I woke up this past Saturday morning a bit exhausted and worn out. No, It wasn’t due to a happy hour that ran too long. I was waking up after 36 hours of nausea and a phenergan (used to treat nausea)-induced sleep.
The beginning of this incident occurred during the parents’ party my husband and I had hosted at our home on Thursday evening. Just before excusing myself, I was engrossed in a discussion with several other parents about the week’s nausea-inducing whipsaws of the financial markets. The most recent headlines had included the following titles: “Stocks Slump as Investors Run to Safety,” “As Fears Grow, Wall St. Titans See Shares Fall,” “Anxiety Rises as the era of easy credit comes to an abrupt end” and “Wall Street Unraveling.” The general feeling was one of disbelief and anxiety.
This morning, after clearing my mind, I saw the latest headlines: “Where things stand in big bailout” and “Stocks surge as Fed acts.” Clearly, things had changed during my long 36 hour sleep or at least they had for the stock market.
With all the talk of the economy and economic performance, I thought it might be helpful to slow down and review what drives the economy. Gross Domestic Product (GDP) is often used as an indicator of an economy’s health. GDP is the total market value of all goods and services produced domestically during the year. This means that to increase the value of the GDP of the economy, you have to increase the value of a good or service, or increase the number of units produced or provided.
Real GDP grew at an annual rate of .9 percent and 3.3 percent in the first and second quarters of 2008 respectively. According to the U.S. Department of Commerce, real GDP grew from 2004 to 2007 at an average annual rate of 2.6 percent.
GDP includes actual goods and services. What drives the economy, the American people, their ingenuity and their work ethic. The GDP of a nation depends on its workers, their ability to create something of value and to find someone willing to pay for that particular product or service. Of course, the ability to access capital makes it easier for the entrepreneur to work on an idea to make something new, (also allowing those with bad ideas to give it a try too), but in the end it’s the new products or services that produced and sold that drives GDP.
We live in a world where an ever-growing amount of information is distributed every minute of the day, so much that the overload can become overwhelming. The minute–by-minute watch of the financial markets’ performance drives anxiety but not production. Instead of March Madness we have September Shambles.
While we might be in the midst of turbulence and uncertainty in the financial markets, panic does not help, it simply freezes one’s ability to act and think. What we need now is to take stock of where we are, review the assets we have and move forward with optimism.
Continued... |