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Welcome to 2009
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We’re several weeks into the New Year now. Symbolically, we’ve discarded 2008 and all the economic discomfort it held for some. Again, symbolically, we’re ready to make a fresh start, with a moderate amount of optimism.

And, in reality, the United States is making a fresh start with the inauguration of a new president, Barack Obama, and a fresh perspective on this and other national and international concerns. With the new administration comes a new sense of optimism and unity. Even so, the economic discomfort lingers and it looks like 2009 will be a rough year, though one that should end with improvement in the economic situation.

Personally, I think the economic crisis was predictable, given the over-heated housing market and ever-more-lax credit requirements, and that steps could have and should have been taken sooner that would have made the current situation less severe.

The 2008 bailouts seemed to make sense at the time as a way to save financial institutions from a total meltdown and reestablish some flow of credit. They accomplished some of that, but certainly not to the extent we might have hoped for. They’ve also greatly increased the national debt.

Phase 2 of the crisis is unemployment. As businesses get less business, they compensate by reducing staff. With more and more businesses cutting staff, it becomes harder for those laid-off workers to find jobs. Overall spending is reduced: companies trim their budgets and unemployed workers reduce their spending to the basics. Loan requirements become overly restrictive, further reducing spending.

Although regaining stability among financial institutions was (is) necessary to regain economic stability, the real key to recovery is disposable income – with an emphasis on trickle-up economics. Essential components of that are jobs for the unemployed and relief from mortgages and predatory loan practices. Each individual consumer is a piece of the foundation of the overall economic system. Weaken the foundation and the system begins to crack, weaken it too much and the system collapses.

For the forest products industries and their supplies, 2008 was a particularly difficult year, and more downtime, more layoffs, and further budget cuts are being announced for the first quarter of 2009. The questions to keep in mind are how far is too far when cutting staff and budgets, and how to adapt to the current situation while positioning the business for the future.

History will be a better judge of the various efforts to halt the economic crisis and stimulate recovery, of the wisdom (or lack of it) in spending billions and trillions of dollars on bailouts for banks and automakers. But this week, we are hopeful.





Members Opinions:
January 20, 2009 at 3:27pm
Re: Predictability. I recommend you look up the writings of Bill Gross of PIMCO. He points out that the system was a Ponzie scheme throughout and he told us so a year ago.
Yes, he did.
George Mead

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