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Editorial: Cautious economic optimism

Tuesday, March 24, 2009

After a year of relentless negative news about the economy, even the faintest glimmers of an upturn are enough to brighten the day for businesses, investors and government decision-makers. Last week, economists took special note of several key factors that indicate the possibility we may be at or near the bottom of this recession.

There were other signs, of course, that the economy may decline further, despite several rallying sessions on stock exchanges both in the U.S. and around the world.

The most important factor driving the economy right now is confidence. When consumers, borrowers, lenders, investors, venture capitalists, business builders and money managers lose confidence, the economy falters.

Cautious and prudent Americans have gone on a savings spree the like of which hasn't been seen for years. This is good in the sense that more Americans than ever have a bit of a cushion to get them through tough times. And it is bad news in the sense that dollars saved are dollars not spent for consumer goods that fuel a healthy economy.

More than a year into this recession, we are starting to get a feel for how we are affected. For those who have lost jobs and homes or seen the value of their investments plunge, it is a tough time no matter what the economic indicators say. But for many others, there is a sense that homes can be refinanced, automobiles can be purchased, other purchases can be made, restaurants can be patronized -- all without endangering the economic future.

As more Americans begin to loosen up spending on purchases that have been delayed while waiting to measure this recession's effect, the overall health of the national and world economy can be expected to improve.

If that's what we're seeing now, good. This may be a good time to be cautiously optimistic about the future.

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Savings are important, they are the source of real wealth that will get us through this recession. Entrepreneurs need a bank of wealth to start up new enterprises, savings provide that. It takes more than confidence to build real wealth, it takes activity/productivity in the private sector. A growing economy needs to produce wealth.

-- Posted by BCStoned on Tue, Mar 24, 2009, at 10:09 AM

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