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Print ArticleWHAT'S SO ESSENTIAL ABOUT YOUR INTERPRETATION OF THE DATASTORM?
First, you're getting more information about the economy than ever before — including both projections and raw opinions. The opinions that are blended in as ingredients of the official news stream aren't necessarily labeled as such and the less knowledgeable won't know the difference. These opinions can be informed and sensible, pin-headed and dangerous, scrubbed to protect an advertiser or brilliantly self-serving in order to sell books. Either way, they all heavily influence your expectations about the economics of today and tomorrow. It is a dangerous datastorm.
In the past, that type of information was something that a financially-oriented person sought out in a special publication or specific cable channel — all of that's changed. Secondly, wholesale buy-in can mislead you and cause you to undervalue your prospects and respond to your business situation apathetically. If you only scan the most general headlines and only listen to the kind of fact-free anecdotal negative notions of your neighbors, then you are sure to become part of the helpless and hysterical horde. It is essential that you see the presentation of economic news and financial forecasts in a way that's similar to a travel agent giving you the scoop on a large lake when they are merely floating on the water's surface.
The world's leading expert on lakes, floating in the lake's center, would only be able to give you a sense of it through the most general readings within his reach; water depth, air and water temperature, oxygen and nutrient levels, etc. The data would form an incomplete profile from which you'd draw your interpretation to plan a fishing trip.
Even with a continuous stream of information from that spot being fed to you, it would be impossible to evaluate the conditions and outlook for each part of that lake. Think of each of the many areas of that lake as individual locales with varying climates and opportunities. What's happening at each and every inlet? What level of biodiversity will you find along the shoreline? Is the lake bottom more active than average? Is the new species of fresh water fish entering the lake likely to change your forecast? Specific answers and specific plans that work can only be the result of pinpoint knowledge and local environmental scans.
EVERY SINGLE THING I KNOW ABOUT RECESSIONS
Recessions are cyclical events that are characterized by a prolonged period of time when the economy is contracting. Technically, the contraction in gross domestic product (GDP) has to last for at least six continuous months to be considered a recession. The economy is now so extremely complex that no single measurement completely and accurately describes the level of economic activity. Much is made of the GDP's value when declaring a recession. For many people, it's the availability of jobs that is the most crucial component of economic health. The thinking goes like this: If I'm being offered a job, the economy is expanding, but if I'm laid off, we're contracting at warp speed.
Politically, it is rare that any one executive administration can legitimately claim victory over the economic cycle (but that has never stopped anyone from trying) and leave office having single-handedly driven the populace to prosperity. The funny thing is for the last 35 years, the U.S. economy has been growing at a surprisingly constant rate of 3 percent. Within the disparate range of fiscal and monetary policies the economy has been exposed to by various administrations, none has had a demonstrable effect on long-term growth — no massive failures, no stunning successes. The result has been a negligible effect — giving even more credence to the fact that our economy prefers to do what it does best: cycle.
It pains me to concede that our politicians seem to value only the most self-serving short term policies. Historically (and depressingly), one of the more reliable traits of occupants of The Oval Office, is their willingness to adopt strictly short-term views of the economic welfare of this country. Their basic concern has been to assure the appearance of prosperous economic conditions until after their regimes are over, regardless of the long-term costs. They resort to this fiscal sleight of hand because the trickery works. With the temptation to hoodwink us ever-present, politicians would lose the use of this shady tactic if we, the constituents, knew more about the economic game.
