Panicked Economy Mirrors Personal Panic
When I lived in Japan between 1990-94 after the Japanese equity bubble burst in 1990, I didn't personally feel the turmoil. I continued to work in banking under the cloud of smaller expectations, but it allowed me to start new business lines for the bank that management accepted due to the need for new opportunities. People were employed. When the Korean (and other Asian) economies crashed in 1997, Korea rebuilt itself as the most broadband and wired nation on earth with economic growth rates bouncing back to 11% in 1999 after plunging 6.6% in 1998. The recovery was tangible and feel-good.
What characterizes this Great Recession is the panicked death spiral that just keeps accelerating since the credit crisis started in earnest with bank runs during the summer of 2007. The borrowers, both government institutions and lenders, and the consumers, are experiencing the same "feeling" - out of control debt threatening a crashing depression or life changing bankruptcy, respectively. The spectre of a very slow recovery dampens the hope that we all can "pull this one out". It's the reason why Obama got elected on hope and change.
Revitalization like Korea 1999 doesn't seem to be in the cards now, but I'm fairly positive that today's dramatic refocus on thrift and productivity on both a macro (government and corporate) and micro (consumer) level will eventually stimulate new higher margin systems that will fuel a renewed economy. Here's a metaphor: think of what happens when a company fires all its old workers who can't or won't use PCs and fills their positions with college grads who do at half the price. It becomes more productive. The people most hurt by this recession are the unskilled. They will now be forced to re-skill, and the resulting productivity gain once this massive human re-engineering takes place will bring back optimism. Now, we wait.
What characterizes this Great Recession is the panicked death spiral that just keeps accelerating since the credit crisis started in earnest with bank runs during the summer of 2007. The borrowers, both government institutions and lenders, and the consumers, are experiencing the same "feeling" - out of control debt threatening a crashing depression or life changing bankruptcy, respectively. The spectre of a very slow recovery dampens the hope that we all can "pull this one out". It's the reason why Obama got elected on hope and change.
Revitalization like Korea 1999 doesn't seem to be in the cards now, but I'm fairly positive that today's dramatic refocus on thrift and productivity on both a macro (government and corporate) and micro (consumer) level will eventually stimulate new higher margin systems that will fuel a renewed economy. Here's a metaphor: think of what happens when a company fires all its old workers who can't or won't use PCs and fills their positions with college grads who do at half the price. It becomes more productive. The people most hurt by this recession are the unskilled. They will now be forced to re-skill, and the resulting productivity gain once this massive human re-engineering takes place will bring back optimism. Now, we wait.
Another great bit of insight Pat. I agree wholeheartedly, it's the less skilled who will feel the pinch more so than others. Though it is a relatively dark time for the economy and our people, it's a fantastic opportunity to put a premium back on education and increase the skill set of the American workforce.
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Hey Pat,
Good Stuff. I think you are dead on. It's tough while we're "in the fire" but we're going to be so much stronger for it in the end.
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Know what it's called "when a company fires all its old workers who can't or won't use PCs and fills their positions with college grads who do at half the price"? It is called age discrimination.
Age discrimination is illegal at both the state and federal levels, to say nothing of it being unethical. The penalties and fines faced by practitioners of age discrimination make idiots -- and paupers -- of those who indulge in it. Even were age discrimination not illegal, ANY form of discrimination creates ill will among other employees, and over time results in a loss of both reputation and customers.
Please find another analogy that involves neither illegality or outright stupidity.
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Pat's comments are right on. Al, I don't think he was actually encouraging firing all the old employees. Might not have been the greatest analogy, but his point was made. The idea of re-educating the workforce to keep up with the times as they quickly change, is a good idea.
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Pat, I completely agree with you, there's no doubt that we're going to bounce back stronger than ever. Our economy is built on entrepreneurship and now that the opportunity cost to starting a business is lower than ever we will see a surge of new companies that will propel our economy.
http://twitter.com/JoeStampone1
http://www.astudentoftherealestategame.com/
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Joe, thanks for referring me to your blog http://www.astudentoftherealestategame.com/. I think it's great.
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