Our Economy

I have been so confused lately…

Is Obama right about the success of the BILLIONS put into the system? Is Warren Buffet right? First Warren says it’s not working, and then last week he said it is. Does that mean his friend Barack called him and begged him not to tank the economy worse than it is, so he recanted on what he said originally? I’m so confused. So, I e-mailed my friend Manisha Thakor, who is on TV all the time because she’s a smart money girl from Harvard. (Manisha, I meant to tell you that you sit too close to the web cam and your face looks too big when you are on TV.)

I said, “What is the deal Manisha?” Here is her answer.

Chris, here’s the issue on the economy:  It’s basically like someone who kept their energy level high through caffeine & sugar, and is now cutting way back on that and trying to drive their energy level through sleep, exercise, and nutrition.  It will work… but there’s a withdrawal period that sucks and then a time lag before the new program kicks in. In the U.S., the consumer has been an outsized driver of Gross Domestic Product (relative to other developed countries) for a good 15 years. The only way consumers were able to spend like such crazy folk was by spending more than they earned, year after year.  It started off slowly in the late ’80s/early ’90s and really reached a crescendo this decade when the savings rate went negative.  With the consumer slowing back, the only possible outcome is that economic growth slows in the short run.  HOWEVER, if we thread that proverbial needle it is possible that we will re-emerge in 5 or so years with a MUCH more sustainable, 3-legged stool driving economic growth, ie a more healthy balance between consumer, business, and government spending. 

Manisha knows me. Caffeine? Sugar? Exercise? Nutrition? Ok, now I get it. Why didn’t you say so in the first place. I feel so much better. Maybe she’s right and maybe she’s wrong, but at least I get it. 

So, I thought it important to pass this clear information on to some of you like-minded confused souls so you can get it too! Now, obviously, I have no idea if Manisha is right that re-working the base from which our economy grows will work, or whether we can sustain ourselves in the meantime and not go under, however at least I now have a visual image to relate it all to.

Why didn’t they just say that in the first place and save me so much angst?

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