I think that the following fuller explanation of this word is useful: "Word History: Managing an economy has at least an etymological justification. The word economy can be traced back to the Greek word oikonomos, "one who manages a household," derived from oikos, "house," and nemein, "to manage." From oikonomos was derived oikonom, which had not only the sense "management of a houseold or family" but also senses such as "thrift," "direction," "administration," "arrangement," and "public revenue of a state." The first recorded sense of our word economy, found in a work possibly composed in 1440, is "the management of economic affairs," in this case, of a monastery. Economy is later recorded in other senses shared by oikonomiin Greek, including "thrift" and "administration." What is probably our most frequently used current sense, "the economic system of a country or an area," seems not to have developed until the 19th or 20th century." [On LIne Dictionary]
So - what is the current state of our economy: good or bad?
Up until today our President has insisted we have a strong economy. But today he admits that we need a strong stimulus package clearly indicating that he and his advisors are clearly concerned that recent signs indicate that we may be headed for a severe recession.
Signs supporting the presence of severe economic distress.
1 - On the Drudge report there is the following headline: "DOW DIVES AS CREDIT CONCERNS MOUNT _
2 - Indeed the Dow Jones average yesterday lost 246 points - and the over the counter lost 48 points both amounts considerably higher than usual.
3 - Citi Bank having to go to foreign sources for more loans to prevent further unacceptable and even dangerous business losses.
4 - Country Wide - a major lender of money for mortgages witnessing a reduction in its stock price from 44 dollars a share in March of 2007 to 6 today.
5 - Major lay offs in the jobs.
6 - Significant lack of sales at Tiffanies in moderate luxury items between $1000.00 and $10,000.
7 - Witnessing my own small portfolio of small growth being beaten down in some cases 80 to 90 percent. And it is noteworthy that the companies I own have all shown strong earnings in terms of their actuality and potentiality in growth sectors that are in, and have award winning products.
8 - My broker indicating that I am not alone. That of the universe of growth companies - approximately 200 - he regularly monitors virtually all of them have plunged in value often paralleling the 80 or 90 percent I have noted in my own portfolio.
There are countless additional signs that make it appear we are on the edge of possible economic disaster.
Ok - maybe so. But now that I am close to being 71 and have lived through a number of these inevitable boom and bust cycles I can reasonably put another less ominous spin on the same admitted facts.
What are you an eternal optimist? No, I prefer to call myself a realist. So what is your sense of reality telling you about the state of the economy?
1 - Context - context - context . Yes obviously the economy is in a mess and seemingly going to hell in a basket. The trillions spent on a ill conceived war has finally caught up with the terrible consequences we are experiencing on the home front. You think the infrastructure in Iraq is bad - ours seems hardly better at home. Cars drop off of neglected crumbling bridges, Katrina was a disaster on multiple levels, and so forth and so forth and so forth.
BUT- this is a Presidential year. Where there is ruin, loss, and devestation there is also great opportunity. The President knows this and so too do all of his advisors. We are likely to see billions pumped into the economy especially aimed primarily at the middle class, intiated by the government - calculated to wins the hearts and minds of the majority of voters for the benefit of the dispirited Republican party.
2 - The stock market has notably taken severe hits most notably in the growth sector. And this despite the fact that many of the hardest hit companies show positives on their earning reports. My reading is a calculated conspiracy of the hedge funds to capitalize on the normal fears of the average investor in the hopes that prices can be driven down to absurdly low levels motivated by fears of economic depression so that when they reach bottom they can be scooped up by the same group that has driven them down to their ultimate goal of astonomical profit as soon as the market turns - which it inevitably has done and I believe will always do.
3 - Whereas it is true that a huge company like Country Wide who has seen its value decline from 20 or so billions of dollars falling to only 4 billion as of today's calculations, isn't it noteworthy that the Bank of America who already lent Country Wide two billion dollars recently is willing (eager?) to pay them 4 billion to 'rescue' them by purchasing their failed enterprise. Now why would anyone, let alone a major bank, want to own such a disaster?
