The Road Less Traveled

The Dow Jones Industrial Average came very close to its highest point in 2009 today. And we are reading so much about the US economy and all our woes. So I got to thinking; is there a bright side?

Well, there is and it's all part of the lesson we can all learn from what has happened to our economy. Let me use an analogy. Have you ever gotten something you really wanted and as soon as you got it you wanted more? Doesn't make a lot of sense does it. After all, you had wanted this "thing" so bad and now that you finally have it all that fills your mind is getting more? Crazy huh?

Well, that's exactly what has happened to all of us. Shortly after Bill Clinton became president, the economy took off! Just look at this chart from October of 1928 to October of 2009 (click on it for larger version):

The start of the RED line is 1980 and there was consistent, sustainable growth during the Presidencies of Ronald Reagan George W. Bush. The HUGE jump in the middle of the red line happened approximately one year after Bill Clinton took office. WHY did things take off so quickly? The answer is easy; credit became VERY, VERY easy to obtain.

With so much "money" in the system due to easy credit, demand increased dramatically. People now had money to buy more stuff...and they did! Businesses hired people to meet the increased demand for their products. People were able to buy houses they couldn't afford because no one was checking to see how much money they earned! It was super growth...and it was insanity!

That first dip is...September 11, 2001. After the attack, the US economy did take a plunge for a bit as people waited to see what would happen next. Everyone has an opinion about George W. Bush II and I must admit he was not a very impressive president. However, he did take action after the attacks and helped restore people's confidence. We were not going to allow the events of that horrible day to crush the American Spirit! Unfortunately, he did not do anything to insure that our "recovery" was on the type of consistent growth path established by Ronald Reagan and continued by his father.

We all know what happened next. Banks realized people weren't paying their loans and they started foreclosing. Individuals who couldn't pay said..."No worries. Take the house; I'll just move back into an apartment." Now the banks were stuck with a LOT of BAD loans...loans they had created because they wanted "more"....just like everyone else. Supply was much greater than demand and the economy slowed down quickly.

Now...here's the interesting part. Look at that red line again. See where it ends? We've been on a wild roller coaster ride but we have wound up almost EXACTLY where we would have if we had maintained the growth path established by Reagan and Bush. If we had taken the Road Less Traveled as Mr. Frost suggested so long ago, it could have "made all the difference."

So I hope you do the same and take the road less traveled. Be wise with your money. Don't spend beyond your means. Save. Make wise choices. We might not get there as quickly or with as much excitement, but we will arrive at the same place all the same...and perhaps with a little more sanity.