Stop Holding Your Breath!

October 6, 2012

It has been said that the only thing that we learn from history, is that we do not learn anything from history. Contradiction or truth, the fact remains that many of us refuse to admit that we have a tendency to do the same thing again and again. Parents lament that their children won't listen, teachers see the same mistakes over and over again, and when all is said and done, we get ourselves in the same kind of trouble year in and year out.

What has that to do with the American economy, I hear you ask, and what has it to do with Greece, and Spain, and Europe, and everybody else on this planet? Am I nuts to put all of us in the same pot like that?

Well, sure, I'm nuts. But here is what “economic health” means in the simplest of terms: it is a measure of the speed at which money flows from one to another. If money is worth little (inflation) people will spend it as fast as they get their hands on it. If money is a rare and precious thing (recession/depression), people will hoard it.

But look at it from another angle: If everybody refuses to spend money, we get a recession/depression (the difference is academic); and if everybody blows money as if there’s no tomorrow, we get inflation, because money is worth little, and it’s so easy to come by that you can always get more tomorrow.

Oh, it’s simplistic, yes, but you can see where I am going with this, no? Psychology!

Psychology and economics? Nuts!

Oh yes, completely nuts, but not nuts enough to be wrong. The problems plaguing Greece are not solved with austerity any more than they can be solved by spending cash as if money is going out of style. Both the Greek economy (to keep picking on one that’s in the dumps) and the American economy suffer from a confidence issue: So long as excesses (fear on one end, exuberance on the other) rule our hearts, we all suffer the consequences.

Greece went off the cliff exuberantly and is now trying to (or being forced to) fix the problem by enacting the opposite. I don’t think one extreme can fix the other, but I’m just nuts, remember?

So what do I think is the cure for getting out of the dumps?

I should not have to spell it out, but the solution is for (larger) companies to hire, instead of playing it safe; companies should not sit on their cash reserves and wait for things to get better on their own. That’s like holding your breath while sinking, without making any effort to get back to the surface. Think instead of the old “one hand washes the other” principle: You hire, and they can pay the bills; and when the bills get paid, accounts receivables are satisfied. It starts small, but grows big. It’s no fast fix, to be sure, but wonders over wonders, it’s the fix that gets us all back on our feet.

Hey, I’m nuts, right, but I think it all has to start somewhere. Ask not what others can do for you, but what you can do for others. You might be surprised what comes around when you send something to go around!

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