The media would have us all believe that our beloved country has its foot to the floor in a race to heck. Everywhere you turn; there are reports of more business closings, higher unemployment and threats of losses in every quadrant of the nation. People are worried sick about what might happen. What might happen?
I think it’s time to turn off the news and let the big boys play ball with each other. Some of you might think that this is like the ostrich sticking its head in the sand but I know that history has a way of repeating itself. The economy goes through cycles. Let’s consider a few facts.
In the early 1990’s there was a recession, complete with high unemployment rates and Black Monday; where the Dow Jones suffered a record loss of 22%. High levels of unemployment and a huge government budget deficit continued for years. Yet our country continued to grow, progress continued to be made, especially in the field of technology. People prospered.
In 1980, there was a short recession of about six months. The housing market and automobile manufacturing were two of the hardest hit industries. Then, in 1981, there was an even worse recession, compared often to The Great Depression. The Federal Reserve responded to the recession by raising interest rates. The federal funds rate went as high as 20% in June 1981. The prime interest rate rose even higher to 21.5% by June 1982. This plunged the overall economy into a deep recession.
In December of 1982, the unemployment rate in the U.S. was 10.8%. The current unemployment rate is 7.2%. In the early 1980’s, the biggest job losses were in the housing, automobile and steel industries. The same is true today. In 1982, there were a number of bank failures and the FDIC spent millions purchasing bad loans. The following year saw even more bank failures.
When the current President, Ronald Reagan, finally admitted that we were in a recession, he raised corporate taxes and lowered interest rates. These measures gradually led to economic recovery.
Then there was the 1970’s. Remember the 1973 oil crisis and the 1979 energy crisis? I was just a teenager, but I remember well how everyone constantly talked about the problems. The same as today, the news and every type of media could only talk about how bad it was and how bad it was going to get.
I could go back every decade and find a recession, but this isn’t a history lesson. This is a blog about how to save money. However, sometimes we need a reminder about how things used to be, sort of a “good old day’s” reminder.
You know what worked back in the good old days? People lived within their means. The common folk, about 80% of America, tightened their belts, helped their neighbors and ate a lot of beans and rice. They didn’t buy new things; they fixed what they had or did without. They didn’t measure their self-worth by their net-worth. They had a certain attitude towards money that we can’t seem to get a grasp on today.
That attitude was – if you don’t have the money, don’t spend the money, pay your bills on time, help your neighbors and save every penny you can for a rainy day. Sounds like a pretty simple approach doesn’t it?
Yes – I thought about this this morning after getting my hit of newspaper article apocalypse. Are these days on an unnatural down, or were we in the last few years on a manic fiscal up?
I think we are about the same age. The times you cite were bad, of course, if you didn’t have a job. But if you did have a job, as I recall people still laughed, had a good time, were kind to their fellow man … they just didn’t bankrupt themselves in the process.
I think that part of the problem is that print journalism is an area where the economic outlook is particularly grim. Newspaper reporters write articles that accent doom because they are themselves worried that their employers may go belly up at any moment.
Remember, though, that changes made by both Reagan/Bush and Clinton to the way the unemployment rate is calculated tend to understate current rates of unemployment. If unemployment today were calculated the same way as it was calculated in 1982, the current unemployment rate would be higher.
One of the themes of the article was that things turn around over time. Although there is some of that in the media. It seels like some people have forgotten this. Especially when it comes to the 401K. Its amazing how many people are pulling out of the 401K at the worse possible time.
#3 has it right. Simply look around your neighborhood on a weekday. What are all these cars doing parked in driveways and on the streets? Answer: The real unemployment rate must be twice what the official figures state.