Living Between Hope and Caution

There are so many things I am not, never was and never will be. A rock star. A major league first baseman. A wealthy man. A hunk.

I am certainly not an economist. I am a reasonably bright and well-educated guy and I think I have a grasp of basic economic theory, but still it remains a mystery to me how a global economy that was perking along reasonably well could suddenly go into such a devastating tailspin. I believe I understand some of the underlying causes well enough – the housing bubble, under-regulated financial institutions pushing sub-prime loans, corporate and individual greed, etc. – but still I remain mystified. There is just as much “stuff” in the world, just as many people eager to work, just as much human need and opportunity. Lawns still need to be mowed (or will be in May) and lawnmowers are still wearing out. If I still have a full-time job and need a new lawnmower, I can purchase one and help the folks at Briggs and Stratton or Toro provide jobs for people who need them.

But then I start to think about it, any maybe to think too much. While my current income may not have changed significantly, meaning I theoretically still have as much money to spend (wisely, I hope) as ever, my savings account and pension fund have taken a huge hit. I feel poorer, and in fact am poorer (even though I know that I am fortunate to still be receiving a paycheck). Maybe I can fix up the old lawnmower – sharpen the blade and replace the wheels – and get another year or two out of it. Maybe I should save that money for a rainy day (and the economists are telling me that there is a lot more rain in the forecast). Who knows? My job could be the next one to be eliminated.

It seems to me that we live much of our lives, including our financial lives, in the tension between “hope” and “caution.” Hope is a wonderful thing, and we could not live without it. But it can be distorted in dangerous ways, as in buying a gigantic television set I cannot really afford because the store is offering a “No Money No Interest for a Full Year!” promotion and I hope that I will have the money to pay for it in 12 months. Another term for that kind of “hope” is “unwarranted optimism that creates a sense of entitlement,” as in “I need this” or “I deserve this.” This distorted version of hope had a lot to do with getting all of us into the huge economic mess we are in.

Likewise “caution” is a wonderful thing when it causes us to look before we leap and think through the likely outcomes of decisions we make in the present. But just as hope can be distorted into unwarranted optimism and entitlement, caution can turn into crippling fear that paralyzes us. We become reluctant to make legitimate purchases or take appropriate risks (and investing in a friendship, like investing in a stock, always involves an element of risk). Obviously this has impact on the prospects for economic recovery, but it also takes a toll upon the health of the common community in which we all share.
So, be hopefully cautious and cautiously hopeful. Do not embrace unwarranted optimism or paralyzing fear. Not an easy balance to achieve, I know, but one worth working at.