Rick Boettger Columns
Sunday, November 8, 2009
Clear skies ahead

By Rick Boettger Special to The Citizen

The recession is officially over as far as I'm concerned, as these things are measured. The U.S. economy grew last quarter for the first time after a year of decline. The recovery won't be complete until jobs return, but there was no way for jobs to grow while we remained in recession. So we can say: Mission (first step) accomplished.

Our nation's economy is incredibly tough. Like Rocky, however much of a pounding it takes from wars, government policy disasters and rapacious CEOs, it -- and we -- keep getting up off the mat, more vigorous than before. But what can we learn from our periodic bouts of economic madness? How can we hope to avoid, or at least guard ourselves from, another financial collapse?

Understanding what went wrong in the high-tech bust of the 1990s, the recent mortgage collapse, and -- by reader request -- Germany's historic hyperinflation, we may hope to learn from the past how to be smarter in the future.

Our last two major recessions were remarkably similar. In both, the hardworking economy of "stuff" did great until the screwed-up economy of "numbers" went nuts. The high-tech and dot.com surge in the 1990s created cell phones, HDTV, high-speed Internet and much more. This decade, we built 15 million wonderful houses, and that many families found themselves living their American dream.

Then, the "numbers" economy screwed us up. In the 1990s, the NASDAQ had magnified real gains into a bubble that burst. Recently, banks sold real houses with too many imaginary mortgages.

What can we learn? Most important is not to be scared by boom times. The 1990s created amazing technologies we all enjoy, and the new houses are great, though sadly empty. We must not now stifle, say, a green jobs initiative for fear it might collapse.

Fear instead getting caught up in the financial craziness of the "numbers" economy. If investors in the NASDAQ and in Florida Keys real estate had sold when they had merely doubled their money, they'd have prospered.

My advice is, the next time you double your money in any investment, check real closely for funny business. In the 1990s, it was companies with no profits priced at $100/share. Recently, it was empty Keys properties being flipped like NASDAQ stocks via 90 percent to 100 percent undocumented loans.

The German hyperinflation was completely different. The reason a loaf of bread cost 140 billion marks in 1923 was that they had printed more than 17 billion marks in 1923 for each mark they had in 1918. By comparison, the U.S. has not even tripled its money supply in the last five years.

Worse for Germany, it had defaulted on its war reparations, leading Belgium and England to march in and shut down Germany's biggest factories. Their "stuff" economy was impoverished. We have a hyperabundance of goods, and no one marching in to shut us down.

I'm keeping my eyes open, and see no disasters threatening. Dare to hope for the best as we recover, and you prosper. Fair sailing!

Rick Boettger was a business professor before writing his book and hosting a 25-state talk radio show on political economics. He has done tax and financial advising in Key West since retiring here in 1996. Questions, information and differing opinions are welcome at rd.boettger@gmail.com.