The Economic Outlook for 2009

How did the economy end up in such turmoil? Fear. That’s right. Plain and simple, fear drove peoples’ choices about their money in a way that resulted in a shaky economy worldwide. They stopped spending and investing. What most people do not understand is that the circulation of money, in other words, spending money – within reason of course – is necessary to keep an economy healthy. Without money circulating, economies falter, people react and become afraid to spend, which causes the economy to get worse…and the downward spiral is in full swing. Until people accept that the current economy is a reflection of their fear, the spiral will not stop, and things will only get worse. If we continue to let our fears drive our decisions and choices about money, the outlook for 2009 will remain bleak.

Not spending money is a result of peoples’ fear that they will not have enough. When we witness businesses closing and watch people lose their jobs, the fear deepens. Many wonder if they will be next and they stop spending. However, when people hold on to their money, the businesses that would have benefitted from their patronage lose that income. When enough people stop spending, the businesses are forced to let their employees go or close their doors. It becomes a self-fulfilling prophecy. We fear that more companies will fail, yet our actions are partly the cause of their failure.

Although only a handful of corporations were involved in the scandals that plagued the headlines in 2008, the fear that resulted from the failure of some large corporations was reflected in the falling value of stocks. Many investors did not have the patience or gumption to wait for things to recover, and they became concerned for their money. Investors who allowed these fears to drive their choices sold the shares of the stocks they held and may have even withdrawn their money completely. Unfortunately, this just meant that the stock values fell more, things appeared worse, and the economy worldwide was affected.

When an economy is in as much trouble as exists now, most people are experiencing some level of concern or fear. Allowed to control their choices about money and investments, fear will only make the situation worse. You can make a difference if you are willing to put in the effort it takes to maintain a positive attitude in these difficult times. For the economy to turn around, people will need to get back their confidence and make choices that are not based on fear. So what can you do? Help people understand how fear-based behavior is actually contributing to the state of things. Encourage people to be smart in their choices and to examine whether they are making decisions solely because they are afraid.

Whether real or perceived, the instability of the economy in 2008 has caused most people to take considerable pause. As the year comes to a close, we will all be watching the stock market, the jobless rate and the financial results of the holiday shopping season to look for clues as to how 2009’s economy will unfold. Will fear drive the direction of those results? Will we let it? Each of us must choose.