The date was February 6, 2009, when I saw on a local Calgary newspaper the headline "'30's Advice for 30-Somethings". Now, without putting too fine a point on it in the introduction, this is a really, really bad headline. For a start, it's promoting this wonderful continued fear mongering over a non-existent recession, and for a second, it's making the tragic assumption that 30-somethings today haven't the foggiest notion of how to live.
Speaking as someone who is 34, I must say that this headline (and related article) are very offensive. The article itself contains 12 paragraphs. The first ten are an interview with an older lady who doesn't seem to have any credentials save the fact that she was alive during the aftermath of the Great Depression. In the article she spends ten out of twelve paragraphs talking about how the younger generation doesn't know how to live, and that they need to ensure that they value their family.
I understand where she's coming from - from the concept of "you need family to survive" right through to "I was so poor I didn't even have shoes." But in all honesty, this isn't the Great Depression, and it's not the 1930's. Times have changed, technology certainly has changed, and financial sophistication has changed dramatically as well.
During the Great Depression, part of the problem was exacerbated by the fact that information traveled very slowly. Consider that during that time, the most reliable form of medium to long distance communication was mail, with its commensurate problems. A medium distance letter (say, from New York to Los Angeles) would take a very long time to get there, let alone one from New York to Tokyo. Any time there was a fluctuation in the market, the only method of propagating that information was through the print media, and perhaps through radio, although the latter was more unlikely, as the print media would be more readily available to people who didn't have radios at work (as is common today.)
The market problems this time around were so quickly identified that it seemed pretty obvious that the crash was coming. We knew ahead of time. We didn't know exactly when it would crash, but we knew it was coming. But now, here is where the differences lie:
When it started to crash, everyone knew - at the time. The internet, the news media, the radio, television, print, every form of communication known to man was crying about how the stock market had come tumbling down, how fortunes were lost, and lives ruined. None of it had actually happened yet, no no. You can't report on things that haven't yet occurred, but since "good news" is based on human misery, the communications technology on which we've become reliant was used to cause the problems.
Many companies right now are doing what happens any time that a market correction occurs. They are downsizing their operations to trim the chaff, they are taking baths on the face of their financial statements (meaning taking losses that are paper in nature [not cash] and writing down assets to more realistic values based on current market conditions.) They are contracting, getting smaller, leaner, meaner, and doing the corporate version of "going to the gym." When times are good, companies tend to overstaff; when the times are bad, they tend to reduce their staffing levels under the misguided belief that such actually does something.
Yet it's the media that is taking all of these stories and linking them together, based on the principles of marketing known as FUD. FUD stands for Fear, Uncertainty, Doubt. The average person may not understand the intricacies of how a person being given a mortgage who didn't technically qualify for one, but they understand it when someone spoon-feeds them "well, Morty lost his job because of the recession." (Morty didn't, he lost it because he slacks on the job, and his boss has always wanted to get rid of him, so now seemed like a good time.)
As a true-life example of this, I know of a company that had two production facilities. It was decided in June of 2008 to shut one of them down in November of 2008. The reasons were varied, but involved operating in a hostile political environment, the lack of ability to hire competent managers in the geographic location, and the poor quality control on the finished product as a result. Given that one doesn't want to tell a group of front-line factory workers that they're losing their jobs in four months (it would seriously compound the quality problems), management made no mention of this to the employees of the production facility.
When the facility was shut down on schedule, the local media interceded and cried doom and gloom about how the production facility was shut down due to "the Recession." (It's worthy to note that the recession hadn't even been verified yet - the stock markets had just started the roller coaster ride.) People rushed in to help the "poor, jilted worker" to find more work, and hissed at the "evil corporation" that shut down the facility. Had anyone bothered to ask beyond the newspaper articles, they would have found that "the Recession" was not the reason. The newspaper, however, wanted to sell many copies, and this was the easiest method of doing so.
It's this narrow-minded fear-mongering that is causing this recession-like atmosphere. The markets have corrected. It's over. It's done. The companies are out there scrambling to live, the ones that can adapt, at any rate. The others will fail. This is called natural selection. It's sad sometimes, yes. But if you're producing a product nobody is buying (like, say an SUV), why would it make sense to continue producing it? If the company can't adapt, it should (and most of the time will [but that's another article]) fail. And that is what is currently happening.
It's not a recession, at least not in the sense of the Great Depression. It's a market correction, bigger than we've seen, yes. But it's over. Let it rest. Let the markets lick their wounds, and they will heal.
However, never ever forget that the world has changed. Business has changed, become more sophisticated. The average consumer knows and understands more about personal finance than ever before in history. To top it all off, the ability to move more information than can ever be necessary instantaneously around the globe, individually or collectively is now almost unlimited.
It's different...
...and it's already over.
No comments:
Post a Comment