There are at least 13 reasons to be worried. But all of those can be solved by injecting one simple ingredient into the economy. You can pick it up at your local post office.
It’s tough to be positive about the economy right now. It’s bad and getting worse.
Let me count the ways…
1. Unemployment is high and rising, hitting 2 million and is on its way to 3 million or more.
2. House prices are down, and still falling.
3. Deflation is beating inflation. Ask the Japanese which is preferable.
4. Banks are still in financial trouble
5. Banks are still not lending.
6. Fearful consumers are still not spending.
7. Snow, snow and still more snow. The novelty has worn off. Roll on spring.
8. Wildcat strikes are becoming more commonplace across the country.
9. Whilst London burns, some bankers are still getting large paid bonuses!
10. England still haven’t got a hope in hell of winning the 2010 football World Cup.
11. No-one, not Barack Obama, not Timothy Geithner, not Ben Bernanke, not Gordon Brown, not Mervyn King and not even David Beckham knows whether they are adopting the right policies and strategies to right the economy.
12. The same people, and a host of others too, have no clue as to how long it will take for us to get out of this deep economic slump.
13. We didn’t get a summer last year, winter has been long, cold and wet, we can’t afford to go abroad on a sun-seeking mission, and worst of all, it’s Friday the 13th.
The One Missing Economic Ingredient
But despite all that, you know what? The vast majority of us will be ok in the end. Right now, the biggest missing economic ingredient is confidence.
If we were told that yes, times are tough and there is going to be some financial pain for a few years, but in the longer-run, it will actually be for the better, and it will all be alright, it might make things a hell of a lot better today.
I remember back to the last two recessions. The 2001 version was relatively mild, although here at the Motley Fool, we sadly had to make a number of staff redundant. For those people, who’d done nothing more than be in the right place at the wrong time, it wasn’t necessarily a mild recession.
The recession prior to that was in the early 1990s. I remember at the time being horrified at the price a friend had paid a year or two before, for a small bungalow in Surrey. At the peak of the recession, they were sitting on a significant amount of negative equity, with no apparent hope of seeing that situation change for the foreseeable future.
We Survived This One Scary Day, And We’ll Survive Again
But change it did. House prices did recover. It may have taken 10 years for them to recover, but they got there in the end. The economy recovered, but not before the huge scare on Black Wednesday, 16th September 1992.
For those of us old enough to remember that day, it was almost as scary as those few days back in October last year, when the global banking system was close to collapse. On Black Wednesday, in the midst of an economic recession, UK interest rates were raised from 10%, to 12% and then it was announced they were rising to a whopping 15%. That all happened on just one fateful day!
For those people on variable rate mortgages, this was about as scary as it comes. All of a sudden, in a matter of hours, their monthly repayments were looking like they were about to jump by 50%. And it wasn’t as if they were starting from a low base either, with many already paying mortgage interest rates of 13% or even more.
Looking Past The End Of Our Noses
By the end of Black Wednesday, the UK decided to leave the European Exchange Rate Mechanism (ERM), interest rates were reset at 12%, and the pound collapsed. But in hindsight, that day was virtually the bottom of the recession, and from there, as interest rates quickly fell, and eventually the economy recovered. Even the pound recovered.
But it all takes time. As much as we like to take a long-term perspective, right now, none of us, from economists, to government, to consumers, can see past the end of our nose. All we can see ahead is doom and gloom, and we can’t see any quick-fixes to solve our economic woes.
It’s because there aren’t any quick fixes. We have collectively dug ourselves into a deep, highly-indebted hole. Anyone who has been over their head in debt will tell you climbing out of the hole is far harder and takes far longer than any of them ever imagined. Those interest bills just don’t stop!
A Compulsory Injection, Available Now At Your Local Post Office
Yet no-one I know is giving up. Although companies like BT Group (LSE: BT-A), BHP Billiton (LSE: BLT), Rio Tinto (LSE: RIO), Royal Bank of Scotland (LSE: RBS) and Diageo (LSE: DGE) have recently announced job cuts, to name but a few, the bosses of those companies and all other companies remain committed to returning their entities to a path of long-term growth.
No individuals are giving up. Yes, caution is required. Yes, prudence is required. But what about everyone having a compulsory injection of cautious optimism? You can pick one up at your local post office.
It could start with the mainstream press. How about a few more upbeat stories of people and companies who are still prospering, despite the economic downturn? How about some stories of companies who are not cutting jobs, and in fact are hiring staff? If you have an upbeat story to tell, post it in the comments section below.
This painful economic period will pass. There is hope. There is good reason to be cautiously optimistic. For starters, with interest rates at historic lows, you could check out our no-fee mortgage service and see if you can give yourself the mother of all pay rises.
Hang in there, Fools. With our collective dose of cautious optimism, we’ll all make it through the other side.
More: Bad News Could Make You Rich | Shock: Even Obama Can’t Walk On Water | Today's Biggest Risk
> If you are looking for a dose of optimism, and something for free, a 30-day trial to The Motley Fool’s Champion Shares premium stock picking service might do the trick. Maynard Paton is currently seeing some excellent opportunities in medium sized, cash-rich, dividend-paying companies. Click here to get instant access to all his very latest research and share recommendations.
> Of the companies mentioned in this article, Bruce Jackson has a beneficial interest in BHP Billiton.
