Fear sells. Economic fear sells best.
In the late 1970s, an economic prognosticator named Howard Ruff published a book, “How to Prosper During the Coming Bad Years.” He urged Americans to hoard various goods: motor oil, guns, ammunition, freeze-dried food, and more. And he made a pile of money.
People Magazine did a piece on what it called the “self-made financial pundit” on July 30, 1979, and outlined the Ruff’s take from his “repent, the end is near” predictions:
“Ruff's Chicken Little alert hasn't hurt his own till. His bimonthly doomsday newsletter, The Ruff Times, is booming despite a subscription price of $95 a year. The weekly half-hour TV version, Ruff-house, has spread to 48 stations. He organizes lucrative survival seminars even on Caribbean cruises. His breezily written primer How to Prosper During the Coming Bad Years has been a best-seller for five months and got him a $350,000 paperback advance. The expected pretax profit of his corporation this year: $1.5 million.”
Peter Schiff is a well-known financial analyst and investor. On Oct. 13, 2008, on a TV show hosted by political commentator Glenn Beck, Schiff said of inflation:
“I think it’s already running north of 10 percent. I think pretty soon, maybe a year or two down the line it’s going to be going at least 20 or 30 percent per year. The government won’t admit it, but it will be.”
Inflation, with some small upsurges, has been around two percent or lower since late 2008.
Along with a tendency to panic, there’s also a problem with absolute statements on the optimistic side, but they don’t tend to inspire the same frenzied search to do something to save our economic hides.
In January 2008, former Federal Reserve Chairman Ben Bernanke said, “The Federal Reserve is currently not forecasting a recession.” Everyone knows what came next: a deep, pounding recession. In late 1929, with the Roaring ‘20s still roaring away, economist Irving Fisher said on Oct. 15, 1929, “Stock prices have reached what looks like a permanently high plateau.” Unfortunately for Fisher, that statement was made just a few days before the stock market crash of 1929, which began the Great Depression.
Today, fear is again on the upswing. An internet search will quickly reveal dire warnings from recognizable names about the dollar’s impending collapse; China’s impending collapse; the U.S. economy’s impending collapse; the world’s impending collapse. Not always, but quite often on the back end of these predictions of catastrophe, are pitches to buy gold, silver, real estate, or some other hedge against inflation, economic depression, and other calamities. The reality is that there are going to be economic downturns, just as there will be economic growth and prosperity.
As accountants and business counselors, we see all types of companies, non-profits, and other organizations in many situations, including being affected by the broader economy. Here are two things that stand out:
An individual or organization is in the best position to navigate through the present and into the future if:
There’s no guarantee of safety from difficulty. But the above list, at a minimum, are things you can do to wisely manage your finances and to keep you from being pushed around by uncertainty and apprehension. Fear sells, but it doesn’t pay.