This morning I received an email from a friend in which he made the following comment:
My view is that el Erian (the Chief Investment Officer at PIMCO) is right in his analogy of the economy being in a old beater car running low on gas on an uncertain road... and we have already used our spare tire. It is scary out there.... It is all based on confidence, and investor confidence can change very rapidly.
He closed his email by saying "Still on the sidelines since Dow 13,500."
I think my friend expressed well the angst felt by many in today's struggling economy. We face more challenges right now than most of us have ever faced before. But who says we are too weak to prevail? My friend was right when he said "it is all based on confidence." Our biggest challenge today has nothing to do with our budget deficit. It has everything to do with our confidence deficit.
For the record, I do not share el Erian’s (or my friend's) pessimism. Clearly we have problems…but do we have more problems than we had in the 1970’s? Or, for something more extreme, the 1930s? I hate to think what would have happened if we had followed the pessimists' advice in those challenging times.
Perhaps we have come to believe that the sense of ease we enjoy during economic bubbles is the way life is supposed to feel--that wealth comes easy. But that just isn’t true. History teaches us thatthe real “normal” is that life is a challenge and it takes hard work and sacrifice. We also find that hard work + sacrifice + patience is a winning combination that our parents and grandparents and those before them used to build the wealth we spend so much energy worrying about today.
Regarding the national debt issue, I agree it needs to be our top economic and national defense priority. Democrats and Republicans are equally to blame so there's no use getting bogged down in inter-party bickering. It is time to finally resolve the issue. I hope the message comes through loud and clear to our political leadership in November.
On a final note, Americans are a very interesting group of people. You don’t need to spend much time in other parts of the world to understand how unique we really are. Over the years, our culture has attracted the best and brightest and most intrepid of people from all over the world. This remarkable group of people has accomplished amazing things in nearly every field of human endeavor including solving some of the most intractable problems mankind has ever faced. With that track record to guide us, I have tremendous confidence in our ability to solve our current problems. I am very bullish on America.