The Shape of Bottoms

I have finally gotten myself back on a normal sleep schedule. For some reason the 6 hours adjustment coming back from Europe was much more difficult than past experiences. Maybe it was just a factor of the schedule we kept while on the trip, maybe just general tiredness.

A more difficult adjustment, however, has been to the realization that the world changed in that week we were gone. Changed in significant and long term ways. McCain seemed unwilling to take on Obama in the debate, virtually sealing Obama's election. We will likely have a totally democratic controlled congress and executive branch in 2009 and it will be an administration with a very different point of view than the one which has been in power for the last eight years. Change is the theme and change, I suspect, we will get.

The backdrop for this expected sea change in our taxation and social system is an economy that has failed. There was speculation and the use of leverage (borrowing to make investments, like margin) by financial firms and hedge funds as well as personal leverages (borrowing against perceived equity in real estate to finance consumer purchases). Now that leverage must unwind and many many people, who had no idea they were at risk, will be subject to the impact of this aggressive financial speculation.

Thousands upon thousands of people are losing and will lose there jobs. There aren't many new jobs for this very capable, educated and often young population to go to. It is expected that the unemployment rate could soar to 8% or more and many of those counted in the "employed" category will be working for far less than their education and experience might otherwise command. That makes it tough to pay bills, especially mortgages and credit cards.

I don't offer any solutions for this situation. There might be some. The economists for Obama, particularly Austin Goolsbee, are very interesting people. Look up his writing on Google and you will find a host of article that might reveal some of the changes we can except. How his ideas will change our lives I leave to your to make your own judgment.

I had, for the last year, thought that we would work ourselves out of this slump by early 2009. Now I am certain we will not. There is a lot of talk about L bottoms, V bottoms and U bottoms. That is a way of referring to the shape of how long the bad period will last. An L bottom means that there is a long period of poor economic performance. A V bottom means that the recovery will be quick and we will return to growth rapidly, forming a shape to the good / bad curve that is in the shape of a V. A U bottom means that we will go into this slowly and it will take a while to slowly recover, forming a U shape to the good / bad curve.

What do you think it will be? How does it feel to you? I think that we should pray for the best and prepare for the worst. It will be, like the Chinese curse, "an interesting time."\\ Sphere: Related Content