Big picture folks - we are in a bad, vicious, negative economic cycle with no end in sight. I hate to repeat bad news, but we’re in for a much longer recessionary period than we can imagine. Even though I’m not an economist, I’ll try to highlight in this post why we’re in for a long dark period and how we’re going to get out of it (hint: it’s not the government).

We’ve gone through a tremendous period of leverage where everyone was able to get credit, this led to assets to being way overvalued (stocks, homes, businesses). This took a while and it will take a while to get out of this. The US government is also highly leveraged, the stimulus bill and new bills to be passed will add trillions to our debt. The credit markets are still badly frozen. All this on top of a recession where people are losing jobs and unable to pay mortgages, education which leads to more freezing of the credit markets. What does this mean?

Brace yourself for massive de-leveraging around the globe. It’s already happening. Less leverage and reducing leverage means asset prices come down significantly (housing, stocks, etc) and at worse, deflation starts happening. This benefits savers whose cash now reigns supreme and it goes further than ever before. However, savers are not spenders and they can’t leverage their cash either - so it stifles the economy even more. You’re already seeing the US saving more and spending less, good in principle, bad for stimulus. It’s going to be a long time before we emerge. A good baseball analogy is that we’re probably in the bottom of the 2nd inning.

So the solution is the government, right? NOT! As you already saw with the TARP (which I incorrectly supported), the money didn’t loosen up the credit markets at all. The stimulus package while nice, isn’t going to be enough to stimulate the economy. We’ve got commercial assets that are very toxic, stocks that are still overvalued, earnings that are still taking a beating. The government doesn’t have a great track record for producing great results, no disrespect to Obama. Anyone who is betting on the government to solve their problems will be sorely disappointed.

What we need is a big dose of HOPE for everyone.

Hope

Imagine if everyone lived a life full of Hope and Inspiration instead of negativity. How fast do you think we can recover as a nation, as a world? I know some of you think I’m pretty negative in this post, honestly, I’m not. My personal belief is that we’re in a cycle of negativity which is keeping everyone down and totally blind to seeing opportunities. I got to hang out with some folks at a retreat last week and everyone was seeing opportunities and going for it. Imagine if everyone was doing that, imagine if we had entrepreneurs around the world seeing opportunities and taking risks, having hope for a better future. They’d employ people, they’d focus on solving problems, they’d seek to build sustaining operations with profitable enterprises. What about social entrepreneurship?

Imagine if you could build a successful business in this environment, what your business would like when we emerge from the recession. It’s time we stop expecting the government to get out of this mess, we must have more hope and inspiration and set an example for other entrepreneurs to work hard, innovate, create, lead, and pull others up.

Isn’t it time that we lifted our eyes out of the darkness of negativity and start seeing hope and pursuing dreams today?

This post was written by Andy Liu, a serial entrepreneur and angel investor. Andy currently runs BuddyTV, sits on several boards, and blogs at InspiredStartup about staring and growing successful businesses.

Tags: Economy, hope, startups

This entry was posted on Monday, March 30th, 2009 at 5:42 am and is filed under Economy, Startup survival. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.