Panic is Always Bad for the Economy

Do you remember the scene in “It’s A Wonderful Life” where George Bailey (played by Jimmy Stewart) was forced to forgo his honeymoon because there was a run on the bank?  The people were afraid their money wouldn’t be available, so they wanted to take it out of the Bailey Building and Loan Association in cash. George tried to explain that their money was invested in each other’s homes.  It wasn’t enough to appease most of them and George was forced to try to make it through the day by trying to hold on to at least one remaining dollar.  That was fiction, but unfortunately it is based on a principle of fact.  If people panic, it impacts all of us and can eventually cause a collapse of corporations and even our economy.

The fact is that the American people have lived well for a couple of decades.  We have mostly lived on borrowed money.  The “excitement” of wealth has driven stocks higher; often higher than their real value and inflated real estate values beyond reasonable appraisals.  It was only natural that a correction would one day come to our economy.  I am not sure a government bailout of companies who lived beyond their means is appropriate, but it appears one is on the way. 

I’m certain though that now is not a time to allow uncertainty to send us into frenzy.  Even the government won’t be able to “bail” us out of a mass panic.  Someone asked recently when I would think it was time to panic about the state of our economy. I guess that would be when Americans are trying to illegally cross the border into Mexico. Our economy still has life in it.  It will recover.  The fact is that corporations that are healthy will be even healthier when these current economic struggles are gone. 

Now should be a time to make wiser choices with our finances, but really, shouldn’t we always be doing that, as individuals, corporations, and governments?  Let’s follow the advice of George Bailey and “Calm Down”.  Or, better yet, let’s follow the advice of Jesus and “not be afraid.”