[thelist] Financial Situation

[Phil Turmel]

Hi David, Fred, et al,

David Kaufman wrote:
> Hi Fred,
> 
> "Fred Jones" <fredthejonester at gmail.com>:
>> Is anyone else considering lowering their hourly rate to get new
>> clients due to the financial situation in the US?
>> [...] I don't read the
>> news much (OK, not at all) so I'm wondering if this situation is
>> affecting people like us also.
> 
Independent businesspeople *really* need to pay attention to the news. 
Government rule-making and wild-eyed "problem solving" is a constant 
hazard.  If you want to limit your intake to business-critical items, 
organizations like NFIB[1] might be useful to you.

> We are seeing most of our medium-sized and larger corporate clients, which 
> had been doing a lot of steady work in the past few years, cutting back, 
> delaying the start of new projects that were scheduled, and talking a lot 
> about examining costs and saving money.  When we ask, they tell us that 
> they are getting the message from their upper management to rein in 
> spending, build rather than buy, do more with less, etc.
> 
I'm in a somewhat unusual spot...  My market is small engineering 
projects for industry, usually with a substantial data collection & 
analysis component.  As a small company, we're more likely to get 
retrofit work than brand-new large system.  Companies are trying to get 
more for their money, and retrofit work is supplanting new installs. 
Ergo, our business is growing while others are suffering.  For now, at 
least.

> Since our bread and butter is big new development efforts, this is becoming 
> a scary trend indeed.  Like others have said, we keep our eye on the news, 
> hoping it can be believed that the next rate-cut or bail-out (ahem, I mean 
> "rescue") or the new administration will stave off what others are 
> predicting will be at best a long recession or at worst another Great 
> Depression.
> 
Call it what you will, but government intervention in markets has a bad 
track record.  Although it's not popular to say so, the evidence is 
overwhelming that FDR's "New Deal" put the "Great" on president 
Harding's depression.  The conventional wisdom is that World War II 
pulled us out of the Great Depression.  The reality is that FDR had to 
cancel his policies to spin us up for WWII.

What's also not well known is that Harding started the depression by 
trying massive government intervention, raising taxes to pay for the 
government spending, and instituting new protectionist trade policies. 
FDR followed up with minimum wage increases, forced unionism, price 
controls, labor restrictions, and massive government make-work programs. 
  Sound familiar?

In any case, our president-elect is pitching a re-run of Harding's and 
FDR's policies.  God help us if he gets them through Congress.  That our 
current president was also treading in Harding's footprints is a bad sign.

> Not to be too overdramatic, but this time has sooo much in common 
> historically with the 1930's depression: a long and massive real-estate 
> bubble that bursts, failing banks followed by giant corporate bankruptcies 
> followed by long-term massive unemployment...
> 
Ummm.  You're being way over-dramatic.  Our economy has suffered worse 
recessions in recent history.  Our current "horrible" unemployment rate 
is 6.8%.  There were worse jobless rates in every decade since the 50's:
	October '49	 7.9%
	July '58	 7.5%
	May '61 	 7.1%
	May '75 	 9.0%
	November '82	10.8%
	June '92	 7.8%

Compare that to 23.6% in 1932, and mid teens all the way up to 1940.

Whether we follow the pattern of recent history or the pattern of the 
FDR's tenure depends on how we as a country react.  It might be better 
to say "reacted", considering our choice on November 4th.

> I've been spending some time thinking and reading about what businesses 
> survive, or even do well, in a depression.  In that last one, it seems, 
> vendors of strong alcohol and those offering venues for temporary emotional 
> "escape", like movie theaters and comedy venues, did quite well :-)
> 
> -dave, still waiting for the "main street" bail-out 
> 
I hope you aren't holding your breath.

If you want to stay in business, take care of your customers.

Regards,

Phil Turmel

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