Wednesday, January 21, 2009

A Crisis of Confidence

Many have already given their thoughts on President Obama's Inaugural Address. There is one theme from his speech that we need to especially think about.

Homes have been lost, jobs shed, businesses shuttered. Our health care is too costly, our schools fail too many, and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.

These are the indicators of crisis, subject to data and statistics. Less measurable, but no less profound, is a sapping of confidence across our land; a nagging fear that America's decline is inevitable, that the next generation must lower its sights.

Much has been made of the technical analysis of our problems. But underlying all of the technical issues is a psychological issue that is every bit as important for us to address. And that is confidence.

belief in own abilities: a belief or self-assurance in ones ability to succeed
Without confidence, even the best efforts to fix what’s wrong with the US and world economies may not be effective. It’s like getting a sick patient on the mend. All things being equal, a person who believes he or she will get better will more likely thrive than one who does not.

While some businesses have already felt the effects of the recession, many others like Ericcson did just fine in 2008. But even those businesses because of their loss of confidence in the future are cutting back on jobs.
Ericsson, the Swedish maker of wireless networking gear, posted an unexpectedly strong profit Wednesday but said it would cut as many as 5,000 jobs in anticipation of a slowdown.
Credit is the lifeblood of most businesses. But despite the infusion of capital by the government, many financial institutions lack the confidence to extend enough credit to keep the economy functioning normally.

Manufacturing in the US has taken a particularly bad beating. Can the struggling US automakers still make a car that enough people will want to buy? Today it was announced that for the first time since the early 1930s, General Motors is no longer the world’s largest automaker. That title now belongs to

The Obama administration is preparing a large stimulus program to try and jump start the economy. But try as we may to pump more money into the economy, financial institutions that are not confident in the future are still going to be reluctant to lend money to both businesses and consumers. And businesses that are not confident in the future are going to continue cutting back on jobs. And without secure jobs, consumers are not going to be confident enough to spend money to keep the economy going. You can give out stimulus checks and tax cuts to consumers but without confidence in the future, they will be more likely to stash the money away or pay off debts instead of spending the money.

President Obama has inspired hope in a lot of people that things will someday get better. But he has been honest enough to say that the economy will likely get worse before it gets better. But for now, more companies are laying off workers. And that doesn’t instill confidence in anyone.

The only thing that keeps us going is the assurance that we have had difficult times before and gotten through them. Although this economic downturn has been called the worst since the Great Depression, some feel that the economy in the early 1980s was
even worse than the one we are going through.

Hopefully our new president will address the economic crisis he has inherited with sound and effective economic solutions. But to ensure success, he must also be able to address the
crisis of confidence in not only our economy but also in government to enable us to move forward.

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