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Consumer confidence is at a sixteen year low. What
has brought that measure of how we feel about our place in the economy to
this level is relatively well known. Tight credit, lower home values and
rising costs for just about everything we consume has made us feel just a
little glum. But it should be comforting to know that it is not your fault.
And as much as we would like to, there is
little that can be accomplished by pointing fingers at likely culprits.
You could if you so chose to, point a crooked
finger at Ben Bernanke. But that would be a waste of time. The Fed chairman
has rates exactly where he wants them for the time being because, although
inflation is slaughtering the fixed income individuals among us, and beginning
to have its wallet draining way with the rest of us, it is under control.
He’s pleased; perhaps even thrilled as
any really smart economist could be because labor
is soft. That means there will be no dreaded wage-price spiral that he fears
could happen if inflation begins to rise in earnest. This odd little economic
condition takes place when employees demand wage increases in order to keep
pace with the rising costs of goods.
Look around you for a moment. Do you or any of
your co-workers feel as though you could demand anything from your employer
right now? Your employer knows that gas and fuel prices are high. Your
employer drives and might even have fuel cost to contend for the business,
which, unless they are turning a blind eye to the obvious is as good of a
predictor that things are going to get slower. And fast. So they empathize
but are highly unlikely to suggest we deserve a pay raise much less entertain
the idea of caving in to a demand for one.
The economy can’t be blamed. It is doing
what it should be doing in times of crisis, contracting. Just as some people
panic during a disaster, many businesses that have heard the warnings about
what the future holds have done what so many do instead, they freeze. Amanda
Ripley’s new book “The Unthinkable: Who Survives when Disaster
Strikes – and Why” (Crown June 10, 2008) suggests that even
though we may not be hardwired for all of the unknowns that face us, we have
a surprising skill for survival. More surprising is the fact that she writes
the survival rate for plane crashes between 1983 and 2000 in 56%. This is an
economic plane crash.
So lets consider for
a moment the airlines, a real life metaphor for what is happening in the
economy right now. Hobbled by bad management, which is nice way of saying
“no foresight” and rising fuel prices, although I doubt they
could have hedged enough of their future fuel costs even if they wanted
because of, you guessed it, bad management, they react by trimming flights. They
trim pilots and with them all those folks who aid and abet the pilot on his
scheduled voyage. (It is safe to assume that none of the current employees
can ask for a raise.)
And then we read that fewer planes will be
flying and that means less planes being built which means, the economy begins
to contract, one episode at a time. This slowly unfolding disaster has left
numerous businesses frozen, waiting for someone or some agency to step in and
stem the flow.
The recent flooding along the Mississippi River has prompted many to ask why levees
fail. But to an engineer, a levee only fails if it breaks. If the water flows
over the top, even though they may not have planned for eleven feet of water
topping a ten-foot barrier, in their parlance, the levee was breached. In
numerous places, the economy is relying on antiquated levees and the hope
that the water will not rise high enough to engulf
them.
We would like to blame oil, and anyone within
striking distance of an oil business, but we should have seen this coming. For
years, we have witnessed economic increases in emerging markets and with
those moves, the demand for energy also increases. Speculators can’t be
blamed for trying to get ahead of the current prices. Oil producers
can’t be blamed for wanting to keep some controls on their production
and the seemingly unstoppable inflow of the dollars that pay for their
product. Oil refiners can’t be blamed for lacking the incentive to ramp
up production.
Rather than place blame, Ms. Ripley offers
five keys to survival. She believes that attitude matters. In the course of
economic downturns, this translates into our ability to be resourceful and
more reliant on the knowledge that each disaster offers opportunities and
more importantly, we are on our own to save ourselves.
If you have experience with the easy credit
that was based on the paper value of your home, you have done so with the
full knowledge that what you were doing was not natural. Some of us knew that
ahead of time.
Being anxious and overweight are two
ingredients that lessen your chances of survival according to the reporter
from Time magazine. The best remedy would be to stop watching the news and
focus on your own financial health. No one can trim the fat in an instant and
this economic downturn should be all the lesson we
should need to comprehend the importance of living within our means.
The last tip Ms. Ripley offers from her book
on surviving disasters is training. While it is difficult to prepare for all
of the natural disasters that occur, economic ones are well within our grasp.
Even if our politicians refuse to acknowledge the condition of the economy,
even if the business leaders believe that things are not as bad as they are,
we should by now know that we are our own emerging economy.
Based on the survival numbers, most of us will
do okay. What worked for you up until this point will work for you during and
after all of this passes.
There is good news for those who were
unprepared for just these sorts of economic disasters: it is not your fault. How
well you recover relies on how many of those five traits you possess and how
quickly you can develop those you do not have. Sadly, we can expect many more
casualties before this is over.
Paul Petillo
www.BlueCollarDollar.com
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