Recession or Recovery?

Ever since the financial tsunami last year, people have been talking about a recession or even a depression. But the stock markets are blooming everywhere in the world, from the U.S. to Europe, China, India, many stock indexes have already recovered most of the losses occurred between Sept 08 and Mar 09. In some countries, housing price even jumped ahead of time, surpassing that before the financial tsunami.

But if you don’t buy stock and don’t have money to speculate on real estate, gold and commodities, you know the hard time isn’t over yet. As a small business owner, I know first hand that the economy is still in trouble and life can be hard in the midst of “economic recovery”.

I own an online pet shop selling natural pet products. Despite that we are in a recession, commodity prices have not dropped in the past year. On the contrary, the wholesale price of some products continues to rise, some even up 15-30%. But hey, we are in a recession, the customers are more reluctant to pay for expensive pet food, so the retail price can’t be raised proportionally, leading to a narrower profit margin. As a result, the revenue increases but the earning may actually decrease.

When I go online to buy stuff like vitamins, printer supplies, I notice the same thing. Things are not getting cheaper. Maybe they haven’t really changed the retail price but some products used to be 40% off, now they are only 25% or 30% off.

So businesses are having lower profit margins, employees are afraid of losing their jobs, things are not cheaper but more expensive, and the stock and commodity markets (and housing market in some places) are flourishing. You don’t need to be an economist to know that this isn’t right. This “economic recovery” is not benefitting the general public but a small bunch of speculators and traders.

I hope the governments of those countries know what they are doing. When they throw out trillions of dollars to stimulate the economy, is the money used to artificially inflate the GDP figure, start another bubble or save the big corporations only? Is the money used to improve the living standard of the people? Or create job opportunities? Or help small and medium businesses? Or correct the mistake that was made before?

As for the general public, it’s likely that we will suffer from the economic slowdown for quite a while. Even worse, we may face inflation before the economy recovers. For those of us who don't earn a fortune, the word stagflation is even more daunting than inflation or deflation alone.