On The Other Hand

ON THE OTHER HAND

Several years ago I heard a university business professor joke that, “There is no such thing as a one armed economist.”  The reason, he went on to explain, is when it comes to economics there is always more than one way to look at things and an economist with only one arm would not be able to say “…on the other hand…”

With all of the different economic events and perspectives, it is easy to see why economists are always saying “on the other hand...”  The challenges that the economy is currently facing make it difficult to see the other sides of our situation.  And, the press has a tendency to focus only on the negative aspect.

For example, a couple of years ago real estate prices were skyrocketing and homeowner’s equity was climbing.  On the other hand, there was great concern about finding affordable housing for future homeowners.  Now with housing prices falling, and becoming ‘more affordable,’ the concerns have shifted to the equity being lost.  The same goes for the stock market.  Falling equity prices have put a squeeze on investment portfolios.  On the other hand some segments of the market are now more attractive than what they were twelve months ago.

High oil and gasoline prices have certainly been devastating to the consumer.  On the other hand, there are some reports that manufacturers are considering moving manufacturing jobs back to the United States to avoid the high shipping costs of bringing products back to the States.  The falling US dollar is blamed in part for the rising oil and commodity prices.  On the other hand, the weak dollar has made US products more attractive to foreign purchasers, reducing our trade deficit.  And while the rising costs may have curbed domestic vacations and spending, some businesses have reported an increase in sales thanks to foreign spending and the weak US dollar.  In June of this year, US business set a new record in total goods and services exported (see Did You Know…).

Throughout recent history, it seems, there have always been reasons for concern about the economy.  The 1960’s brought the Cuban missile crisis, president Kennedy was assassinated, and the Vietnam War escalated.  The 1970’s brought Watergate, the oil embargo and energy crisis, and the Three Mile Island nuclear accident.  The 1980’s came with “the worst recession in 40 years,” bank failures, the junk bond debacle and the record setting market crash of 1987.  In the 1990’s we had a recession, the Persian Gulf War, riots in Los Angeles, foreign currency crisis’s, and fears of Y2K. 

So far, the 2000’s have brought the collapse of the ‘dotcoms’, the 9/11 terrorists attacks, corporate accounting scandals, the Iraq war, soaring oil prices, and a sub prime credit crisis.  On the other hand, our nations economy continues to move forward, standards of living improve, and the average household has more conveniences and gadgets than someone could have even dreamed of a hundred years ago.

Today we face the threat of looming recessions, rising unemployment, international conflicts, currency problems, and a decline in real estate values.  Yet years from now, with the benefit of hindsight, I wonder if we might someday look back and think of these times as ‘the good old days.’  Of course, on the other hand…

Written By Kimber Heaton - Certified Financial Planner