Is the media killing our economy?

“The times they are a changing” to quote my favorite poet of the 60’s and 70’s Robert Zimmerman aka Bob Dylan. In all my years I have never seen the economy crash and burn as quickly as it has this past year. Companies have been downsizing or closing altogether, thus putting more people on the unemployment line, the food line and some unfortunately at the end of their line. As a mortgage broker I have seen some banks particularly with regards to commercial mortgages literally close up shop or only offer mortgages to their better current clients. There are people, businesses, etc. that have been told that the bank will no longer offer them a commercial mortgage and they are forced to scramble elsewhere in search of salivation, and historically the desperate man does not get the best deals.

What has caused this drastic change? In the case of the banks, there are several institutions that were hurt by losses in the sub prime market, which in itself could cause them to tighten their purse strings. We won’t even mention the markets dropping, causing people’s portfolios to shrink by 20 – 30 % or the investment scandals that have rocked our world recently.

The above mentioned catastrophes were horrible but let’s be honest with ourselves, the average Joe was not affected by these events, particularly not in Canada. In Canada the banks when it came to handing out mortgages were infinitely more prudent than their U.S counterparts and did not use the presence of a pulse, as a primary requisite for the procurement of said loans. In fact how many average individuals do we know who have lost fortunes in the stock market? I would venture to say that there weren’t many. As the old joke goes, when a person was asked, if they were to find $1,000,000.00 on the street would they return it to its owner, and their response was, yes if it belonged to a poor person. The fact is that the average Joe does not have a great fortune to lose, and the wealthy individual, should he lose 20-30% of his $100,000,000.00 portfolio will still have what to live on.

What has really caused this apprehension in the economy? Why are we holding onto our money, not willing to spend it and thus causing the entire structure of our economy to collapse. Everything snowballs and if we don’t spend our money, the stores won’t be able to sustain themselves, and so it goes on and on. There is an old expression that goes, “Ignorance is bliss” but today, thanks to all the media, such as radio, television, newspapers, and of course the new frontier the internet, there are no more secrets, hence no more bliss. The medias are forecasting doom and gloom and with the proliferation of information we are creating a self fulfilling prophecy.

The governments have tried to lower interest rates with an end to stimulate the economy but the fear is not enabling us to open our wallets. We can liken this to the fable of the wind and the sun making a wager as to who can remove the traveler’s coat. The wind blew as hard as it could in an effort to blow the coat off, but it only intensified the man’s resolve to hold onto his coat even tighter. The sun eventually came out, and its warmth caused the traveler to remove his coat. We don’t need fear mongering coupled with the lowering of interest rates to stimulate the economy. We need the ray of sunshine and upbeat reports to cause us to remove our hands from our pockets.

In our economy we have two opposing views of the market place, the vendor and the purchaser. In the housing market you have the purchaser who eyes the situation and thinks to himself, “Great, the interest rates are going down and the sales of houses have slumped, now is the time to get a bargain”. The vendor on the other hand looks around him and says “Wow there aren’t that many houses for sale on the market, and interest rates have gone down, so I can probably ask a higher price for my house and get it”
We need everyone to meet at a common ground and realize that today it’s up to us to stimulate the economy and not some artificial external force.