Franklin Roosevelt said that at his first inaugural address when the country was in the depths of the great depression.  That depression was deflationary, and right now, this economy has businesses fighting the problems of deflation again.  Our current economy is in no where near the sad shape of the 1930’s when banks failed en-masse and unemployment reached 30%.  However, there are some similarities between then and now, so Roosevelt’s words are relevant now.

    Things are clearly better today.  Our economy is growing, albeit in fits and starts.  And things are much less dicey than a year ago as we emerged from 9-11 with little idea of what to expect.  The threats are different today, but no worse than global depression, Pearl harbor, the Cold War arms race and the threat of nuclear annihilation, Viet Nam, oil embargoes, 82% income tax rates, rampant inflation and a host of other problems the United States and our free enterprise system successfully dealt with.  Human nature dictates that looming problems seem to be the worst ones.

    Ironically, consumers see deflation as good – purchases become cheaper – but it can mean death for business, because they can’t make any money.  A glut of capacity (idle factories) built in the go-go 1990’s means price competition in which only the most efficient businesses will survive.  This is the creative destruction called capitalism.  We end up stronger for it, though.

    Now it seems that fear of War with Iraq is holding many folks back from making long term plans, like investing.  Before Iraq became the big issue last Summer, there were signs the economy was beginning to pick up.  While there is great confidence that a war with Iraq would be a swift success, the potential backlash from the Arab world is an unknown.  And investors fear uncertainty.  

    The benefits to the US of having a friendly regime in Iraq are significant.  Iraq has the 2nd largest oil reserves in the world behind Saudi Arabia.  Having a secure source of oil will allow us to deal with terrorists with out having to tip toe around the Saudis.  As an investor, you need to ask yourself does this benefit outweigh the fear?  Think of Roosevelt when you do.