One of the biggest concerns on the mind of average Americans, investors, big businesses and small businesses today is the fear that the US economy will slide back into another recession due to the low economic growth and high unemployment. This fear has kept consumers from spending more money into the economy, and it has also kept businesses from investing more in the economy. As a result, the economic situation in the US is still very uneasy for many people. US economic prospects were not helped by the fact that the Senate recently voted down Obama’s jobs bill, meaning that there is likely not going to be any economic help from the government for at least the time being.
But there are many reasons, why it seems unlikely that the US economy will hit another recession. The initial impact from the sub-prime mortgage crises which drove the US economy into recession in the first place, has largely subsided. The current economic climate is caused mainly by consumer worries about jobs and debt, as a result they are willing to spend less, which means that businesses have less incentive to invest in the economy. But all this economic unease, doesn’t mean that we are heading back into another recession. According to famed investor Warren Buffet, “I would bet very heavily against that. How fast the recovery will come, I don’t know. I see nothing that indicates any kind of a double dip.” So basically the entire economic situation can be summed up in one crude example.
Say your at a bar. If you start drinking a lot, you generally start feeling good for a while. As a result, you keep ordering more and more drinks, until eventually it happens, you throw up. After throwing up everything you just drank, its highly unlikely that your going to start throwing up again. But just because your not throwing up, doesn’t mean your going to be feeling good. In fact, quite the opposite, your going to have a hangover the next morning and are generally not going to be feeling good for rest of the day. You might not even drink again for a while. So basically to bring the analogy home, the US economy is past the point of throwing up and is currently in the hangover phase. When will the hangover be over? nobody knows. But instead of a recession, it seems likely that the US might go through the current period of stagnation for at least the next year or so. But what does all this economic unease mean for small business owners, who are struggling right now.
It basically means that small business owners have their work cut out for them, for at least the next couple months or so. Depending on the business, since business priorities are different based on the industry and the owners. It would probably be best to hoard cash for a while, and simply focus on providing good quality service at a cheap price. While cash hoarding by businesses, might seems like the cause of the current economic unease; at least in the eyes of the government. The truth is that it all comes down to the American consumer, since close to 70% of the US economy is based just on consumption. And as long as the consumer is more worried about their debt load and housing bills, 70% of the American economy is going to be performing poorly. So small businesses are just going to have to stick it out in the short run, and like I said earlier, it would be good to hold onto cash. Since, the current economic malaise can’t last forever, and when it does end, small businesses should try to be in good shape so that they can quickly take advantage of the accelerating economy.