The economy’s sluggish rebound is still topping financial news. Consumer spending is flat, unemployment is up, and as I’m writing this the Dow is down.
What are we to conclude from these trends? Will we continue to slowly make headway, or will we lurch backwards into a double-dip recession?
These are certainly interesting questions, and the one thing that we know for sure is that there are no shortages of opinions on this subject.
The truth of the matter is that sometimes we need to get worse before we can get better. We have been addicted to debt and leverage for too long, and we are having to slowly ween ourselves off it as we adjust to a life of not being able to keep pace with the Jones’. Our society is “deleveraging,” which means many people are selling assets to reduce debt.
It is painful to go through, but the result is a happier citizen whose monthly note isn’t so overwhelming anymore.
I find that most of us can go through our homes and find a slew of things we regret having purchased. Recessions are about cleaning out old drawers and selling the things that we do not really need.
On a macro level it is much the same. Just as we are forced to analyze which expenses are truly discretionary and which ones are not, corporations find themselves in a similar situation. Since labor costs make up such a large component of corporate expenses the downsizing of labor forces is a typical side effect.
While workers are forced to adapt in an ever-changing economic envoironment, consumers benefit from the cost savings this provides to essential products and services.
Our economy is going through a renewal process. Companies are typically the first to adjust, and workers follow in suit. The process may be painful, but America always comes through on top – and this time will be no different.
