, the conditions today are hardly very bad, overall.  In fact, the only real danger today is that people overstate our difficulties to the point where we do something really stupid and throw away a good thing.

Let's put our problems in perspective.  People in this country are complaining about debt and losing "things" like overwrought houses and expensive cars.  People in Africa are complaining about not having enough food.  We are doing very well, actually.  Strip away the political propaganda, and view your life in real terms, and it turns out we are doing pretty darn well.

Which is why I am optimistic.