Every time you turn on the news, or in my generation’s case, flip through the four papers you’re subscribed to on your iPhone (only after checking the ESPN app first though), you see more and more sensationalistic media coverage and “experts” talking about how the sky is falling. In fact, I think we have become so used to moving from crisis to crisis that we don’t realize in a historical context that the world is not a bad place to be right now, at least relative to what a terrible place it has consistently been in the past. In terms of the economic atmosphere, the major news stories center around austerity, debt meltdowns, slowing rates of growth etc. I just read a book about how increased energy costs are going to doom us all. Ok, everyone take a deep breath and just breathe with me.
Euro Debt vs Euro Wars
What would be of more concern to you, revolutions and world wars, or problems balancing a budget? Seriously though, think about the truth behind that statement. While I think much of the world has lost touch with reality as far as production and the role of government goes, trying to restore more of a balance to taxation and entitlements is a pretty far cry from hundreds of millions of people in relatively close proximity trying to kill each other. The drama that we have seen unfold in Greece is obviously not fun for everyone, but what’s the absolute worst case scenario here? Greece pulls out of the Euro, goes to the Drachma, devalues its currency until its tourism industry flourishes, sees its government reformed into an actual working mechanism, and in twenty years reaches its past heights? Even take the leap and say that it destroys the Euro zone. That really sucks, but at the end of the day people marching on Paris because they want to retire early doesn’t quite scare me as much as people marching on Paris because they have swastikas on their arms.
Integration vs Isolation
In a related note, President Obama is mad at the Euro crew for screwing up his economy in an election year. This has of course brought out the chorus of naysayers who claim that our economy is too integrated now for its own good. Really? Seriously? If it’s one thing we know, it’s that people, politicians, and countries will act in their own self interests. Isn’t it to our collective benefit to be integrated then? Hey, China may really dislike the USA some days, but is it ever going to bomb them? NO! They need the consumer base, and they own much of the USA’s debt! Being integrated doesn’t look great when markets are falling (what does?), but it isn’t the worst thing in the world. Happy days will come again. You know what really hurts economies? I’m-going-to-take-my-resources-and-go-home-ism. In other words, when countries feel isolated, erect tariffs, and try to pull back from this integrated world. That’s the stuff of recessions and great depressions. I’ll take a little blowback from the Euros trying to get their house in order as opposed to zero-sum style economic thought.
Our Problems Now vs Then
Here is what the USA stock market has seen in the last 100 years: World War (war to end all wars), great depression (not of the variety where people protest about entitlements, the kind where people need food), another world war (another war to end all wars), creation of the UN which it mostly funds but gets no support from, Cold War/several proxy wars against ideological opponent, Adam Sandler’s last 13 films, and the Rex Sox actually winning a World Series. Today we have this really bad stuff called polarization and political gridlock. You know what else what polarizing? Slavery and the American Civil War, I’ve heard those guys didn’t always see eye-to-eye. So we’ve overspent our budgets and we have to figure some stuff out, is that really worse than having school children learn to “duck and cover” because that was their big defense against nuclear bombs?!
This Too Shall Pass
My point here is, don’t let the talking heads fool you. Are we doing a lot of stupid things in the world today? Yes we are. Are we making lots of common sense mistakes and do we need to pull our collective heads out of a certain collective body cavity? Yup. On the flip side, more of the world is literate than ever before, technology is gradually trickling down to billions of people around the world that have never seen a Walkman, never mind an Ipod. While the gap between rich and poor is growing in some areas, India and China are beginning to see a true middle class emerge. While we certainly have some challenges to face, I would argue that today’s world and today’s stock market will be just fine. All we need is to find our new equilibrium and business will do what it always does and find a way to grow again. On the other hand, the more things change, the more they stay the same, Middle-Eastern Unrest anyone?
TM writes about all things personal finance over at My University Money. He intends to continue his quest for lifelong learning and hopefully help others along the way.
SPF Note: Buy local – we used to do it all the time.