Today we are living with life threatening health issues and uncertainty as to direction of the world economy. Of course, the Ocala economy is not exempt from the forces at work. The doomsday prophets among economists are predicting an economic contraction unseen since the Great Depression. However, Nobel laureate Paul Krugman is more optimistic. In a book published earlier this year, “Arguing With Zombies”, he calls many of our worst economic fears zombies, or unsupportable ideas.
The renowned winner of the 2008 Nobel Prize in economics does not diminish the ominous danger facing us today. Instead, he believes that drastic economic steps are required to protect the world economy from devastation. However, he presents a case that fears that the economic cure will be worse than the disease are not supported by history. One such fear is that we will increase our national debt to unsustainable levels. Some economists believe that this will shackle future generations and severely negatively impact future economic growth. Another fear is that we will trigger hyper inflation which will send the world economy spiraling to historic depths.
Krugman’s Zombies
Dr. Krugman points out that national debts of many countries have in the past risen to high levels relative to GDP. For example, after Word War II Britain’s national debt stood at over 270% of its GDP. However, over the next twenty years that debt dropped to only 50% of GDP without government intervention of any kind. The normal course of economic growth and inflation solved the problem. It is also important to note that as a result, Britain never had to pay back the debt at all.
As for hyper inflation, again Dr. Krugman reviews history and finds no support for the fear that this will happen. A recent example is the subprime crisis of 2008. The Obama administration funneled trillions of dollars into the economy in an attempt to stabilize it. At the same time, Ben Bernanke and the Federal Reserve invested trillions in a bond buying program to create equilibrium between demand and supply as to these financial instruments. Many people, among them economists of great repute, politicians and members of the business community, feared the specter of hyper inflation. However, the exact opposite happened. Inflation dropped to historically low levels and has hovered near those levels ever since.
Krugman’s Views On Today’s Economy
Recently, Dr. Krugman addressed the situation we currently face more directly in an interview. He stated that he feared that our economy was nearing collapse in early March of this year. Then the third piece of stimulus legislation, the CARES ACT, was passed, funding the Federal Reserve to the tune of $445 billion. Therefore, the Fed received the weapons it needed to fight the negative forces impacting our economy. Over the next thirty days, current chairman Powell and the governors of the Fed launched a bond buying program similar to that of 2008. They purchased more than $556 billion in bonds and the program continues today. In Dr. Krugman’s opinion, this action and other stimuli provided in the congressional legislation averted the greatest risks to our economy.
Lets hope Paul Krugman is correct and the economy rebounds as fears of the pandemic ease. If we take as a given that the Ocala economy will rebound as well, where do we go from here? We still face dangers and uncertainties, not the least of which is how to protect our health and that of our loved ones. But we must believe that our future is in our hands.
What The Future Holds For Real Estate and the Economy
The Ocala economy was strong before the pandemic arrived and temporarily knocked it off track. However, there is pent up demand. People are itching to go to restaurants, beauty salons, barbershops and retail stores, or just to catch a movie. Travel and vacation plans are on hold. We will face difficult times, but a combination of economic stimuli and pent up demand bodes well for the future.
As our economy recovers, demand for real estate will as well. The real estate market flourished for over ten years because of a strong economic recovery coupled with historically low interest rates. I expect that the same forces will be at work as we pull ourselves out of the clutched of the pandemic. But now we also have pent up demand. Therefore, the intermediate to long term outlook is bright.
Staying Positive
Despite the difficulties we currently face, you must stay positive. To achieve your goals in life and build the future you dream of for yourself and your family, you must begin with believing in yourself. However you define success, surround yourself with like minded people and avoid nay sayers. Understand that there are those who will criticize your dreams and goals and attempt to tear them down. Clearly, the key to dealing with such people is to realize their views are founded on their own fears and insecurities. But above all, accept that how you decide to pursue your dreams is no-one’s business but your own.
The fundamental truth I live by is exemplified in Napoleon Hill’s motto, “What the mind of man can conceive and believe, man can achieve.” Don’t let your confidence be diminished by anyone. The Ocala economy has great long term prospects.
Paul Krugman presents an encouraging case. Lets salute him & stay positive. – Andy K.