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Confidence

Posted by Larry Doyle on March 21, 2009 10:07 AM |

Our economy, markets, and global finance are impacted by a wide array of factors. While various analysts will focus on the differing magnitudes of a variety of these factors, I know of nobody who would not say that ultimately the greatest factor of all is “confidence”. While there is a monthly Consumer Confidence Survey generated by the University of Michigan, confidence is not measured by hard data.

Regrettably, we are currently suffering a crisis of confidence. The crowd in Washington has not helped instill confidence with its scattered approach to legislation and policy.

Over and above the problems in Washington, our global economy is suffering from increasing protectionist measures. Our current administration may talk about free trade and open markets, but their actions speak otherwise. Those actions impact global confidence. Other countries and regions are equally guilty of the same issues.

One of our Thought Leaders, Robert J. Shiller, writes about Winning the Confidence Game. Shiller writes about the global experience pre- and post-WWII. While we certainly do not need the pain, suffering and economic deprivation from global military strife, we do need the leadership across regions to work our way through this economic turmoil. Will we see this leadership at the G-20 conference in early April?

Shiller promotes the concept that global governments have not provided sufficient fiscal stimulus in the face of this economic meltdown. I am by no means a major proponent of Keynsian principles promoting the need for massive government intervention during times of economic stress. I am a major proponent, though, of strong, principled, unselfish governmental leadership.

Investors in global markets vote with capital everyday. While a few markets and currencies have held up relatively well, many markets – including the U.S. – are uninspired by much of the leadership on display.

As a result, no confidence.

LD

  • lizzy

    Reading Shiller’s article was interesting. I wasn’t too familiar with the Marshall Plan. I don’t see any confidence coming from a program Obama might propose; he is too much the con man. It is difficult to allocate money for foreign aid when things seem to be crumbling here. We might feel better if we could get rid of Obama with a “no confidence” vote as they do in some parliamentary systems. We have been living in a time of plenty here; gradually our incomes were reduced and we tried to maintain our consumption with credit. As I think about this crisis I can live comfortably on much less so perhaps I will be consuming less.

  • Larry Doyle

    No doubt we will all have to adjust.

    I am not sure as a country and society that we have come to grips with the need to sacrifice. Sacrifice takes discipline. I am not sure we have enough of that.

    I certainly do not think we have enough discipline in Washington. Both sides have shown themselves to be, “now its our turn to take as much as we can as quickly as we can.” I view the Obama proposals and plans very much in that camp as opposed to displaying discipline. I think the markets here and abroad are saying the same thing.

  • TeakWoodKite

    LD A while back i asked about “pent-up demand”…

    The widespread impression that there was such pent-up demand also led people to believe that there could not be another depression.

    Only problem is people should not confuse faith for risk.

    Of interest to me is the constant tug of war between global and national economies. I see it as the global economic
    “vascular” system that is suffering from any number of maladies born of a chronically poor diet and lack of exercise.

    Protectionism is occurring within the global economy as well as the national economies of the world.






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