Fear and the US Economy

I have been thinking a lot lately about the next twelve months, as most of us are prone to do each December. During this time, I have been thinking a lot about the big picture. What will make or break my business and, due to my heavy reliance on a paycheck, my personal life? The answer, I believe, is the abundance or lack of fear.

See, I believe more than any other factor that the US Economy is driven by fear. For instance, let’s look at the years surrounding 2000, when the stock market crashed and the “irrational exuberance” era ended. From 1993 to 2000 we had one of the largest and longest economic expansions in US history. It was built of a strong dollar and an expanding knowledge base of educated employees. From 2000 until 2007, we have had a vacillating economy. The good times were driven by a housing boom in most of the country.

But that picture is incomplete. What else happened from 1993 to 2000? Nothing. And nothing is a good thing for the US economy. There were no wars, no dire predictions of impending doom, no terrorist attacks, no perceived risk of biological or nuclear attack. Couple this with the rise of China and India, the solidification of EU, and the country’s pre-occupation with our president’s sex life, and there was very little to distract us from building businesses and making money.

From 2000 to 2007, the opposite has been true. First, irrational exuberance finally hit its peak and sent the markets down. Then, 9/11 happened and ever since we have been met with endless predictions of biological, nuclear and terrorist attacks. Every time we start to get comfortable in our skin, there’s Osama bin Laden on the screen again or dead people in Iraq and Afghanistan or a led-filled Thomas the Tank in my two year old’s mouth.

So how will 2008 turn out? That depends. Will the fear of not being able to flip our houses and pay for our collective credit card bills overwhelm us? Or will some blissful peace overcome us, leading to another year of economic expansion and happy bank accounts?

I know which one I prefer. I also know which one I fear.

2 thoughts on “Fear and the US Economy

  1. Pingback: Financial Crisis: A Layman’s Understanding « Mobile Success

  2. Pingback: The Economics of Fear « Elia Insider

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