Regarding the economy of the United States on March 22, 2008

Regarding the economy of the United States on March 22, 2008.

I noticed that many people are reluctant, or "were" reluctant, to use the word recession as the economy spiraled down in 2007. Yet in my eyes the recession was late and it annoyed me when people denied it's arrival. Stockdale suggests we don't keep our head in the sand if we want to survive.

"Every good-to-great company embraced what we came to call the Stockdale Paradox: You must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, AND at the same time have the discipline to confront the most brutal facts of your current reality, whatever they might be."

- Good to Great, Jim Collins

The fact that the US economy is in a recession, and may go into a depression, isn't rocket science. It is common sense.

You have malaise at best in America. From that previous link ArabNews says:

The United States remains the sole superpower, but its dominance is challenged by an economic and cultural shift toward Asia and the impact of globalization, which Americans do not yet fully comprehend.

Add to that a few more items. Oh I don't know we can start with high energy prices. The debt and deficit growing. The irrational exuberance of the housing market dropping. Overdue. Baby boomers buying more meds on less money because they "spent their children's inheritance" (so sayeth bumber sticker wisdom). And bought condos in Florida they can't afford. A crazy unpopular war but no way out without breaking commitments to allies.

To continue, no universal health care, nor any in sight. In Texas we are seeing our taxes go up under a "Republican" governor. And the cost of sending kids to college has gotten so high the "default" package proposed by colleges to students proposes parents double the debt of their children in education loans for them (read banks won't loan kids enough to actually attend many colleges). The fed is bailing out, or wiping out, wall street bankers who lack common sense. Poisonous goods from China bought to increase the trade deficit. The fall of the dollar.

The future of the US resides with the Millenials, the selfish generation. That is once the other selfish generation, the boomers, get done being divided as they have been since the 70's. The Clinton's and bushes being skull and bones rivals I suppose. And yes of course a cynical sardonic X-er is penning this post.

So this pretty much all points in the wrong direction. Pretty much.

And the feds solution is to pile on the national debt. Awesome.

Now pile on the psychological response of the individual to the stress of a recession/depression/time-of-uncertainty. We get sick more, make errors more often, have more car accidents. etc, etc. Basically people tend to fall apart more in difficult times which compounds the problems.

As an employer these elements make it very hard to create jobs. And it makes it very hard to expand the business. Or give pay raises to people who deeply deserve them at an emotional level, yet they like me are having a hard time creating excess profits in a crappy economy, profits used to increase pay.

Don't get me wrong - the company is doing well, just emotionally I am not feeling any sense of cooperation from the economy as a whole. And it requires me to be cautious.

I see one element of hope that many have ascribed to. Perhaps irrational. There is politician exuberance in the hope many feel in Obama. This optimism is refreshing. Almost. Much like the joy you see in a child's eye when they gobble down delicious ice cream. And you step back and think "wow, not sure that is really the key to happiness long term." And secondarily "gosh, I wish I could buy in at that level" but you can't quite. You can't quite get there. The brain-freeze hits you first.

If you look outside of politics, there is very little reason to see hope. And that is a bummer. We will get through this, we always do, but something has to change. If nothing changes I see no way we can avoid going into a economic depression.

Last thought:

"In a fight between a grizzly bear and an alligator, the terrain determines the winner." - unknown

All in favor of moving the fight into the Redwood Forest please say "Aye!"

Comments

[ericabiz]

Hi Ed,

Your blog post is kind of sad. :(

I'd be interested to hear more about how the recession is affecting your company. I noticed you went into a few small details, but said overall you are doing well. Are you noticing a significant difference from, say, last year -- or is it just reading the news and watching the government's actions that has gotten you down?

-Erica
http://www.erica.biz/

[eschipul]

Erica,

Economically speaking the recession is affecting our clients differently. With over 400 clients some are down, and some are actually up. First quarter is a bit up from 4th quarter already and we aren't done yet.

On the flip side just talking to regular folks there is a HUGE disconnect between the euphoria of SXSW and the UP Experience and real people. College applications and claims adjusters for teenager induced vehicle malfunctions tend to temper post conference highs maybe.

But overall I think what gets me is I do study the future from a planning perspective. And all of the data I see outside of the company is really ugly. Internal data, patterns I can discern from payment patterns etc, are OK, not great but also not horrible.

In short – there is little to be excited about. And I wonder how much of a Houston-tech-bubble I live in for those things that do appear economically positive?

- Ed

[Cathy]

Ed, your post reflects perhaps the biggest problem facing the economy: People believe that things are bad because they are being told they are bad, not because of their own experience.

We have a media intent on showing us the very worst, and exaggerating for effect. A fraction of 1% of homes are facing foreclosure, but to judge by the news reports, we are all in danger of losing our homes. Unemployment is still at near-record lows, especially here in Houston.

Does that mean that everything is wonderful? No. There are problems. But there are always down cycles in the economy.

I have decided that I am not going to participate, so anyone who wants to have a recession can do it without me.

[Ed Schipul]

Cathy - it sounds like you are opting out of the "Stockdale Paradox" which is cool. But I don't really have that option.

And we can't blame this entirely on the media. College tuition costs, the national debt, the Iraq war - those exist in reality with or without media coverage.

I'd like to think my observations are not fear mongering, but rather prudent caution from someone with a lot of people depending on him. But I could be wrong.

[Michelle Greer]

A strong and honest post. Props.

I've wondered if this will create the next "Greatest Generation". Our grandparents didn't fight off a Depression and a war because they were "the greatest", they did it because they had to.

I think we'll be okay. There are more tools than ever for people to cooperate to solve problems than ever before. I like Obama not because of what he can do, but because he seems to understand that he is only a part of a very large equation.

Hope you had fun at the rodeo. Keep posting ;).

[Kevin Lacobie]

College tuition costs. I guess that's something we're both facing, so you gotta pay attention. I've often wondered, though, at the relationship of educational cost increases and tuition prices; is it costs that are forcing prices to go up, or is it consumer willingness to pay that is allowing prices to continue to rise?

Strange as it may seem, I do indeed think it's our (consumers) willingness to continue to pay that's allowing these increases to continue; our willingness to pay, even if it requires more debt. The evidence? Look at the building booms going on at most university campuses. We have Rice U. close by as an example. Same goes for medical. We've got the craziest building boom going on at the TMC. Is this a sign of an organization being squeezed by rising costs, forced to increase prices just to keep afloat? Or is it a sign of "excess profits", that in a non-profit organizations MUST be spent on something ... that something usually being large-scale capital expenditures.

On other news Ed, I have a hypothesis: Houston will miss the brunt of this recession. Good for us. But, hey, the U.S. has got to get it's budget deficit under control, or we will indeed be in the eclipse of a nation.