Swaying economies

The media seems to be making out that we're heading into a recession, house prices are tumbling and doom and gloom is upon us. This is an example of the media creating what it reports. If readers/viewers/listeners believe the media they tend to act accordingly and things happen faster than they should.

A friend of mine once went for a helicopter test flight (to see if he could win free lessons). One of the things he had to do was hover and hold the helicopter steady. What happens (to the inexperienced) is that the helicopter starts to drift so the pilot corrects. Usually this correction is slightly too much because the effect is not immediate. They then correct in the opposite direction once the initial correction starts to take effect and so on. The result is a swaying (or seesaw) effect.

I believe this swaying effect is now taking place in our economy. I have noticed it particularly with house sales as we are both selling and looking to buy elsewhere. It is easy to believe that prices will tumble so those really keen to sell are dropping their price to allow a quick sale. Buyers are expecting prices to drop so they are aggressively negotiating.

This effect will slow then swing in the other direction for a while - back and forth, back and forth.

It could be a bumpy ride but not disastrous. The main warning is don't get in too much debt. We will probably downgrade on house value so that we carry less debt (hopefully even none).

technorati tags:economy, predictions, helicopters, seesaw