I continue to hear ad nauseam that businesses are cutting, cutting, cutting everything and everywhere in order to remain solvent. Fine. But be advised. This will only make the depression and by extension their business worse. Much worse.I've blogged on the negative feedback loop before, but it's worth touching again. A negative feedback loop is when a negatively impacted Action-A negatively impacts Action-B which in turn negatively impacts Action-A, and so on. I actually think businesses, with their record massive layoffs and reductions in capex, are initiating the feedback loop, and in turn kickstarting a serious depression.
Businesses shouldn't be so quick to layoff the masses and slash capex based on a gloomy 2009, because by doing so they only ensure a gloomy 2009. If we get 3M more layoffs, do you think 2009 GDP grows or severely declines??? If GDP declines, what are the chances that any business has seen material P&L growth.
The economically uninitiated think the $1T stimulus will return our economy to 2005...it won't. The stimulus may keep 2M jobs losses from becoming 3M but in the end it will only make things less bad. Business, drive, innovation, creativity and risk will make things better, not Barak Obama.
