The Sky Is Falling, better known as Chicken Licken, Henny Penny or Chicken Little is an old fable about a chicken (or a hare in early versions) who believes the sky is falling. The phrase, “The sky is falling,” has passed into the English language as a common idiom indicating a hysterical or mistaken belief that disaster is imminent.
–Wikipedia
Yesterday was Saturday, garage sale day in Southern California. There were three sales on my block but no one was selling anything. It was one of those days where everyone apparently went to the beach instead of cruising the neighborhoods looking for hidden treasure. When someone asked, “I wonder where everyone is today?”, the answer came back, “No one has any money, everyone is staying home because of the economy.”
I’m so tired of listening to the media report (and then listening to people parrot what they hear in the media) about the current recession. First of all there doesn’t seem to be a consensus on whether we are or aren’t in a recession. Some outlets say we are, others say we’re headed there and still others say we’re at the brink of a full scale depression. My personal opinion is that we, you and I, are making this worse than it is. Look, I don’t have my head in the sand, I understand that the economy is in a down trend. I live in San Diego county where we pay $4.60 for regular unleaded so you don’t have to tell me that some things, like food and gas, are getting more expensive while other things, like real estate are getting less expensive. But I believe we are making this a lot worse than it is. I believe that, for the most part, you and I are doing this to ourselves.
Now I know that some of you are already rolling your eyes because you KNOW that the war, the floods in the mid-west, the government, the oil companies, and big business are all at fault (and probably conspiring together against us). OK, I’ll grant you those things are playing into the current economic trend but I still believe that the majority of this is us doing it to ourselves.
I’m no economist and truth be told, I really don’t care about, nor do I pay too much attention to, global economics and national finances. But here’s why I say this is primarily our own fault and why we should pay little attention to what the media is telling us: because most of the stuff that people are freaked out about on the news doesn’t affect them personally in the least. OK, gas and groceries affect all of us but let’s set those aside for just a minute. What does this “recession” affect first? What, besides gas and groceries, is the media’s message of doom and gloom focusing on?
Interest Rates
Does that really affect most of us on a large scale? Does it affect your ability to deposit money in your checking or savings, write checks, pay your bills, buy that ever-more-expensive gallon of gas? Maybe it does you but I don’t see where that process has changed much for me on a day to day basis. Credit card interest is higher but we ran those balances up ourselves kids. And there are simple, simple systems for paying those balances down, so I don’t see that the banking industry and interest rates really affects most of us and our ability to conduct our day to day business.
Real Estate
No doubt about it, real estate values have gone down in a lot of areas. But given the inflated prices of a couple of years ago, didn’t we know that would happen? Isn’t it the nature of real estate to go up and down? But all that aside, who does the current loss in real estate value affect? Everybody? Not hardly. There are really only two groups of people I see really affected- those folks who got into an adjustable rate mortgage and never refinanced into a fixed rate and those people who bought on speculation and want to sell their house right now. In other words, my house has dropped in value from what it was a couple of years ago, but my house payment didn’t go up. I’m paying the same amount I was paying before “the recession”. I don’t see that I’ve lost money. You only lose money if you sell for less than you paid and I’m not planning on selling. While it’s a problem for some, it does not affect a majority of home owners in this country.
The Stock Market
As of November 2005, according to the Securities Industry Association and the Investment Company Institute in their joint survey, “Equity Ownership in America, 2005,” half of all U.S. households own stocks, either directly or in a mutual fund or retirement plan. But of that, how many are buying and selling those funds and retirement plans on a regular basis? In other words, don’t most Americans who own some stock, have them as a long term investment? The average working American is not day trading their retirement plan, they are investing regularly in a 401k or mutual fund for the long term. So like real estate, the only time you lose money is if you sell when the market is down or if the company you invested in goes under. And like real estate, I think most people understand that stocks will fluctuate wildly, that’s why most Americans, in thinking about the long term and retirement, invest in conservative funds. And according to the above joint report, even that only affects half of the population, the other half don’t own any stocks or funds at all. So again, maybe I’m seriously naive, but do the wild fluctuations in the market directly affect most Americans in how they operate on a daily basis? When most folks are drinking their first cup of coffee and watching one of the morning “news” shows, do they see the Dow Jones industrials and go, “Crap, there goes the day!”. I don’t think so. More people are interested in the fact that on Friday, the lines were around the block to buy the new 3G iPhone than the fact that Apple’s stock went down over $4 a share on Friday.
However, here’s where it does affect everyone and why I say we are doing it to ourselves. We are constantly bombarded by the media with this message that the sky is falling and whether it directly affects us or not, we subconsciously buy into it. You have to understand, the media’s job is not so much to report the news, it’s to keep us watching and listening. The more horrible the news, the more we watch. We are fed a steady diet of bad news and that constant negative input affects our thinking and that DOES affect how we operate on a daily basis. I believe the more we THINK we are headed for a great depression, the more we will ACT like it’s already upon us and the faster we will actually manifest it.
The fact is, you can lump the American public into three broad categories:
1.) There are people that have financial problems no matter what the economy is doing. They have money problems all the time, no matter whether the economy is up or down and they have had the same issues their whole life. The economy doesn’t need to change so much as they need to change.
2.) There are people that do get hit by layoffs, downsizing and corporate “restructuring” (that means pay cuts) but don’t let it ruin their lives. I have a good friend that works in the airline industry. He wasn’t downsized but he has taken a couple of major financial shock-loads in the past couple of years. What did he do? He looked to his skills and started a new business to supplement his decreased airline income. The good news is, he now has two streams of income. While it’s a little tougher right now, he hasn’t lost his house or traded his full size pickup in on a sub-compact yet. And when the economy turns around (and it always does) he will be in even better shape than he was before.
3.) There are those people that make money and prosper no matter what the economy is doing. In an up economy, they make money. In a down economy, they still make money. They seem to always miss those news reports that tell the rest of us how bad things are.
The reality is that gas and milk are more expensive, and they will probably get even more expensive before this is over. But is that all it takes to ruin your life and send the country into depression? I don’t think so. I think the majority of the problem is us and what’s between our ears. We are listening to the wrong people and buying into the crap they are feeding us for their own personal gain.
I think we need to kill Chicken Little. I think we need to cut it’s little head off, invite those folks in categories 2 and 3 over for fried chicken dinner and start listening to what they can teach us rather than what the evening news says is inevitable.
So yeah, I think yesterday everyone decided to go to the beach, I don’t think the “recession” had a thing to do with garage sale revenues. But I do believe that a recession mindset will sink you.