The answer is obvious. Because they are buying a potential profit bonanza at a dirt cheap price. Where there is disaster and loss there is an opportunity for great regenerated growth and profit.
4 - In my own small portfolio I see that the companies show a notable loss of valuation are, never the less, continuing to build, expand their sales, amassing awards for products of the year and the likes. These facts are heartening and neutralize my fears of wipe out. My losses, until I actually sell my stocks, are only paper losses not real losses. If I have the patience to hold and not panic I am positive that the trend lines will reverse. Further - considering the fact that the drop has been so precipitious when it does reverse, the line should go up as intensely as it has descended.
5 - Nice fantasy you say. Why not be real and admit you and mulitple others like you may be screwed to the wall. Ok - fair confrontation. However, just yesterday with one of my beaten down stocks there was an announcement by the company of partial earnings before the actual earnings due next month. The earnings increase not only sustained the positive guidance issued at the end of the last quarters' report - it also indicated that the results will be considerably better. Having carefully monitored this stock on a daily basis for the last few years I took this positive report as a bell weather indicator to accumulate more at a rediculous beaten down price. I did so. The stock increased 83 percent in two hours of trading at the absurdly low volume of only 35,000 shares. I can't imagine what will happen when the information about this obscure over the counter stock reaches the eyes and ears of the general public.
6 - I am not touting myself as a brilliant stock picker or having any grand over view of the shifting tides of the general economy and more specifically the trend of the stock market at any one point: past, present or future. I am only attempting to state that in making judgments about serious affairs re money it is important not to get overly pessimistic or overly optimistic at any one time.
7 - This is a highly emotional time. And during times of highly charged emotions there is a tendency for individuals to get swept up in black white thinking and all or nothing feelings. If, as I believe, there is a conspiracy to instill wide spread fear so that unscupulous manipulators can take advantage of our weaknesses - then we need to individually and collectively hold our ground and not be swept up or down with the emotional trend of the moment.
So is the economy good or bad?
Like in all other similar situations the true answer is - it depends on your scale of observation. From the trees perspective the economy looks bleak. From the forest perspective it appears to be a golden opportunity to invest with a reasonable expectation of huge profits.
I recalll having read somewhere that during the great depression while there were many intelligent people jumping out of windows because of their fears, losses, and blows to their pride - there were others who were mortgaging all they owned to invest at rock bottom prices and made out like bandits when the tide turned positive.
Your call - and good luck to all.
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Comments: 13
In recession heading to depression, nothing to back new money. Yep, fiscal conservatives HA!
We have more Billionaires who don't pay taxes, though. There money is kept in another country while they call themselves Americans. That's supposed to be good for the economy (according to the Republicans).
This is the nature of competitive duality, there will be only winners and losers in the end ... and what the "winners" do not yet know, is that they will have lost also when their "counterpart" is no longer playing the game ...
I haven't seen anything compelling that gives me confidence we can avoid some near and long term economic hardship. Nor have I seen changes proposed yet that can provide much relief except for more of the short-sighted "fixes" done in the past: robbing Peter to pay Paul. Someone can buy round after round to postpone the inevitable, but eventually someone will have to pay the check. I don't see politicians working to keep that from happening so much as putting it off as far as possible so it doesn't happen on their watch.
That isn't going to do the citizens of this country any good in the long run.
Being a little gray now-a-days, and when discussing the economy, I think back to the late 70's/early 80's and use that as a mark of bad myself, anything better than that is OK...? High inflation, unemployment, massive lay-offs at work, home loans at 13.5% etc., etc. was the norm then....
Thanks for your thoughts.
People that think it is really good may well be appreciative of that ... but aware or not, they may be looking the "other" way to NOT see the handwriting on the wall of the pending drastic changes ... the effects of which will be "hidden" as long as possible while the "big boys" restructure their own investments for maximum gain being wise enough in the workings to better know the truth of the next "level" of things ... that often just "engineered" by "them" as business as usual, the early bird gets the worm and what have you that amounts to "winning" at all costs ... the nature of the game and the "beast" who best "rules" it. The "little guys" will just be collateral damage ...