This current economic debacle has more to do with the lack of trust in the entire global system and the collapse in confidence that people and institutions are basically good and trustworthy. As a wise man once told me, it's like turbulence in an airplane. Turbulence just is. When you're sitting in your over-priced row 12, seat F and the plane hits a pocket of air that makes it dip and buck as if you're on a cheap carnival ride, most people who have flown don't start swearing at their pilot or flight attendants. They know that it is just turbulence. The bucking dip is neither good nor bad; it just is. That's where we are now. Billions of people around the world are fearing a calamitous airplane ride like people sealed in a financial flying tube. Now the pilot could make it worse by continuing to fly at the same altitude, neither asking for permission to go higher or lower, but staunchly staying the course. Those are our current pilots in Washington, New York, Detroit, Beijing, Mumbai, Islamabad, etc.
Getting back to my question: Just how long will this recession be?
Most experts agree, we haven't hit bottom yet. That's something we know for certain. In fact, most economists now believe that we began our turbulent recession starting in December of 2007, although most of these experts announced this month what the rest of us knew last year. That's some lag time.
What we know for sure is that people are still losing their jobs at an alarming rate; some analysts put the jobs lost at a half a million every month.
Also, retailers are just counting their receipts from the holidays. I visited a Northern California Target Store three days before Christmas of 2008 and a Costco the day before that. There was so much inventory on the shelves that you would have thought that we were at the beginning of the shopping season rather than at its end.
This signals that we won't be able to buy our way out of this crisis. When President George W. Bush urged people to "buy and shop" after September 11, 2001, we should have known our own misguided patriotism brought us to this place.
The healing process of a deeply wounded banking system, that has already led to nearly $1 trillion of write-downs, will act as a weight around the neck of any economic recovery in the latter part of 2009. Banks will likely continue the slow process of recapitalization and cleaning up the mountains of toxic assets on their balance sheets for a period longer than just the next few quarters. CNN-Money.com.
We'll be in it for the better part of the next eighteen months before we see the glimpses of some sort of recovery. That's June of 2010. What has to happen is we'll need to restore some trust in the system that has been badly damaged. If anyone did not believe in Chaos Theory, these last eight to twelve years should be proof that it does exist. That goes for global warming, too.
Not only should we be cleaning up toxic assets, we should also have the faith that the whole of our government and economy are out to help us rather than throwing us to the wolves. Unions, business people, government officials, bureaucrats, and NGOs must work together to restore and build our confidence and savings back up. I'm not talking about the halcyon Clinton or Reagan years but to a place that has never existed in American society. We all must come together, red states and blue states, Democrats and Republicans, Jews and Gentiles, Protestants and Catholics, Blacks and Whites. It's not "Kumbaya" that we should be holding hands and singing but "how can I help you because I can't do this without you."
People must save money and spend realistically rather than create a system (the economy, the environment, schools, etc.) that is leveraged to the hilt. It's not just financial literacy, but financial reality.
The reason why it will take 18 months to get ourselves out of this mess is because we need to have the courage to save and save ourselves rather than just spend ourselves silly--downsize rather than super-size--making sure that the courage of our convictions leads to a better and more hopeful world.
It's not just Barack Obama that believes in hope. We all must be a part of this solution. This IS our time.
Now comes gravity and our own brand new reality.
