Tuesday, November 10, 2009

False Impressions Regarding the Recession

We all have stereotypical beliefs about the economy, about financial matters, and about how the world works.

For the longest time, we were taught that an diversified investment portfolio must have owned and loaned equities. Compare a $10,000 investment in a stock or bond mutual fund made 10 years ago. That really has not worked out for most of us.

Buy a house because it will only go up in value. If you rent, you are throwing away money. We have learned by the school of hard knocks that cash rules. Working capital management, be it for you personally or for your business, trumps just about everything.

The recession will end, they all do. What is it in our economy that is going to drive investment? It is investment that creates growth, new opportunities, new innovations. It is investment that creates jobs. With the federal government's monetary policy of printing as much money as possible and its fiscal policy to deficit spend like never before, the federal government is handcuffing business.

The role of government is to secure the rights and freedoms of individual citizens. the less government get involved it the lives of its citizens, the better. the more they get involved, the less freedom we have.

The government and the Federal Reserve have created this recession. There is nothing in their plans that will pull us out of it. For the past 60 years, we have pulled of of these downturns -- the Fed-driven ups and downs. This time, they are going to have a tough time addressing the problems because they have gone too far down the socialist path. Ten percent unemployment might be the norm for some time; seeing it back in the five percent range will probably never happen again in this nation.

No comments: