Optimistic? Pestimistic? No. Realistic

You’re right to try to be optimistic. Or at least positive. A positive outlook helps keep spirits up, helps avoid despondency. despondency can be the worst because then you just stop doing anything and sink in to a mire of desperation.

But optimism about the outlook could be even more dangerous. It could result in further losses because you base your expectations on a scenario which fails to materialise. The best approach is realism. That should be based on sound analysis of the data available and an evaluation of sentiment. Right now the realistic outlook is not good. The best historical benchmark we have for what is happening today is the Great Depression. Back then the image is of soup kitchens. And that picture is likely to re-emerge sooner than we would like because of two serious issues which have no immediate solution – the gaping hole in the credit markets and the rapidly rising unemployment of people.

Look around you and talk to your friends. People are losing their jobs daily. And many of those people have little savings or those savings are tied up in property (illiquid and valued below cost) or stocks (valued below cost). People need to eat. Without food anarchy ensues. People can not grow their own – they mostly live in urban areas – so they must be given food. So expect to see food aid in developed countries.

I just paint that picture in case you are feeling too optimistic. You should base your expectations on reality so that your strategy for survival, and hopefully helping others, is based on sound judgement.

I certainly hope that economies reliquify soon and people start getting jobs again. If that happens then solutions will be easier. but there are few signs yet that fiscal stimulus is being applied or that it is working. The numbers coming out continue to be bad. (For example, today’s headlines: US faces deep problems, OECD says and World Bank predicts global gloom.)

It appears that solutions are going to have to occur at the local level, because governments are stymied. So let’s hope for community supports and local incentives to restart the credit markets. Be positive, and realistic.