This is what I think of when I hear the term “double-dip” recession. Chocolate can be a good and a bad thing. It is good because the taste and chemicals within it can bring pleasure, but bad because too much of it is unhealthy. A double-dip recession occurs when we have had a steep downturn and then what appears to be a recovery…then we get slammed with the second half of the recession. The problem is, this is very hard to predict. As with any recession, hind-sight is definitely 20/20.
Economists and financial experts seldom agree on what direction the economy or stock market is going. Something to keep in mind when listening to these folks (me included!) is that someone is always wrong. No matter how someone justifies their past wrong position, they were still wrong. Also, the fact that they were wrong that time doesn’t exclude them from being right in the future.
Our economy is made up of so many moving parts, I always find it odd that our financial experts, who go on television and share their opinion, are usually only backed up by data from a few aspects of the economy. I feel that these men and women are looking at our economy as sort of a balance. As long as things are equal on both sides, with a few key things (what each terms key varies quite often), then the economy is in balance and we can move forward. If those things are out of whack, then we start to have problems.
My view is slightly different. The world economy is so interwoven with so many various pieces that it is impossible to predict what could happen. When one thing fails, there may be other things to prop it up. You hear the term “economic indicators” some of which are leading (which are supposed to “indicate” what is to come) or lagging (telling you why something happened) and the phrases like “consumer spending is low” or “unemployment rate has fallen”, but these don’t describe the situation entirely.
Because the economy is so unpredictable, you need to come up with a strategy to manage the situation should a “double-dip” recession become inevitable. No matter what, you can’t control everything. You can, however, prepare for eventualities. Plan for certain situations, and make decisions based on current information.
A good analogy would be a battle. Imagine for an instant that you are a general in charge of a war. You are fighting an unpredictable and deadly foe (much like our armed forces are now), and you know that intelligence is the key to winning. Because if you only know what the people in the caves are doing, and not what the people in each town are doing, you can’t possibly win. However, you cannot accurately predict what each enemy element will do. But you can game it out and come up with several different possibilities.
Your war is to make sure that you come out of the recession in as good or better shape than you were before the recession. By planning properly and executing decisively, you can make sure that your double-dip is short and sweet as opposed to long and fattening.