A Crisis of Confidence

It felt, for a long time, like all the noise being made in the U.S. about jobs being the key to a pickup in the economy was simply a cycle like many other business cycles that needed time to move through the system and as long as the economy kept moving forward, it would pick up momentum and improve. That could still be the case, but recent developments in England and other Europeon countries, with riots and uprisings centered around youth unemployment and cuts to entitlements are certainly unsettling and suggest that problems may have gotten beyond those encountered during normal recent historical business cycles.

Governments, having become accustomed to stimulating business in order to deal with employment slow downs are finding it different this time and already having spent enormously on bailing banks and financial institutions to avoid a serious financial crises are having great difficulty in finding stimulus money for employment. Everyone is tighter with their money these days, especially lenders, and in this environment the weak, including in many cases well educated youth with no proven skill sets or experience, are being somewhat squeezed. In some cses they are pushing back and with the use of technology that they understand far better than many of the older and more experienced workforce including police and security personnel, they are able to organize and carry out some very effective demonstrations. We have seen the effects and they are in some cases ugly and destructive.

All of this sometimes seems remote to us. Happening in far off places and seemingly affecting people we don't personally know. We often think it does not concern us. We should think again. Markets whether they be real estate, equity, bond or even employment markets are becoming affected. Confidence in the system is of great importance and uncertainty of the viability and direction of markets is a strong and destuctive force that destoys confidence, promotes fear and stunts progress. Regardless of where you stand on the chicken and egg theory, we should all be of one voice when it comes to debating the importance of creating decent employment for the youth of our developed countries. It is of serious importance and ignoring it will likely undermine the confidence in our system.

I spend a considerable amount of energy studying equity markets and the recent instability, despite what some in the press report, seems to me to be as much related to the fear and uncertainty created by rioting and demonstartions around the world, as it is to the underlying financial stabilities of businesses and governments. Many people, myself included, are awakening to discover, once again, that technology does not only serve the purposes of good or right. We need to make sure that all of the self education of the youth in the fields of modern technology is put to good uses. We can certainly see from the level of organization in these riots, how powerful it is.

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Tom Herlick

Tom Herlick

CENTURY 21 Pinnacle Realty Ltd., Brokerage*
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