Monday, December 08, 2008

Containers and Car Lots

When people used to ask me about the state of the US economy, especially vis-a-vis other countries, I'd take them out to Port Newark, NJ. It's not hard to size up the situation there: Huge stacks of empty shipping containers meant that the dollar was strong and the US economy was perking right along. Empty lots meant that the economy and/or the dollar was weak and there wasnt much economic activity.

Well, here's rule three: if those lots are, instead, crammed with thousands of unwanted cars, we've got oversupply. The economy is tanking so fast they can't turn the boats around in time. Prices will have to fall (deflation anyone?), losses will have to be absorbed, inventories will have to settle down to normal levels. This all will take time.
And "time" is really what this whole panicked crisis mania is all about. Things will return to normal sooner or later. If we collectively thought it would take a week, nobody would be panicking. I can wait a week to buy a new car. But to wait a year or more would be painful, indeed.

So there's the bottom line: economic pain will be defined in terms of time. Patience, as always, will be a virtue.

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