How To Kill Economy in One Easy Step!

Well, perhaps I exaggerate a bit. No, not about one step part, but about it being Easy. It is a little harder for regular folk like me and you.

I’ve been meaning to post on economy for a while, especially on my dormant Econoville blog, but what finally prompted me to post is a call from my father, this weekend. He was really concerned about whether or not we were going to loose our home. You need to know that he doesn’t live in the US, so I was surprised to hear that even in his corner of the world there was so much “misinformation” on the housing crisis in the US, and the collapse of our economy.

I have posted further details about the importance of Consumer Confidence Index, at least the way I see it (and I am no economic expert). And the gist is – our fears and overall “feelings” drive our behavior. A lot of purchasing and spending is directly driven by our emotions and thus, economy takes a hit. This in turn hits us, which in turns hits the economy.

The bad news – Nothing is faster than big President’s speech, to scare us all into stopping our spending, as clearly seen in the chart above. I am not saying there aren’t real problems out there in housing market and in auto industry, and in Financial industry (more on that separately). But, rather than helping these industries, the speech caused All of us to cut back our spending! The Result – accelerated freefall of the Economy!

Onto the good news – I am a strong believer in Moore’s Law, and the related Singularity. What this means for us, in my view, is that this whole Economic Cycle will be shorter this time around. Perhaps as short as 6 months, and yet shorter in the future.

Laying blame is easy, but I certainly wonder – What, if anything, could have been done differently to avoid this crisis. Meanwhile, printing more money clearly turned out to be pretty good idea to boost things. Now, if only we can manage to figure out who to give all those pretty new bills to… Definitely needs to be someone who is a big spender!