Wednesday, February 25, 2009

We have nothing to fear...

Franklin Delano Roosevelt, three-quarter lengt...Image via Wikipedia
Up until recently, I don't think I fully appreciated the words of Franklin Delano Roosevelt when he said "We have nothing to fear but fear itself." The statement is technically not 100% accurate. We have other emotions to fear besides fear. But, it makes a good point. Lately, I've seen our country get into a whole heap of trouble based on letting our emotions run amok. Greed caused the real estate pricing bubble. Greed caused the banking crisis (predatory lending practices). Herd mentality causes dollars to chase dollars creating stupidly wild swings in our markets (real estate and stock markets). When stocks are on the way up, all stocks rise- regardless of the merit (or lack of merit) of particular companies. People can't pour their money into the market fast enough. Same with real estate, as people were buying and "flipping" properties sight unseen. When stocks are on the way down, we trample each other running for the exits. Some great companies' stocks are "on sale" right now, beaten down by the lemming-like exit from the market. Fear is exacerbating this crisis as we all are holding onto our wallets tighter now (where just a few months ago we were all spending like drunken sailors on shore leave). Banks, who were giving loans to anyone who could fog a mirror, are now afraid to lend to anyone, including each other.

Last night Obama touched on another emotion that we need to be careful of as we navigate through this crisis. That emotion is anger. I hear people saying we should not reward those who got us into this mess, implying we should allow the banks to go under to punish the stupid, incompetent and greedy managers who ran them into the ground. I hear people saying "Where's my bailout?" when they hear we are going to help people stay in their homes. What we cannot lose sight of is that no matter what the reasons were are in this mess, we are all in it together. There's no place for anger when it comes to working on solutions. Sure, we're tempted to let the banks that made stupid decisions go under. But, what happens to our credit system when too many of them fail? We all suffer. Of course, we don't want to help out the guy making $50,000 a year and living in a $500,000 home. But, if we allow too many homes to be foreclosed on it hurts all of our property values and we all lose.

Fear is an emotion I am all too familiar with. For many years fear had me in its grip. I have largely overcome fear by the use of one technique- living in the moment. What I finally realized is fear is all about the future. Fear is anticipatory. It's never about what is happening, it's about what could happen in the future. Part of the solution to this crisis is to stop the hand-wringing and the worst case projections and get on with our daily lives. The media has been complicit in this fear-mongering. Every night on the news we hear about how bad things are and how there is no bottom in sight. The reality is most of us are still employed, still living in very nice homes, still live one of the best standards of living on earth and are in no real immediate danger of starving or being homeless. Sure things are bad, worse than they've been in a long time. But, as a friend of mine often says "It ain't Auschwitz". Let's keep things in perspective. "Bad" is a relative term. Compared to to the best of days, these ain't them (economically). But things could be a whole lot worse. And, if we keep living in fear, it's likely they will get a whole lot worse. Housing prices are falling at a record pace. But, no one seems to remember they were rising at ridiculously high rates just before that. Even a non-economist like me could see several years ago that home prices could not keep rising at double digit rates every single year forever. Whose going to be able to afford the homes? (BTW- did you catch the fact that the personal savings rate has shot up to higher than it's been in six years?). Economically, for every downside, there's usually a corresponding upside. Higher savings rates means more Americans are living within their means which means they'll be better positioned to spend at a sustainable rate in the future. Housing prices had to (and must) adjust so real people can afford homes. When home prices get back in line with what people can really afford (without gimmick mortgages based on prices continuing to rise), then we'll see people buying homes again. Lower home prices means more people will be able to afford homes.

While fear thrives on living in the future, anger thrives on living in the past. I love the saying "Forgiveness is giving up all hope for a better past.". There is no point in pointing fingers now (except to make sure we don't fall into the same traps again). While we're in the midst of a crisis and working on getting out of it, withholding help that could be beneficial to all of us to spite those we feel got us into this mess is the very definition of cutting off your nose to spite your face. Yes, some of the economic stimulus and "bail outs" will reward those very people whose greed and short sightedness created this crisis. But, what is the alternative?

I think Obama did a great job last night of laying out for the American people why we are where we are and what we need to do to get out of it. One of the things I really admire about him is his "cool" and I hope the American people follow his cue. This is not the time for fear. This is not the time for anger. This is the time for taking a sober assessment of exactly where we are now and what we need to do to make tomorrow just a little better. If we can all do that, we will pull out of this stronger for the experience. That is what I choose to believe.

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Don said...

I, like you think NOW is the most important time for us to live. Too many "futurists" of the immediate kind are only adding to the "fear". I particularly like your quote: "Forgiveness is giving up all hope for a better past."
Nice positive, Now centered post, Brian.

Sue said...

I also like how Obama is really nice to look at.

Did I say that? Oops.

Great post, Brian. The power of now indeed :)

Someday said...

I think the biggest fear mongers are those in charge of the US Government. We pushed through the first TARP bill based strictly on the fear that something bad was going to happen. We are pushing through even larger interventions based on the fear that if my neighbor fails, we fail. The government keeps telling us that this is the worst economy since the great depression. I objected to that early on. We don't have an economy as bad as the one we experienced in the late 1970's.
I can't help but think all this fear mongering has a purpose. One of our current white house officials has stated that a good crisis is a terrible thing to waste. Every time our Government officials lay out their plans to "fix" the economy, the stock market dives. Coincidence?

When we say that it will be bad if we let others fail, be it giant banks, or our neighbor down the street because of how it will affect us, we are submitting to fear.

The courage to allow the economy to correct itself is what we need, not the fear of failure.


Brian said...

Good to hear from you Someday. That's an interesting perspective. Let the market correct itself. I personally don't agree that a free market is to cure to all ills. I think the market needs to be controlled. But, I really get a little nervous when I hear we should let our neighbor down the street fail, regardless of whether it affects us directly or not.

I agree that this is not the worst economy since the Great Depression. I also agree that, perhaps, the government is using this crisis to push through its agenda. But, I do not agree with the sentiment that the market is the cure for all ills. And, I certainly don't agree with standing by and watching people fail because it doesn't affect us.


Someday said...

We are free to help our neighbor down the street whenever we feel it necessary.

We can do that without the Government. It's what our churches and charities have historically done. It's what good neighbors have always done.

It's the Christian thing to do.


Brian said...

I understand your philosophy concerning government (or lack of) involvement, Someday. I just respectfully completely disagree.


kc bob said...

I liked this Brian:

"This is not the time for fear. This is not the time for anger."

I thought that it is a helpful way to look at the current crisis.

IMO, the democrats seem to be reacting from a fear of a worsening future and the republicans seem to be just angry about losing control of the government.

Brian said...


Perhaps you are right about the Democrats. Since none of knows how deep or wide the recession would go with government inaction though I'm not sure that is a risk I'd like to take. We always have to balance trying not to act out of fear against not taking the necessary steps to try to create a better future. Maybe the reaction is out of proportion to the crisis. But, I'm glad to see the government at least trying to minimize the pain that a lot of people are feeling right now. I think, at the very least, the government needs to instill confidence again. Confidence is what we need as much as anything.

kc bob said...

On this we agree Brian:

"I'm glad to see the government at least trying to minimize the pain that a lot of people are feeling right now."