Have you read the news lately? It's scary. Oil prices are rising, consumers are buried in debt, economic growth is weak, unemployment is high, and the politics of an election year makes it all that much worse. Consider these nine quotes I pulled from major newspapers, all of which should scare you:
1. "Private economists are warning of the possibility of a 'double dip' recession in which GDP ... slips back into the negative range as the recovery falters and the recession returns with full force. Even if that scenario does not develop, analysts believe that a variety of problems facing the United States, from strains on the banking system to an overload of consumer debt, will make this expansion the weakest in U.S. history."
2. "Americans burdened by weak income growth cut back sharply on their spending in October, the government said Wednesday in a report some analysts called the most disturbing sign yet that the country could be headed for a double-dip recession."
3. "Lawrence Hunter, the chief economist of the U.S. Chamber of Commerce said that 'far from leading the economy out of the recession, consumers are leading us back into a second [one].'"
4. "The stock market suffered a broad loss Thursday, beset by recession worries and a relentless rise in oil prices."
5. "Briefing reporters before the sessions began, many of the corporate executives took issue with the administration's more-optimistic forecasts of a fairly rapid return to robust growth rates. They said the huge overhang of government, corporate and personal debt ... was likely to depress economic growth for some time to come. 'It will be a rather slow and painful recovery out of this recession,' said ... the head of General Mills."
6. "'People ... want an employment check, not an unemployment check,' [Newt] Gingrich said."
7. "The U.S. economy is going through a 'slow, uneven' period of growth, the Federal Reserve said Wednesday in a bleak report analyst said underscored the danger of the nation slipping back into recession ... Analysts said the new report showed that Fed officials were becoming more worried about the possibility that weak growth in the spring could falter and topple the country back into a recession."
8. "'I think there's a crisis in this country relating to the national debt and we've got to crush that before it crushes us,'" Boyer said."
9. "A flurry of fresh data, including the sharpest drop in factory orders in nine months, suggests the economy's slowdown is more drastic than analysts suspected and the risk of a recession cannot be ignored."
Scary stuff, right?
You bet. But I have a confession:
These quotes are all from the early and mid-1990s.
What followed wasn't a recession, a slow recovery, or a debt crisis. It was one of the strongest and longest-lasting economic booms in history, 20 million new jobs, a government surplus, and an epic bull market.
That should be a reminder of two points.
One, nobody has any idea what the economy or the stock market is going to do next. Trends shift, things change, and stuff happens that no one could see coming. Stop listening to the analysts who say they know what stocks or the economy are going to do next. They don't. What's the saying? "You plan, God laughs"?
Two, people's emotions peak at the wrong time. Bearishness was common in the mid-1990s because there was a recession in 1990 and it lingered in people's minds. They weren't forecasting; they were back-casting. Same in 2000, when optimism looked unstoppable. Three books flew off the shelves that year: Dow 36,000; The Long Boom: A Vision for the Coming Age of Prosperity; and World Boom Ahead: Why Business and Consumers Will Prosper. The author of the last one saw "two more decades of 1990s-like growth for the U.S. economy." Whoops.
There's a lot to worry about in today's economy. There's also a lot to be hopeful about. Any of the quotes above could fit seamlessly in today's newspapers, and most would make people worry just as they did 20 years ago. But they were wrong then, so why should we think they're right now? We shouldn't. Too many of today's negative outlooks are just what they were in the early 1990s and in 2000: not forecasts, but back-casts. That itself may be a reason for optimism.
If you haven't already, check out my new ebook, 50 Years in the Making: The Great Recession and Its Aftermath, on Amazon or Barnes & Noble. It's short, packed with information, and costs less than a buck.
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