The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

Didn’t Someone Say The Recession Was Over?

On May 24th, 2010, posted in: Uncategorized by 1 Comment

Growing up, we’d go fishing just about every weekend.  Prior to my first cast, I’d be fairly excited about the prospects of having a good day of catching fish.  Shortly thereafter, my attention deficit disorder would kick in and I’d be skipping rocks and playing with the bait.  To stare aimlessly at a bobber in hopes of some famished fish hooking on to the juicy night crawler dangling a foot or so below the surface, left me bored in about…hmmm…let’s say maybe 30 seconds.

As the morning would progress, it was inevitable that in some mysterious, unexplained way, a ball of fishing line would emerge at the end of my pole.  A tangled ball of confusion would show up inviting me to take the time to untangle.  This, of course, would be nothing more than a deceptive exercise in futility and further exacerbate the frustration of the day – yeah, sort of like the economy.

The tangled ball of fishing line of my youth pales in comparison to today’s economic blob we attempt to unwind.  We pull one of the loose ends for a few seconds and it gives us the false hope of unwinding.  As our progress comes to an abrupt stop, only then do we realize a tighter knot will be the result.  Truly, our economy is intertwined with the goings on around the globe.  Nothing inside the economy is operating independently or unilaterally.  Oh, what a tangled web we weave.

Yep, the economic woes of Greece and Spain adversely affect our stock market. Yeah, reduced American wealth leads to reduced consumer spending.  Subsequently, this leads, in part, to cuts in school districts, state governments and local municipalities.  Reduced tax revenue equates to reduced services and jobs, and less spending.

Oh yeah, another thing to watch.  We’re holding our breath that there will not be a geo-political uprising anywhere in the world any time soon – that means more upset.

In response to tough times, folks are trying to save more money which, in turn, means even less spending.  Without spending, we buy less stuff.  Because of less stuff, less people work; which means more unemployment.  That means even less spending; which insures further reductions in jobs.  Is there more?

Gas prices usually drift north in the summer.  That means the transportation costs from manufacturers to grocery shelves are more expensive.  This usually means that the gas costs get passed along to us, but not right now.  Right now, we’re not spending money.  So if prices go up, then we’ll spend even less.  That means low-to-no inflation.  That’s a good thing, right?  Unfortunately, that borders on deflation, and that’s not good.  As a result, that means nobody makes any return on their savings.  In addition, cheap prices mean fewer profits from sales.  Uh-oh, it all ends up leading to slower job creation.  Make it stop.  Please make it stop!

So, when private businesses and consumers don’t spend money, the government does.   Seems reasonable except that the government doesn’t have the money to spend.  That means we (the good ol’ USA) go into debt.  That debt is expensive and is usually paid for by increasing taxes on wages, goods, services, etc.  When we pay more taxes, we have less to spend and save.  That can’t be good, can it?

Growing up, fishing was OK.  Messing around on the shore when I should have been fishing was even more fun.  But that nasty ball of fishing line – what a pain!  Hindsight being 20/20, the convoluted ball of line was nothing compared to the current economic crisis.  Where do we go from here?  Didn’t somebody say the recession was over?  Well then, let’s get going.

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