I wrote an article last year on confidence, at a time when the bailout funds were flying free and targeting major corporations and businesses. I said that the goal was to restore confidence, and that the next bailouts should focus on giving Americans and incentive to spend more – either through a holiday stimulus or by attacking the root problems of the loss of confidence – job loss, house foreclosures, etc.
Well, lo and behold, almost a year later, I am saying the same thing. Why?
Reports today showed that sales unexpectedly decreased in America. This comes even as the auto industry reversed its fortunes due to the impact of the Cash-For-Clunkers initiative.
People are being shaken by the difficulty of finding work, and also the threat of losing the job that they do have. It is making Americans much more cautious in spending the money they do earn and very selective.
This highlights the importance of confidence, and goes back to the core assertion I have made – the economy will not reverse itself unless Americans step out on faith that it will turn around, and the people will not step out on faith until they see the economy improve. It is a tough and vicious cycle, because both entities are depending on one another to move. It is like Americans are standing at the door, not ringing the doorbell, because they assume the economy will not respond and open the door. Meanwhile the economy is waiting for that ring to come.
The government, through its policies, should be making the Americans either more confident that ringing the doorbell will produce a response. While the Obama Administration has been tackling the economic recession, it is clear that the potential for improvements are not being seen and economic facts not being heard in American households – because many people cannot hear past unemployment.
Confidence goes a long way. If sales are decreasing in a month, it is a clear sign that confidence is not there. Not restoring confidence is like ignoring the internal bleeding of a stress induced ulcer – all other efforts are weakened by this underlying ailment.
If we want this economy to turn around, then it will take faith from all to spend. But the government cannot expect people to believe in the economy and spend if it has not shown them their faith can be rewarded. The government most certainly isn’t God, but they certainly can make policy that focuses on job creation and on reducing the costs of some major ticket items in the lives of Americans (cough, Cough health care, cough). When discretionary income is freed up or increased due to these government policies, Americans should do their part, and have confidence that spending helps them in the long term.
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