Why Are We Feeling So Good When Everybody Says It’s So Bad?

October 15th, 2008 at 07:02am Teresa Beach-Shelow

The following is written by Chris Keihl–a gem over at the Fabricators and Manufacturers Association off of Mulford—
This issue of “Fabrinomics” is almost literally being written from the FABTECH International® & AWS Welding Show floor (or at least at the neighboring hotel). This has given me a golden opportunity to get some of the input that the talking heads on CNBC don’t generally get. I don’t want to make too many assumptions from what is arguably a very idiosyncratic examination, but there are a couple of observations that are more than interesting.

The first is that the vast majority of people I talked to reported that business was decent and, in some cases, good. There are certainly exceptions to this rule but, by and large, it would be hard to reconcile the stories of Wall Street carnage with the action at the show. The second observation is that most of the attendees have a better grasp on economic policy than Congress seems to have, and that goes as far as to suggest that some of the business practices on display need to be adopted by the powers that be. The question now is, what causes this disconnect?

This isn’t the place to try to explain the whole sorry mess the financial sector is in, but suffice it to say the bulk of the current economic problem is squarely the responsibility of the financial sector. This is not so much a recession that scooped up the banks but a bank-led recession that threatens to scoop up everybody else. Right now there is a “real” economy that is still capable of holding its own and an economy that is frighteningly sick. The fear is that the disease that ravaged the banks will prove infectious enough to bring the rest of the economy down. The whole issue has come down to a credit freeze. The debate over what the banks did to create this situation will rage for years - the important thing is noting that we are in the mess and that credit access is the key to getting out of it.

The demand factors are in place, and there is even money in the hands of banks and investors - despite the beating the markets have been taking. Consumers are justifiably worried about the future, but they still have money and most still have their jobs. Unemployment is at a little more than 6 percent, which is about normal. The average person is still ahead of their debt, and many still have some financial stability. The problem is that all of this is very precarious, and there is the potential for truly catastrophic decline if the basic issue of credit isn’t solved. The engine of the economy has stalled and the political response has been weak and vacillating. Assuming that much of this indecision is attributable to the chaos of election season, there is hope that the next President can assert himself and prove that Winston Churchill was right: Americans WILL do the right thing - after all other alternatives have been exhausted.

The fact is that the manufacturers and fabricators are doing better than many realize, but progress is somewhat fragile and could vanish if the banks stay in a funk and the politicians fail. It is a very tense time, and one that demands that people and businesses keep their wits about them.

Entry Filed under: Economy