24 February 2009
Macroeconomics 101: Uncertainty
As we watch our 401k's sink in value, as we gaze upon the destruction that used to be our 529 plans for the kids, keep in mind that the whole of the economy depends on one thing. That thing isn't necessarily crude oil or low taxes, nor even the industrious nature of those who innovate, create, and drive themselves to be better than their competitors.
No, the one thing that holds the economy together is "confidence." We can be reasonably confident that we'll wake up and go to work tomorrow, and we can be reasonably confident that we'll get our next paycheck. We're pretty sure that our taxes won't suddenly jump up overnight, nor will the Social Security Administration suddenly decide that it does have a solvency problem and want to fix it with 75% of your pay.
Similarly, when there is uncertainty, or lack of confidence, the market suffers. Think of your own life: If you weren't sure where your next paycheck would come from, would you go out to dinner tonight? Would you sign up for that $200k mortgage? If there was a decent chance that you might not come back from the grocery store, would you head out to pick up that gallon of milk you forgot to get yesterday?
So, with our intrepid President Obama and his Gathering of Clowns (also known as Congress) leading the way, we have speeches about how dire the economic situation is (uncertainty), how it's all the fault of things we don't really understand (more uncertainty), and that we don't really have a decent plan for what to do (ah, the uncertainty topping!).
Watch Obama's body language when he's talking about the economy. He doesn't have a freaking clue about what to do, because for all of his "golden boy" status, he never learned the real lessons of life.
As long as this train-wreck of a government is going to try to "help" I fully expect the markets to continue to spiral downwards. Why? Because these guys couldn't find their way out of a paper bag, much less try to control a $14 trillion economy.
Although I am unhappy to see my retirement monies disappear like a campaign promise, I will be sitting and gloating when those who voted for these ass-hats come to the realization that stupidity can not save you from stupidity.
Wisdom can only be brought with pain. Prepare to get really wise over the next few years.