Rational exuberance

We have to face the fact that tough times lie ahead. But just because we all might have to tighten our belts does not mean we should fall prey to a gloomy outlook. In times of struggle, we must take comfort in the certainty that the economy will once again rebound, and times of plenty must eventually return.
 
An economy is life writ large. It is a word that conveys the sum of individuals’ hopes, desires, ambitions, triumphs and frustrations. At any given time, these individual trajectories are going in all directions. As one company goes bankrupt, throwing thousands of people out of work, a leveraged-buyout firm finds it can buy the leftover assets at a fire-sale price. It cobbles together the bones of defunct companies and breathes life into them, giving rise to new opportunities for employment and shareholder wealth.
 
The falling dollar has, for some, signaled a falling sky, a dimming horizon. But for others, the dollar’s decline has given rise to a whole new world of opportunity. As the value of the U.S. dollar falls, imported goods become more expensive, and domestic industries, long thought dead, spring to life again. Look at companies like American Apparel, one of the few U.S. clothing retailers that rely on domestic manufacturing. The U.S. textile industry, a dominant international force a hundred years ago, fell prey to cheap manufacturing in Asia and other foreign countries. Today, most of our clothing is made abroad. But companies like American Apparel, which manufactures its clothing domestically at a Los Angeles facility, find their businesses flourishing amid a diminished import market.
 
The bright side of high fuel costs and a weak dollar is that is makes it more difficult for foreign imports to displace American products. In fact, because of the weak dollar, American assets are particularly attractive abroad.

During times of struggle, whether individually or collectively, we would do well to look ahead to the coming bounty and prepare for it. We should not get so consumed by our hardships that we fail to see the good that can become of them — or rather what we make of them. This is a time for rational exuberance. We know we will get through this, and when we do, we, as a nation, will be fitter, stronger and better adapted to the realities of this brave new world. It is just a matter of time.